Talking business
Opportunities came and went but the finance ministry failed to impress the cabinet to rally around the bill.
From all the fuss, one would think this was the first time our MNAs had ever seen tax reform legislation. But the question is this: why this uproar today when back in April, the same piece of legislation was introduced, debated and discussed in the same parliament and Senate quietly and politely?
The parliamentarians are the same between then and now, the bill is pretty much the same too – except they called it the VAT bill back then and the RGST bill today. It’s the same International Monetary Fund (IMF), pushing it as a condition for releasing the same tranche from the same facility that Pakistan is still on. The government is the same. So what is today’s ruckus all about?
The VAT bill (as it was originally known) was originally drafted under the leadership of the then finance minister, Shaukat Tarin, around the same time last year. But by the time it was ready to be presented before parliament, Tarin had left the ministry.
The new finance minister, Dr Abdul Hafeez Shaikh, entered the picture on March 18. When the VAT bill was presented before the National Assembly’s standing committee on finance in April, the finance minister and secretary were both in Washington, trying to get the IFIs and the Pentagon to release some money to close the fiscal year with.
They were successful. The IMF released its pending tranche after accepting the plea that the VAT bill will be steered through parliament by June 30. A backlog of Coalition Support Funds was also released for the army, about $30 million of Kerry-Lugar money and a clutch or two of World Bank funding. The minister returned to Pakistan to applause from his political masters and the GHQ.
The VAT bill, however, stalled in committee and never made it before the full house. During his budget speech, Shaikh quickly announced a new deadline for when the measure would be presented before parliament: October 31.
But by mid-July it was becoming clear that importance of the bill had been seriously underestimated. Lower-level technical committees continued deliberating over whether collection of sales tax on services should be done in an integrated manner or the provinces could be empowered to collect the tax on their own.
One key member of the technical committee from Sindh disclosed in July that as far as he was concerned, his work was done. An agreement had been reached and the lower-level technical committees comprising secretaries and advisers had done their job. It was now the place of the political leadership to pronounce on the matter.
Several opportunities came and went to get the political leadership on board behind the initiative but the finance ministry failed to impress the cabinet to rally around the bill until it was too late. It failed to explain the importance of the bill for Pakistan.
Where the high-ups in the ministry should have been seen talking about the importance of passing this bill, talking aggressively to the public about the rich fat-cats who pay no taxes, they were instead focusing on the high offices of power in the government – as if they alone could deliver this most contentious of reform measures.
Unfortunately, the result of this misplaced gambit has been that the optics of the whole affair have slipped out of the economic managers’ hands. Where the VAT bill hardly stirred a feather in parliament back in April, the so-called RGST bill has sparked a political firestorm today mainly because politics, like nature, abhors a vacuum.
The writer is Editor Business and Economic policy for Express News and Express 24/7.
Published in The Express Tribune, November 15th, 2010.
The parliamentarians are the same between then and now, the bill is pretty much the same too – except they called it the VAT bill back then and the RGST bill today. It’s the same International Monetary Fund (IMF), pushing it as a condition for releasing the same tranche from the same facility that Pakistan is still on. The government is the same. So what is today’s ruckus all about?
The VAT bill (as it was originally known) was originally drafted under the leadership of the then finance minister, Shaukat Tarin, around the same time last year. But by the time it was ready to be presented before parliament, Tarin had left the ministry.
The new finance minister, Dr Abdul Hafeez Shaikh, entered the picture on March 18. When the VAT bill was presented before the National Assembly’s standing committee on finance in April, the finance minister and secretary were both in Washington, trying to get the IFIs and the Pentagon to release some money to close the fiscal year with.
They were successful. The IMF released its pending tranche after accepting the plea that the VAT bill will be steered through parliament by June 30. A backlog of Coalition Support Funds was also released for the army, about $30 million of Kerry-Lugar money and a clutch or two of World Bank funding. The minister returned to Pakistan to applause from his political masters and the GHQ.
The VAT bill, however, stalled in committee and never made it before the full house. During his budget speech, Shaikh quickly announced a new deadline for when the measure would be presented before parliament: October 31.
But by mid-July it was becoming clear that importance of the bill had been seriously underestimated. Lower-level technical committees continued deliberating over whether collection of sales tax on services should be done in an integrated manner or the provinces could be empowered to collect the tax on their own.
One key member of the technical committee from Sindh disclosed in July that as far as he was concerned, his work was done. An agreement had been reached and the lower-level technical committees comprising secretaries and advisers had done their job. It was now the place of the political leadership to pronounce on the matter.
Several opportunities came and went to get the political leadership on board behind the initiative but the finance ministry failed to impress the cabinet to rally around the bill until it was too late. It failed to explain the importance of the bill for Pakistan.
Where the high-ups in the ministry should have been seen talking about the importance of passing this bill, talking aggressively to the public about the rich fat-cats who pay no taxes, they were instead focusing on the high offices of power in the government – as if they alone could deliver this most contentious of reform measures.
Unfortunately, the result of this misplaced gambit has been that the optics of the whole affair have slipped out of the economic managers’ hands. Where the VAT bill hardly stirred a feather in parliament back in April, the so-called RGST bill has sparked a political firestorm today mainly because politics, like nature, abhors a vacuum.
The writer is Editor Business and Economic policy for Express News and Express 24/7.
Published in The Express Tribune, November 15th, 2010.