Senate panel refuses to validate disputed tax orders

ISLAMABAD: Acting in line with the Supreme Court’s historic judgment in August last year, a Senate panel on Wednesday refused to validate disputed tax orders that had been challenged in the courts.

The Supreme Court had ruled that the prime minister could not take decisions by himself or by supplanting or ignoring the cabinet because the power to take decisions was vested with the federal government, i.e. the cabinet.

The Senate Standing Committee on Finance and Revenue asked the government to take the issue of disputed tax matters to the federal cabinet or propose a separate legislation to provide legal cover to all tax notifications and orders issued after the 18th constitutional amendment.

The majority of tax orders have become disputed as a result of the Supreme Court judgment wherein it defined the federal government as the collective entity which is described as the cabinet constituting the prime minister and federal ministers.

The government has inserted a clause in all four fiscal laws in the Finance Bill 2017, suggesting “all notifications and orders issued and notified in exercise of powers conferred upon the federal government before the commencement of the Finance Act 2017 shall be deemed to have been validly issued and notified in exercise of these powers”.

“How can the Senate give its seal of approval without individually looking into each case as many Statutory Regulatory Orders (SROs) were person-specific,” said Senator Kamil Ali Agha of the PML.

Committee chairman Senator Saleem Mandviwalla asked the government to take the matter to the federal cabinet. However, the Senate’s recommendations are not binding on the government in case of the money bill.

Minister in-charge powers

After opposition parties raised concerns over the government move, an official of the Ministry of Law, Justice and Parliamentary Affairs opined on Wednesday that the Supreme Court might reject the federal government’s bid to delegate powers of the federal cabinet to the finance minister.

“The proposal of giving powers of the federal cabinet to a board with prior approval of the minister in-charge may be deleted,” said Sheikh Sarfraz Ahmad, Joint Secretary, Ministry of Law and Justice.

He added that instead, some of those powers might directly be given to the board, which would not raise eyebrows. He said there was a precedent where some of the federal government’s powers were used by the Federal Board of Revenue.

“The Supreme Court may think that it defined the federal government as the federal cabinet and now the government has given everything to a single minister,” said Sheikh while giving his views on the Finance Bill 2017 in the meeting.

Sheikh, who is a draftsman in the Ministry of Law, also suggested that the powers to increase tax rates should rest with the federal cabinet and only those powers may be delegated where procedural matters were involved.

Govt considering withdrawing banks’ special tax regime

After concerns shown by senators, Federal Board of Revenue Chairman Dr Mohammad Irshad also said that parliament might not delegate powers to the minister in-charge in case of increasing the tax rates.

He maintained that the FBR was facing serious problems after the Supreme Court’s judgment.

In the Finance Bill 2017, the federal government has proposed that its powers to change the scope of taxes, increase or decrease in tax rates, in addition to settling procedural issues may be delegated to the FBR with prior approval of the minister in-charge.

The move is aimed at circumventing the apex court judgment that stopped the prime minister from taking unilateral decisions.

The finance minister has sought sweeping powers for himself, including increasing and reducing tax rates and exempting people from taxes without the prior approval of parliament — or even the federal cabinet.

“We have no issue with delegating power in areas where procedural matters are involved but the powers to levy taxes cannot be given to anybody,” said Senator Saud Majeed of the PML-N.

The government’s proposal stirred a debate and legislators, mainly from the opposition, have interpreted it as an ‘unconstitutional step’ by the federal government. Many have seen the government’s proposal as a complete reversal of taxation reforms initiated under the three-year International Monetary Fund programme.

“This year’s Finance Bill should be dedicated to Finance Minister [Ishaq Dar] as in every third clause of the bill there is a proposal to delegate powers of the federal cabinet to the minister in-charge,” said Senator Saleem Mandviwalla while criticising the government’s move.

Senator Mohsin Leghari thinks that “any change in tax rates, either an increase or decrease, should only be done by the federal government.”

Source: The Express Tribune