Islamabad:
The Inland Revenue Service (IRS) has approached the Election Commission of Pakistan, urging the electorate to prevent the caretaker government from what it considers an “illegal and unconstitutional” restructuring of the Federal Board of Revenue (FBR).
The petition was filed during the opening meeting of a federal cabinet subcommittee, which remained unclear on Wednesday. A day earlier, the cabinet had formed a committee of six ministers to discuss the proposal to overhaul the FBR.
The cabinet had also refused to approve the outline for the restructuring of the FBR, citing lack of clarity and questioning the legal mandate of the caretaker government to go ahead with such a drastic restructuring.
During Wednesday’s meeting, the ministers expressed their views on the proposed restructuring of the FBR. A new meeting is scheduled for today (Thursday). The finance minister proposed separating the Internal Revenue Board from the Federal Customs Board, along with isolating tax policy from operations.
“The ECP should take cognizance of this illegal and untimely action and restrain the caretaker government from discussing and approving the summary, which is clearly beyond its mandate,” said the petition filed by the deputy Commissioner Ali Saleh Hayat Kalyar on behalf of the IRS.
The IRS is responsible for collecting income tax, sales tax and federal excise tax at the domestic stage, holding critical administrative positions within the FBR – a point of contention for the Customs Group, which is now seeking separation.
The petitioner noted that the caretaker finance minister has taken up the task of restructuring and overhauling the FBR with the aim of increasing the tax-to-GDP ratio from 8.5% to 22%. However, the proposed structure lacks a clear road map to achieve this goal.
The IRS has asked the ECP to intervene in a way that prevents the privatization ministry from going ahead with the sale of Pakistan International Airlines.
A month ago, the ECP had written to the cabinet secretary, dissuading the guardians from privatizing PIA, stating that such privatization “does not fall within the fabric of multilateral and bilateral agreements and these important policy-oriented tasks must be explored and be implemented by an elected government.”
Reading IRS finance minister deadlocked on FBR overhaul
The IRS argues that the caretaker organization lacks the mandate to make significant legislative changes, such as restructuring a major revenue department, which directly violates various laws, including the FBR Act 2007, Income Tax Ordinance 2001, Customs Act 1969, Federal Excise Act 2005, and Sales Tax Act of 1990.
“The proposed restructuring and reformation of FBR is illegal, unlawful, contrary to the mandate of the constitution and law and can be set aside, stopped and discontinued by accepting this representation,” according to the petitioner.
The petitioner cited Section 230 of the Electoral Act, stating that the caretaker government has been mandated to run the day-to-day affairs necessary to run the federation and the provinces in accordance with the law.
With less than three weeks until the general election, taking decisions with far-reaching implications would amount to stripping parliament of legislative powers, according to the petition.
He added that the restructuring of the country’s highest revenue service requires an inclusive approach involving all stakeholders and should be supported by the legitimate lawmakers elected by the people of Pakistan.
Making drastic changes in the Revenue Department without any discussion on the floor of parliament, bypassing public opinion and stakeholders’ interests, will lead to chaos and collapse of the entire system, he added.
The IRS has also opposed the creation of oversight boards under the proposed structure, stating that such boards, in the name of accountability, would open avenues for vested interests and may even include individuals with conflicts of interest.
He also said that the task of formulating tax policy, under the restructuring plan, is being assigned to a new board called the Federal Policy Board (FPB). The FPB will report directly to the finance minister, thereby politicizing the board’s role as its members will also consist of private sector individuals, which itself illustrates a conflict of interest, he added.
“It will be in the interest of justice as well as in the interest of the nation to restrain the caretaker government from discussing and approving the summary, which is clearly beyond its mandate,” according to the petitioner.
Published in The Express Tribune, January 25u2024.
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