Islamabad:
A Senate wing on Wednesday opposed the caretaker government’s decision to overhaul the Federal Board of Revenue (FBR) and called on the caretaker law and finance ministers to justify their maneuvers to introduce new legislation.
The Senate Standing Committee on Finance took this decision after Federal Board of Revenue Chairman Malik Amjad Zubair Tiwana confirmed that the proposed restructuring of the agency would require sweeping legal changes, splitting it into six to seven pieces.
“Initial work has shown that about 1,000 amendments to laws and rules will be required to implement the restructuring approved by the Special Investment Facilitation Council (SIFC),” the FBR chairman said. He explained that three types of amendments would be needed, including amendments to existing laws, statutory laws, rule amendments and new legislation.
As a result, the FBR will be fragmented into six or seven entities, including the Federal Board of Customs, the Federal Board of Inland Revenue, the Tax Policy Department, the Tax Policy Office and the directorates general of assessments, according to Tiwana.
SIFC has given a deadline of one month to implement the new restructuring.
The committee, headed by Senator Saleem Mandviwalla, decided to summon both Law Minister Ahmad Irfan Aslam and Finance Minister Dr Shamshad Akhtar to justify the caretaker government’s tendency to introduce restructuring and new laws without a constitutional mandate.
The Express Tribune had reported on Wednesday that differences between the FBR chairman and the caretaker finance minister persisted over the restructuring of the tax machinery. Both the finance minister and the FBR chairman failed to resolve their differences over the submission of a cabinet summary.
On January 3, the SIFC in-principle approved the administrative and legal restructuring of the FBR and directed the finance minister to submit a summary to the federal cabinet within 15 days for approval.
So far, the FBR has performed well this fiscal year, however, opposition in the Senate Standing Committee has raised concerns about possible disruptions in revenue collection, especially when Inland Revenue officers have threatened a nationwide strike. The differences between the Customs Service group and the Internal Revenue Service further complicate the situation.
If the proposed restructuring is implemented, the FBR will become a public-private corporation, said Senator Farooq H Naeek, former law minister and PPP committee member. He stated that this was a radical revolutionary setup and the interim government should stay away from it.
PPP Senator Sadia Abbasi also opposed the restructuring of the FBR, calling on the caretaker government to refrain from any such act which is not within its mandate.
Reading SIFC’s deadline to overhaul FBR expires
Opposition from the Senate Standing Committee on Finance weakens the caretaker government’s case, particularly with only 21 days to go before the general election.
The standing committee also postponed two bills proposed by the caretaker government regarding changes in banking laws on the grounds that it was not within the mandate of the officers to legislate on any matter.
Flawed Law on State Enterprises
The standing committee’s proceedings also revealed flaws in the Ministry of Finance’s preparation of the State-Owned Enterprises (SOEs) Act 2023 – an action the ministry had widely touted as one of its success stories.
The committee unanimously approved amendments to the SOE Act, proposed by Senator Bahramand Khan Tangi of the PPP, to further strengthen the law. The committee approved amendments to minimize conflicts of interest, prevent misuse of public funds and improve criteria for selecting top executives of state-owned enterprises.
Surprisingly, Finance Minister Imdad Ullah Bosal opposed the amendment to set the minimum experience for appointing the chief executive. According to the current law, any graduate with zero experience can be appointed as a managing director of a state-owned company. Current law favors bureaucrats becoming CEOs of these companies with little or no relevant experience.
The committee approved an amendment requiring at least 10 years of experience for the appointment of the managing director.
The track record of the finance ministry in appointing the right bureaucrats for the right state enterprises is very poor. Appointed additional secretary external finance as board member of SNGPL. Despite being transferred to the Establishment Department as special secretary, the officer still sits on the board of SNGPL.
Similarly, some additional and joint secretaries of the ministry occupy board positions with little or no industry experience. Budget people have been appointed to the boards of power companies.
The Finance Minister also admitted that the rules under the SOE Act 2023 are yet to be framed.
“How can a law be made operative without the approval of the rules?” questioned Senator Farooq Hamid Naek.
The committee also approved an amendment according to which the resources of state-owned enterprises cannot be used for personal monetary and political benefits. Again, the finance minister opposed the amendment.
Senator Tangi said political parties are using the resources of electricity distribution companies to influence voters.
Published in The Express Tribune, January 18u2024.
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