''President won''t go for ordinance'': taxation bills stalled in parliament

"The President will not promulgate any Ordinance to impose 15 percent income tax surcharge and increase in Special Excise Duty (SED) by 1.5 percent," president''s spokesman Farhatullah Babar said while talking to Business Recorder on Thursday.
Answering a question about tabled bills relating to flood surcharge and special excise duty in November, he said that it is up to the government to find a way out to increase revenue. Babar added that Finance Minister Dr Abdul Hafeez Sheikh held a meeting with President Asif Ali Zaradri today (Thursday) to discuss the economy and briefed him on the on-going negotiations with International Monetary Fund (IMF).
Finance Ministry believes that the economy''s paramount need is to generate resources (internal as well as external) to reduce the burgeoning budget deficit at a level acceptable to the IMF, thereby reviving the stalled Stand-By Arrangement (SBA).
Other donors are linking release of pledged assistance to IMF''s Letter of Comfort, which would remain elusive without some revenue generating measures to reduce the fiscal gap, finance ministry sources further revealed. The FBR had argued that the only option available after strong resistance in Parliament to the two money bills tabled in November was to promulgate an ordinance.
It was decided that the FBR''s recommendation would be presented to Prime Minister Yousaf Raza Gilani for onward submission to the President. Specifics of the Ordinance, sources revealed, would include the imposition of a 15 per cent flood surcharge and an additional 1.5 per cent special excise duty. According to sources, the proposal was to withdraw tax exemptions being enjoyed by various sectors through the ordinance and by bringing changes in the relevant Statutory Regulatory Orders (SROs).
The view of FBR officials in the meeting with the high-ups of Finance was that promulgation of the ordinance was also required to withdraw sales tax exemption and impose 17 per cent tax on fertiliser, pesticides, agriculture implements and local sales of the five export-oriented sectors - textile, leather, surgical, sports goods and carpets.
The domestic consumption of imported cotton and cotton yarn was also to be brought under the purview of 17 percent sales tax. According to sources, the facility of refund would only be available to registered importers so as to encourage the informal or un-registered business people to avail the refund facility by coming into the tax net. Clearly the Presidency and the ministry of finance/FBR are not on the same page with respect to the issuance of ordinances, a senior PPP leader stated on condition of anonymity.