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ISLAMABAD: The government will establish a new court of Inland Revenue to expedite the process of tax-related litigations in courts involving stuck up revenue of Rs3.5 billion owing to cumbersome procedure of four stages of appeals.

While briefing the National Assembly’s Standing Committee on Finance and Revenue presided over by Faizullah on Wednesday, Federal Board of Revenue (FBR) Chairman Dr Muhammad Ashfaq Ahmed stated that Rs3.5 billion tax cases including Rs300 billion custom duty are stuck in litigation. The chairman said that various stages of appeal procedure is cumbersome and time consuming; therefore, efforts are being made to reduce the stages.

Earlier, the meeting of the committee unanimously, cleared Financial Liability and Debt Limitation (Amendment) Bill, 2021 following briefing by the Finance Ministry that proposed law envisages reduction in debt-to-GDP ratio to 60 percent by 2026-27 with annual decrease of two percent.

DG Debt Ministry of Finance Muhammad Omer Zahid told the committee about the changes being suggested in the proposed law, and stated that quantum of government guarantees would be increased from six percent now to 10 percent after the approval of the law.

This is being done because the government is undertaking through public-private partnership some mega project for which the guarantees have to be issued, he said.

However, he added that every year debt-to-GDP ratio would be reduced two percent to decrease the debt-to-GDP ratio. Some members of the committee have been skeptical about cut in debt-to-GDP ratio and adherence to greater fiscal discipline when the guarantees are being increased to 10 percent.

Tax collection hamstrung by stay orders: govt

In replying to a question as to what would be pressure on the government bring about two percent reduction in the debt, he said that the government would have to explain before the National Assembly the reasons for the failure to do so. Later on, the FBR chairman told the committee meeting procedure to deal with the tax cases was very time consuming because there are four stages involved before the final decision from the Supreme Court.

He said that overgrowth in pending tax cases has been because these cases come under the purview of Article 199. All the cases were being taken to the courts under Article 199, he added.

The FBR chairman explained to the committee about the measures being taken to recover stuck revenue in the courts and stated that the FBR is increasing number of Appellate Commissioners and Tribunals besides establishing an Inland Revenue court, he said that the government has been in the process to simplify the four taxes of the FBR in order to make the system simple.

Ashfaq Ahmed said that the FBR has been trying to lessen the forum of appeals and will also introduce arbitration as a result of Alternate Dispute Resolution (ADR) have not been as per expectations. Ahmed said Pakistan has not been able to fix basic tax issues.

He added that development partners have been arguing that all the sectors of the economy have not been paying their due taxes and consequently, the entire burden of taxes is shifted to industry, which in turn becomes uncompetitive and eventually, the country repeatedly stuck in balance of payment crisis.

The FBR chairman informed the committee that the share of agriculture in the taxes has been negligible in proportion to its size and the same was the case with the service sector. Development partners have been suggesting distributing taxes on all the sectors to get out of the vicious circle of balance of payment crisis, he added.

We have been unable to justify to exemption doled out to various sectors, he said, adding that the sales tax regime has been overhauled through Supplementary Finance Bill, 2022 as prior action of the International Monetary Fund (IMF).

The meeting again deferred approval of governance and operations of the State-Owned Enterprises after members did not agree to approve it with flexible and fluid procurement policy for the SOEs, and wanted adoption of standardised procurement procedure.

Ayesha Ghous Pasha said that there are more than 200 government-owned entities and with the proposed procurement policy every one of them would come up with its own policy.

The meeting was informed that the committee’s recommendation to include members of the parliament in the board of the SOEs have been included and the speaker can nominate a member of the National Assembly or chairman of the Senate from the Senate.

The committee members suggested that non-parliamentary board member should at least have 10 years’ experience in the relevant field and Pakistani citizenship. However, Syed Naveed Qamar said that there is not harm in making dual nationals members of the board because they are also patriotic. The committee directed the Ministry of Finance and the Ministry of Law to bring the law in the next meeting after making necessary changes in the light of observations of the members.

Copyright Business Recorder, 2022

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