EDITORIAL: Secretary Election Commission of Pakistan (ECP) in a letter to Secretary to the Caretaker Prime Minister barred the caretaker federal government from implementing administrative reforms in the Federal Board of Revenue (FBR) on Tuesday.
While acknowledging that “improvement and reformation of state-owned institutions is one of the core jobs of the government of the day; however, under the constitutional scheme and intent of legislature as expressed in Section 230 of the Elections Act 2017 the scope of functions of the caretaker government has been defined”, and he advised that the reforms be kept “pending for consideration by the new to-be-elected government by virtue of general elections.”
The sequence of events is unclear: was the ECP letter received by the Secretary to the Prime Minister before (or after) the scheduled cabinet meeting and, if so, were its contents known to the caretaker cabinet members before (or after) it approved the FBR revamp plan?
Be that as it may, a lot of work appears to have been undertaken by the caretaker finance minister to formulate and finalise the reform plan and she made a successful impassioned plea during the cabinet meeting that led to its approval.
However, only a few of the plan proposals were not under consideration by previous elected governments (sharing of data with FBR was already being implemented) and include a blueprint for FBR digital transformation and structural reforms.
The former include: (i) documentation that was put in place during the tenure of elected governments, which made it mandatory for all relevant state-operated (example Nadra) and private sector entities (example commercial banks) to share data, assets, transactions and income with FBR through a digital platform; (ii) digital invoicing to capture sales and purchase transactions, leveraging the technological prowess of Nadra and bringing in Karandaz to help digitise tax collections; (iv) digitisation of withholding tax collections; and (v) a new and simple scheme for untaxed sectors to ensure no human interaction.
Structural reforms envisaged are: (i) separation of policy function from operations; (ii) establishment of a separate Customs and Inland Revenue wings headed by DGs; and (iii) institutionalising a new oversight mechanism distinct from Customs and Inland Revenue.
With the exception of the decision to identify Karandaz to assist in digitising tax collections - Karandaz in which the caretaker finance minister served as chairman of the Board of Directors, with her critics challenging her decision as conflict of interest - and the institutionalising of a new oversight mechanism distinct from Customs and Inland Revenue, there is little that was not under discussion within elected governments.
That she has firmed it up goes to her credit; however, the mandate of the caretakers does not go further than firming up strategies/reforms for consideration by an elected government especially as elections are imminent - scheduled on 8 February.
The caretaker Minister for Water and Power, Muhammad Ali, has firmed up a plan to reduce the intractable circular debt (whose flow per month has risen during his tenure in spite of the IMF Stand-By Arrangement conditions to contain it) but which requires 1.268 trillion rupees for one working day – an amount that if disbursed at 9am will be returned by 5pm to the Finance Ministry.
Details of what he will do, other than to balance the books – an activity reminiscent of what Ishaq Dar did in 2013, borrowing from the banks and clearing 480 billion rupees of circular debt at one go through book adjustments which was later challenged by the Auditor General of Pakistan – is not clear.
The two most poorly performing sectors as per international donor agencies and domestic economists, notably the tax sector and the energy sector, have not only failed to show any improvement in performance for decades but have instead demonstrated a steady deterioration in performance.
The caretaker finance and energy ministers understandably wish to leave their portfolios on a positive note and that is simply not possible without approving and implementing structural reforms. They also need to be cognizant of an obvious fact, pointed out by the ECP: it is not within their competence/mandate to undertake structural reforms but they can formulate detailed/structured plans that an elected government may consider.
To influence and persuade the next government to positively consider structural reforms, it is appropriate to go the route of the caretaker Finance Minister, who not only publicised details of the reforms that were approved by the cabinet but also uploaded her impassioned speech to the cabinet outlining the reasons for the reforms on her ministry’s website.
Copyright Business Recorder, 2024
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