Comments on Finance (Amendment) Ordinance, 2015 A good omen for Pakistan's future

The following gives an overview of significant amendments suggested by Tax Reforms Commission (TRC): The Federal Government through Finance (Amendment) Ordinance, 2015 ("FAO") has introduced following amendments in statute, by curbing discretionary powers of federal government and FBR, which in our opinion will serve a long way and will ensure transparency of issuance of such future notifications.
Amendments have been introduced in following statutes:
1. Customs Act, 1969 (IV of 1969)
2. Sales Tax Act, 1990
3. Income Tax Ordinance, 2001 (XLIX of 2001)
4. Federal Excise Act, 2005
Currently these amendments are part of FAO. In our opinion, these will be incorporated in the relevant statutes through Finance bill 2015-16.
The analysis of these amendments is as follows:
A. Customs Act, 1969 (IV of 1969) ("CA")
Title: Powers to exempt from custom duties
Sections: 19 and 20
Amendment(s): Amendment, Addition and Deletion
Historical Perspective:
Prior to the FAO, federal government had powers to exempt goods from customs duties ("CD") subject to conditions as it deemed fit. Section 20 of ITO empowers Central Board of Revenue ("Board") to exercise powers to exempt CD.
Significant Amendment: FAO amended section 19 of CA making it compulsory for the federal government to seek approval of Economic Co-ordination Committee of Cabinet ("ECC") to exercise its power to exempt any good from CD in the events of exceptional nature such as natural disaster, national food security in emergency situations, protection of national economic interests, etc.
Moreover, section 20 of the CA has also been deleted withdrawing above mentioned powers of the Board. Further, through addition vide subsection, it has been made mandatory for federal government to place before the National Assembly ("NA") all notifications issued under section 19 of CA in a financial year and all such notifications will stand rescinded at the expiry of that financial year, if not earlier rescinded.
B. Sales Tax Act, 1990 ("STA")
Title: Higher and lower tax rates and Exemptions
Sections: 3, 13
Amendment(s): Amendment, Addition and Deletion
Historical Perspective: Prior to FAO, federal government had power to notify any goods or class of goods imported into or produced or any taxable supplies made by a registered person or a class of registered persons to be charged at such higher or lower rates as specified in said notifications
Federal government also had powers to exempt goods from Sales Tax ("ST") subject to conditions as it deemed fit.
Further, vide clause (b) of subsection (2) of section 13 of STA, Board also had powers to exempt goods from ST by special orders stating the reasons therein for such exemptions.
Significant Amendment: The powers of federal government to notify higher or lower rates are restricted to taxable goods only by amending section 3 of STA.
FAO amended section 3 of STA making it compulsory for the federal government to seek approval of ECC to exercise its power to exempt any goods from ST in the events of exceptional nature as stated in A above. Moreover, clause (b) of subsection 2 of section 13 of the STA has also been deleted withdrawing above mentioned powers of the Board.
Further, through addition of a subsection, it was made mandatory for federal government to place before the NA all notifications issued under section 13 of STA in a financial year and all such notifications will stand rescinded at the expiry of the financial year, if not earlier rescinded.
C. Income Tax Ordinance, 2001 (XLIX of 2001) ("ITO")
Title: Exemptions and tax concessions in the second schedule
Sections: 53
Amendment(s): Amendment and Addition
Historical Perspective: Prior to FAO, federal government had powers to notify any addition, omission or change in any clause or condition in second schedule to the ITO.
Significant Amendment: FAO amended section 53 of ITO making it compulsory for the federal government to seek approval of ECC to exercise its powers to amend Second Schedule to the ITO. Further, through addition of a subsection, it was made mandatory for federal government to place before the NA all notifications issued under section 53 of ITO in a financial year and all such notifications will stand rescinded at the expiry of that financial year, if not earlier rescinded.
D. Federal Excise Act, 2005 ("FEA")
Title: Exemptions
Section: 16
Amendment(s): Amendment, Addition and Deletion
Historical Perspective: Prior to the FAO, federal government had powers to exempt goods from Federal Excise Duties ("FED") subject to conditions as it deemed fit.
Subsection (3) of section 16 empowered Board, under circumstances of exceptional nature, to exempt goods from FED by special orders.
Significant Amendment: FAO amended section 16 of FEA making it compulsory for the federal government to seek approval of ECC to exercise its power to exempt any goods from CD in the events of exceptional nature. As stated in A above. Moreover, subsection (3) of section 16 of FEA has also been deleted withdrawing above mentioned powers of the Board. Further, through addition of a subsection, it was made mandatory for federal government to place before the NA all notifications issued under section 16 of FEA in a financial year and all such notifications will stand rescinded at the expiry of that financial year, if not earlier rescinded.