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Given no apparent end in sight in the growing number of coronavirus cases across Pakistan, in an unprecedented move the Federal Board of Revenue (FBR) has started budget preparation exercise by seeking tax proposals from the chief commissioners and collectors of Customs through video conferencing with the direction to timely finalise proposals keeping in view the current tax/economic practice in vogue.

The FBR has also decided that the budget consultative process for 2020-2021 with the business community would also be carried out through video conferencing. In this regard, the FBR has issued budget instructions to the field formations on the video link conference, here on Friday, specifying timely completion of the exercise like in the past years.

According to the FBR's instructions to the field formations, the budget exercise 2020-2021 has been initiated and the process of formulation of budget proposals has to be completed in the context of current tax/economic practices in vogue.

In view of the critical importance of the task, it has been decided to hold a video link conference between the tax authorities and the chief commissioners Inland Revenue as per schedule issued by the FBR, the directive added.

It is learnt that the FBR chairperson and members have started internal budget meetings, but there are no visitors allowed in the FBR Headquarters due to precautionary measures taken to tackle the outbreak of the coronavirus.

The FBR has started receiving budget proposals from stakeholders. Keeping in view the current circumstances and lockdown in the country, the FBR has so far not held any meetings with the business and trader community.

Sources said that if the current situation persisted, the FBR was likely to have meetings with the business and trade community through video conferencing, and use of other electronic tools available for interactive sessions.

When contacted, Dr Ikramul Haq, an international tax lawyer/researcher explained legal and constitutional position for the passage of budget in an extraordinary situation.

Dr Haq stated that in case of any taxation measures or giving relief from any tax, in the absence of session of the National Assembly, the government can use Article 89 of the Constitution of Pakistan.

The president on the advice of the prime minister can issue an ordinance. The last issued was the Tax Laws (Second Amendment) Ordinance, 2019 on December 28, 2020. Besides, taxation, the president can issue any amendment in any law within the parameter of Article 89.

As regards federal budget for FY 2020-2021, Article 80 of the Constitution, requires that the federal government shall, in respect of every financial year, cause to be laid before the National Assembly a statement of the estimated receipt and expenditure of the federal government for that year, referred to as the Annual Budget Statement.

The same can be prepared and presented prior to July 1, 2020. The speakers can amend rules to hold session using information technology, Dr Haq maintained. The international tax expert said that for supplementary and excess grants, Article 84 of the Constitution can be used.

Only Article 86 deals with authorisation of expenditure when assembly is dissolved, which is not the case under the present circumstances. The presenting of budget is necessary for authorisation of expenses for which the speaker with the consultation of a standing committee should amend rules for holding office through internet using various platforms available or Pakistan Revenue Automation Limited (PRAL) can be asked to prepare one specifically for the National Assembly, Senate and provincial assemblies.

For proclamation of financial emergency, Article 235 is available but it requires to be laid down before a joint sitting and shall cease to be in force at the expiration of two months, unless before the expiration of that period it has been approved by resolution of the joint sitting and may through a resolution be extended for a further period not exceeding two months at a time; but no such proclamation shall in any case remain in force for more than six months.

"There is no need for invoking Article 235 as budget for the next fiscal year can be prepared and presented and there is no bar in the Constitution that session cannot be held by using IT facilities. By this time, the speaker must have worked on it as well as Cabinet must ponder over it in case the COVID-19 outbreak continues, for which nobody can predict when it will end," Dr Haq explained. When asked about consultative process for finalisation of budget, Dr Haq stated, "budget markers can seek budget proposals through internet, many programmes are available like ZOOM, Google Meet etc."

"The government can also interview the speaker for his intake to amend rules for holding sessions through internet using the above or any other platform," the global tax expert added.

Another tax expert said that the Constitution had a specific article to deal with the situation in case of emergency in Pakistan.

For instance, the government can reduce the period of debate and the passage of finance bill by the Parliament from six weeks to three weeks in case of emergency.

However, it is yet to be seen whether there is a need to invoke the article of the Constitution to deal with the current emergency-like situation. Last month, the FBR had asked the business community and the tax officials to submit budget proposals for 2020-2021 with the specific focus of eliminating tax fraud, plugging in loopholes, and facilitating genuine taxpayers.

According to the FBR, the board invites the proposals for the coming budget for FY 2020-2021 relating to sales tax and federal excise, on six broad parameters. First, the proposals should focus on broadening the tax base and increase in revenue collection.

Second, amendments may be suggested in any of following laws/rules etc including the Sales Tax Act, 1990, the Federal Excise Act, 2005, the Sales Tax Rules, 2006, the Federal Excise Rules, 2005, and the ICT (Sales Tax on Services) Ordinance, 2001.

Third, amendments may be suggested with a view to achieve simplification, remove difficulties and anomalies, and to abolish any outdated/obsolete provisions. Fourth, wherever possible a draft proposed amendment/procedure may be enclosed along with revenue impact both in soft and hard form.

Fifth, the FBR would especially welcome proposals for eliminating tax fraud, fake and flying invoices, plugging loopholes if any, facilitating genuine taxpayers, and making the procedures transparent.

Sixth, the proposals should be made keeping in view the consequences for the other related trade groups, which might be adversely affected by the proposed measure, the FBR added.

Copyright Business Recorder, 2020