The pandemonium in the energy sector is not calming down; where the power sector dues and the circular debt continues to trot their way up, the progress on the January petrol crisis has only moved in the direction where five additional senior management officials of Pakistan State Oil (PSO) have been suspended, along with OGRAs chief sent on a three-month forced leave.
Hold your breath as this is not it! While those at the helm seem to be failing yet again at governance and transparency through unruly suspensions and delayed appointments, it is appalling how the government is still resorting to taxation through statutory regulatory orders (SROs): first the hike in petroleum taxes and then the increase in regulatory duty on the import of furnace oil through the governments controversial mini-budget exercise, both have serious legality issues.
While in conversation with BR Research, Dr. Ikramul Haq, Advocate Supreme Court, pointed out how all this is an unlawful delegation of power to the Executive ignoring the unambiguous ruling of the Supreme Court that Parliament/Legislature alone and not the Government/Executive is empowered to levy tax. Governments stance of increasing revenue collection in the falling price scenario appear to be somewhat convincing, but the fact remains that it is violation of the Constitution of Pakistan. He said that even though the government proclaims to do away with the SRO-culture, taxation through executive orders is just the opposite: unconstitutional in view of Article 77 read with Article 162 of the Constitution of Pakistan.
Apart from the legality issue and the Governments assurance for not bringing about any changes in the taxation system through the promulgation of SROs, another key aspect especially about the rise in petroleum taxes as highlighted by Institute for Policy Reforms is the trade-off between the federal governments financial stability and the economic growth as well as welfare in the country.
In its recent fact sheet, IPR underlines that such taxes are regressive in nature, burdening the poor further. Low petroleum prices are bound to bring relief to the masses, and IPR estimates that the Government has overcompensated for the impact of falling prices on GST revenue from POL products. The fact sheet highlights that the government has increased GST on petroleum products not only to compensate for the fall in revenue, but also to generate additional revenue to the tune of Rs36 billion on an annualized basis.
Though the opposition leader Khursheed Shah has chanted his objection regarding the hike in taxes, Parliament has to share the blame when it comes to the controversial SROs since long. If that is the case, the question is who will go to the court!