Finance Bill 2022-23: Empowering Bureaucracy to Implement 'Zero Tax' Regime
In
a meeting chaired by Senator Saleem Mandviwalla, the Senate Standing Committee
on Finance conveyed to the Federal Board of Revenue (FBR) that the Finance Bill
2022-23 grants the bureaucracy the authority to create a taxation regime with
zero taxes for the business community. The committee was briefed on the
incorporation of budget recommendations from the Senate into the budget for the
year 2023-24 and highlighted its concern about the empowerment of the
bureaucracy to establish a tax-free system.
The
committee received a briefing from a senior official of the FBR, stating that
separate rules would be introduced for a specific purpose. The provision will
be applicable in cases where a transfer pricing audit is initiated based on
risk profiling.
During
the briefing, the committee emphasized that any prescribed rules should be
transparent and serve the larger public interest rather than benefiting a few
individuals.The committee took note of the Finance Bill's extension of income
tax exemption, which was set to expire on June 30, 2023, for residents of the
erstwhile Fata/Pata. The committee rejected this extension, but the government
decided to extend it for one more year, citing reasons for the development of
the area and local employment.
Regarding
recommendations, the Finance Division received 55, while the FBR received 97
proposals. The finance bill incorporated 77 of these proposals, and partial
implementation was carried out on 15 recommendations.
The
committee was informed that Rs35 billion has been allocated for the Universal
Service Fund (USC), with Rs5 billion specifically allocated for the Prime
Minister's Package. Additionally, the Finance Division allocated Rs5 billion
for the Prime Minister's Laptop Scheme and imposed taxes on bonus shares.
The
committee's recommendations related to the privatization of loss-making
enterprises, increased budget allocation for the health sector, rehabilitation
of flood victims, availability of subsidized food items, increase in TV fee
from Rs35 to Rs50 per month in electricity bills, and mechanisms for subsidies
on fertilizers, solar energy production, and daily food items were fully
adopted. However, the ministry only partially adopted recommendations like
granting tax holidays to export industries and laptops schemes, explaining that
sufficient support was already being provided to the IT sector and
export-oriented industries.
Regarding
the Small and Medium Enterprise (SME) Bank, the committee recommended that the
Cabinet review the decision to close the bank in the interest of the weak
business community and the associated employment. The federal cabinet had
approved the winding down plan to protect depositors' interests and minimize
financial losses to the national exchequer. As of June 30, 2023, the bank
successfully paid Rs5.227 billion to its depositors and was actively working to
facilitate withdrawal for remaining customers.
The
committee also discussed the matter of imported vintage cars still parked at
the dry port for clearance. Despite exemptions on various duties and taxes
granted by the federal government in 2018, the cars remained uncleared. The
committee urged expedited action on the matter and mentioned that it would be
taken up in the Senate Committee on Commerce in coordination with the Commerce
Ministry and the federal cabinet for relaxation on the Import Policy Order
(IPO).
The
committee received letters from some sectors reporting the opening of selective
Letters of Credit (LCs) even after the lifting of all restrictions.
The
committee also addressed the news about the potential launch of Pakistan's
first-ever digital currency. The State Bank of Pakistan (SBP) stated that no
decision had been made yet, and they were closely monitoring other central
banks' experiences with their digital currencies.
Lastly,
the committee discussed the issue of Hawala/Hundi, noting that an estimated $6
to 8 billion in remittances were coming through this informal channel annually.
The SBP, however, reported that $27 billion in remittances were recorded in the
previous financial year and that the government was taking measures to
encourage remittances through formal banking channels.
