Tax waiver of Rs64.2 billion avail by only 37 enterprises

Tax waiver of Rs64.2 billion avail by only 37 enterprises

ISLAMABAD: An amount of Rs64.2 billion has been granted as waiver to only 37 enterprises, including the State Bank of Pakistan (SBP), Dr. Ikramul Haq, Advocate Supreme Court said on Monday.

He was addressing a webinar hosted by Pakistan Institute of Development Economics on the topic of ‘Impact of SROs on Pakistan Economy’.

Further highlighting the cost of tax exemption, Dr. Ikram said that the Supreme Court of Pakistan’s Diamer-Bhasha Mohmand Dam Fund donations had cost Rs2.13 billion as tax expenditure under income tax.

“Total cost of exemption on perquisites, benefits and allowances received by judges of Supreme Court of Pakistan and High Court is estimated at Rs 283 million. Value of tax-free superior judicial allowance was at Rs526.507 million for in-service judges and for the retired judges it was Rs605.280 million,” according to presentation of Dr. Ikramul Haq.

While criticizing the issuance of SROs, he said that the SROs, other than for rule making or clarification or guidance, are in utter violation of the supreme law of the land and binding judgments or Supreme Court under Article 189 of the Constitution.

“Even rule-making power should be subjected to approval by Parliament as is the case in many countries,” he added.

The impact of SROs on the economy, Dr. Ikramul Haq said a typical shock follows a cumulative drop of real GDP per capita of 5.8 percent over the court of 10 years.

“This means about 0.171 percent – 0.885 percent of real GDP per capita growth is lost every year due to SRO exemptions,” he added.

Taxation that includes reduction or enhancement of rates or giving exemptions, waivers and concessions by SROs is a flagrant violation of the Constitution.  “Blame lies solely with legislators that have delegated (rather abdicated) their constitutional obligation,” he added.

He further added: “Delegation of power to executive to issue SROs is violation of Article 77 read with Article 162 as any Bill that imposes or varies a tax or duty, the whole or part of the net proceeds whereof is assigned to any province, cannot be even tabled in Parliament without the prior approval of the President.”

He pointed out that a report of World Trade Organisation (WTO), Trade Policy Review of Pakistan (March 24 & 26, 2015) highlighted that about 4,500 SROs were issued leading to a revenue loss of Rs 650 billion.

Exemptions/concessions given through SROs were of Rs. 5500 billion from 2008 to 2013 alone, as admitted by the Chairman FBR before the Senate Standing Committee on Finance & Revenue on May 13, 2014.

Reduction of duties and tax concessions for those possessing enormous money power by Executive by using its executive authority available in the form of SROs, has created innumerable tax distortions in tax system.

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