The Inland Revenue Service (IRS) has approached the Election Commission of Pakistan, urging the electoral body to prevent the interim government from what it deems an “illegal and unconstitutional” restructuring of the Federal Board of Revenue (FBR).

The petition was filed during the inaugural meeting of a sub-committee of the federal cabinet, which remained inconclusive on Wednesday. A day earlier, the cabinet had formed a committee of six ministers to discuss the proposal to overhaul the FBR.

The cabinet had also withheld approval of the summary to restructure the FBR, citing a lack of clarity and questioning the legal mandate of the interim government to proceed with such a drastic restructuring exercise.

During Wednesday’s meeting, cabinet ministers expressed their views on the proposed restructuring of the FBR. Another meeting is scheduled for today (Thursday). The finance minister has proposed the separation of the Inland Revenue Board and the Federal Customs Board, along with the isolation of tax policy from operations.

“The ECP should take notice of this illegal and untimely action and restrict the caretaker government from deliberating and approving the summary, which is evidently beyond their mandate,” reads the petition filed by Deputy Commissioner Ali Saleh Hayat Kalyar on behalf of the IRS service.

The IRS is responsible for the collection of income tax, sales tax, and federal excise duty at the domestic stage, holding crucial administrative positions within the FBR – a point of contention for the Customs Group, which is now seeking separation.

The petitioner noted that the caretaker finance minister has taken on the task of restructuring and overhauling the FBR with the objective of increasing the tax-to-GDP ratio from 8.5% to 22%. However, the proposed structure lacks a clear roadmap to achieve this goal.

The IRS has requested the ECP to intervene in a manner that prevents the privatisation ministry from proceeding with the sale of Pakistan International Airlines.

A month ago, the ECP had written to the cabinet secretary, restraining the caretakers from PIA privatisation, stating that such privatisation “does not fall within the fabric of multilateral and bilateral agreements, and these important policy-centric tasks need to be explored and implemented by an elected government.”

Read Finance minister, IRS at stalemate over FBR overhaul

The IRS argues that the caretaker setup lacks the mandate for major statutory changes, such as the restructuring of a major revenue department, which directly violates various statutes, including the FBR Act 2007, Income Tax Ordinance 2001, Customs Act 1969, Federal Excise Act 2005, and Sales Tax Act 1990.

“The proposed restructuring and overhauling of the FBR is illegal, unlawful, against the mandate of the constitution and the law, and liable to be set aside, stopped, and stayed by accepting the present representation,” according to the petitioner.

The petitioner cited Section 230 of the Election Act, stating that the caretaker government has been given the mandate to run day-to-day affairs necessary to run the federation and provinces in accordance with the law.

With less than three weeks until the general elections, making decisions with far-reaching implications would amount to taking away legislative powers from the parliament, according to the petition.

It added that the restructuring of the country’s highest revenue agency requires an inclusive approach, involving all stakeholders, and should be supported by the legitimate law-making representatives chosen by the people of Pakistan.

Making drastic changes in the Revenue Department without any debate on the floor of the parliament, while bypassing public opinion and stakeholders’ interests, will result in chaos and the collapse of the whole system, it added.

The IRS has also objected to the establishment of oversight boards under the proposed structure, stating that such boards, in the name of accountability, will open up avenues for vested interests and may even include persons with conflicts of interest.

It further stated that the task of formulating tax policy, under the restructuring plan, is being assigned to a new board called the Federal Policy Board (FPB). The FPB will directly report to the finance minister, thus politicising the role of the Board, as its members will also consist of persons from the private sector, which in itself portrays a conflict of interest, it added.

“It will be in the interest of justice as well as in the interest of the nation that the caretaker government be restrained from deliberating and approving the summary, which is evidently beyond their mandate,” according to the petitioner.

Published in The Express Tribune, January 25th, 2024.

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