Govt reneges on promise to end SRO culture ISLAMABAD: The government has issued about 228 Statutory Regulatory Orders (SROs) since it came to power though it promised to end discriminatory tax regime evolved over the years with such orders.
Finance Minister Ishaq Dar told the Senate on Friday that the government is following a policy of bringing transparency in tax laws and has abolished through the Finance Act 2015 the powers of the Federal Board of Revenue (FBR) to issue exemptions orders.
He explained that the government could now only grant exemption subject to approval of the Economic Coordination Committee (ECC) of the Cabinet in exceptional circumstances involving national security, natural disasters, national food security in emergency situation, protection of national economic interest in situation arising out of abnormal fluctuation in international commodity prices, removal of anomaly in taxes, development of backward areas and implementation of bilateral and multilateral agreements.
However, the report he tabled in the upper house revealed that only 15 out of 228 SROs were issued with the approval of the ECC or for implementation of ECC decisions. The detailed report, however, described another 79 SROs as “procedural”.
The minister said the government had also reviewed the existing concessionary regime under various SROs. “Entire concessionary regime has been reviewed by a high powered committee which had recommended a three year time span for elimination of concessionary SROs in three phases. Two out of three phases have been completed,” he said.
The report noted issuance of 16 new SROs under the income tax ordinance (ITO) of 2001 between Jan 1, 2016 to May 2016 and five of them were under the ECC approval while another six were described as procedural. Also, a total of 38 SROs under the ITO 2001 between January and December 2015 and only six of them were under ECC’s approval and 21 were described as procedural.
A total of 12 SROs under the ITO were issued between July 1 and Dec 31, 2014 and none of them had the ECC’s approval. Under the same law, the government issued 16 orders between July 1, 2013 and June 30, 2014 and none were in line with ECC’s approval.
The finance ministry said 75 SROs were issued between July 1, 2013 till July 21, 2016 under the Sales Tax Act and only one of them was issued with ECC’s approval. Likewise, 11 SROs were issued during the same period under federal excise powers without the approval of the ECC.
The number of SROs issued under the Customs Act of 1969 stood at 62 between July 2013 and July 2016 and the government did not report if they had the ECC’s approval.
Interestingly, the Finance Minister Ishaq Dar reported to the IMF in March 2016 that the FBR did not grant any new tax concessions and exemptions and the government did not issue concessional SROs, except under exceptional circumstances.
“Furthermore, parliament last year approved legislation permanently restricting the government’s authority to grant tax concessions or exemptions. Such concessions and exemptions are now in the purview of parliament, except in a number of specified exceptional circumstances, in which the Economic Coordination Committee (ECC) of the cabinet can grant them on a temporary basis”, he reported to the IMF.
The minister also reported to the IMF that the government had already reduced tax expenditures from 1.9 per cent of GDP in fiscal year 2013-14 to 1.3 per cent of GDP in 2015-16 and eliminating additional tax concessions and exemptions in 2016-17. “We will use any new concessions sparingly and for exceptional purposes”, he promised to the lending agency.
He said the trade policy reforms will increase consumer welfare and stimulate growth as a result of increased competition. “Simplifying tariff rates, phasing out SROs that establish special rates and/or non-tariff trade barriers in some 4,000 product areas, and improving trade relations should deliver the much-needed competitive environment”, he said.