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Senate committee rejects key budgetary proposals

Updated June 18, 2019

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The committee did not insist on continuing the exemption of tax audit for three years post audit of any firm. — APP/File
The committee did not insist on continuing the exemption of tax audit for three years post audit of any firm. — APP/File

ISLAMABAD: A key parliamentary panel on Monday rejected a number of crucial budgetary measures including the treatment of mis-declaration of value of imports and exports as money laundering with 10-year imprisonment and giving powers to prime minister, instead of the federal cabinet, to appoint judges of customs courts.

While discussing the Finance bill 2019, the Senate Standing Committee on Finance, led by Senator Farooq H Naik, deferred a series of budgetary proposals and rejected many others to allow tax authorities to get well prepared about background, implications and improved legal language as well as better checks and balances of the proposals.

The committee, however, did not insist on continuing the exemption of tax audit for three years post audit of any firm is done, after Federal Board of Revenue Chairman Shabbar Zaidi pleaded that the three-year gap in tax audit was being done away under some conditionality of the donors.

Zaidi also informed the committee that the federal government was seeking to take over jurisdiction from provinces over general sales tax on restaurants because it believed the restaurants were selling goods and not the services that fall in the authority of the provincial governments.

He said the Ministry of Law had been requested to give its legal opinion on the subject. Senator Naik warned the tax officials that it was a constitutional issue and would have to be done through changes to the 18th amendment.

The FBR chairman said the transfer of funds abroad by understating the value of exports and overstating that of imports was also money laundering and was on the radar of the Financial Action Task Force (FATF) and hence the FBR could not withdraw the proposed amendment but was ready to introduce checks and balances to stop its misuse.

The amendment proposed that if anyone overstates the value of imported goods or understates that of exports or vice versa, such person shall be served with a notice within a period of two months from the seizure of goods to show cause as to why such goods may not be confiscated, according to amendment in the Customs Act of 1969.

Also, if a person commits trade-based money laundering, he shall be liable to penalty of confiscation of goods and upon conviction by a special judge, he shall further be liable to imprisonment for up to ten years, Rs1 million fine, forfeiture of property in accordance with the Anti Money Laundering Act of 2010.

PTI Senator Mohsin Aziz said the proposed insertion of section 32C in the customs act would lead to FBR officials misusing money laundering powers and affect genuine business transactions. Other senators also insisted that FBR was seeking to gain powers which should not be unbridled, otherwise tax officials with ulterior motives could also hold traders for some omissions. Zaidi said the proposal should be amended to the extent that once the malafide is established, then it be treated as trade-based money laundering.

The senators said the title of proposed section 32C was contradictory to its subject and intensions of the law and hence could not be allowed in its present form because mis-declaration of value of import or export could be punished with confiscation of goods or commensurate punishments.

The proposal was thus deferred until its language improved and punishments brought in line with relevant laws.

The committee also rejected a proposal seeking replacement of the word ‘federal government’ with ‘prime minister’ for appointment of judges of the custom courts in consultation with chief justice of the high court concerned and induction of advocates of high courts through public service commission.

Senator Naik opposed the proposal saying institutions need to be protected and the appointment of judges of tax courts was required to be completed through cabinet in consultation with the chief justices of high court under article 175 of the constitution, which had to be preserved and could not be trampled with through a money bill.

The committee also deferred another proposal for lack of clarity on creation of alternate dispute resolution forums and the composition of a committee to create such forums. It also recommended reconsideration of laws relating to property valuation and suggested that mis-declaration of value of property by the tax official and property owner through bribe should be proceeded against by under judicial system available for taxes and its jurisdiction not be given to other agencies. Otherwise the National Accountability Bureau would start harassing people.

After detailed discussions, the committee agreed to support government’s proposal for printing of retail price on imported products for the purpose of sales tax and allowing exemption of sales tax on cottage industry below annual turnover of Rs3m.

Published in Dawn, June 18th, 2019