KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Mian Nasser Hyatt Maggo has said that a high-level inquiry be conducted into the deliberate acts of “debt mismanagement” which has cost the country’s taxpayers Rs2,500 billion and is still bleeding fiscal resources.
He said there is a need for making negotiations with the International Monetary Fund (IMF) more transparent by involving the representatives of the FPCCI.
Elaborating further debt mismanagement, the FPCCI president in a letter to Finance Minister Shaukat Tarin on Wednesday stated that it is disturbing for the business community to learn from media reports that the IMF has demanded that more taxes of Rs500bn be put in the current fiscal year which shows a clear disconnect between the tax targets and fiscal management. This is the mismanagement of the federal debt that needs to be addressed rather than increasing tax burdens and restricting the economic growth.
The letter is co-signed by former federal secretary and FPCCI Policy Advisory Board chairman Younus Dagha.
Apex chamber demands inquiry to fix responsibility; wants representation in ongoing negotiations with IMF
He said interest rates were unjustifiably jacked up to 13.5pc despite 8-9pc inflation at the beginning of the IMF programme. The move derailed the economy and led to the country’s first- ever negative growth after 1952. This had also diverted an additional amount of Rs1.1 trillion of taxpayers’ money into the banks annually which is almost equal to country’s defence budget, increasing debt servicing to Rs2,709bn in FY20.
Mr Maggo said it was told that this inflation targeting interest rate regime would bring inflation down and everyone expected lowering of interest rates.
It is surprising, he added, that under the watch of IMF, the then finance minister unjustifiably took the decision to commit the federal government to higher interest rates for coming several years by re-profiling short-term loan to long-term at very high rates despite expectation of lower rates in the coming years. Banks got up to 100pc growth in their profits due to such decisions.
The FPCCI chief said such acts of debt mismanagement need to be reversed to address the fiscal needs. It is the responsibility of both the Finance Division and the IMF who allowed such harmful decisions to be taken when the country needed better fiscal planning.
He urged the finance minister to re-fix the interest rates by negotiating with the lending banks and bring down the debt servicing needs of the federal government which would bring down fiscal deficit and also provide much-needed funds for the country’s development.
Meanwhile, in a separate press release, Mr Maggo also recorded his strong reservations on the attachment of bank account under section 140 of the Income Tax Ordinance 2001 and Section 48 of the Sales Tax Act 1990 and termed the new amendment as a hurdle to ease of doing business as envisioned by the prime minister.
He stated that on the instructions of the prime minister the government machinery made an atmosphere that unless the taxpayers are at ease to do their business without any fear of the tax officials, it is not possible to boost the collection of revenue.
However, he said, it seems that the said atmosphere is again at its disturbance in the light of the Federal Board of Revenue’s (FBR) Oct 11 letter wherein attachment of bank account is ordered to be made without informing the taxpayers and implementation is ordered retrospectively on all recoveries.
The president FPCCI said that the trade is under pressure due to escalation of parity between the dollar and rupee and now comes the draconian steps being taken by the FBR in the shape of instructions to forcefully recover the disputed taxes from the bank accounts of taxpayers.
He said that the tax machinery is almost at a failure to dig out new taxpayers instead it is bent upon on hand twisting methods against the existing taxpayers to collect so called revenue. On the other hand if such practices are enforced it will pile up the litigation between the tax collectors and taxpayers and the courts are already at a burden due to such litigation.
The trade community feels that the hierarchy of the FBR is under pressure to meet their targets and to recover the disputed taxes by using their extraordinary powers.
In recent months, the taxpayers have been complaining about the “highhandedness” by the FBR.
The matter had also landed in the Senate Standing Committee on Finance that last week recommended the government to sack taxmen who made exaggerated tax demands and then rejected appeals of taxpayers under pressure from FBR headquarter.
Published in Dawn, October 14th, 2021