THE just-dissolved parliament has left behind a legacy of unethical practices by the then government’s move to support, though stopping short of passing, two controversial tax bills into law during the concluding days of the National Assembly.
Many of the assembly’s members were publicly committed to oppose and block the bills at all costs.
What surprised many was the kind of tactics the opposition employed to let the tax amnesty bill be passed in the Senate on January 4, and then in the NA standing committee on finance on March 6. They may have adopted the face-saving methods of walkout, boycott and absence, had the two bills, one for whitening black money and the other for legalising smuggled vehicles at nominal tax rates, had been presented for vote in the house. However, the government itself dropped the idea at the eleventh hour.
But the proposed bills are still out of the harm’s way, as finance minister Saleem H Mandviwalla has hinted at the possibility of a presidential ordinance for the enforcement of tax amnesty, since it was because of a shortage of time that the NA could not take up and pass the bills. Besides, there is Plan B as well, and the Federal Board of Revenue (FBR) has administrative powers in this regard for meeting tax shortfall. So, nothing is lost.
One reason many lawmakers lost interest in the amnesty bill was the amendment incorporated in it at the NA committee level, which said that parliamentarians, officials and their immediate families will not be offered tax amnesty. But their interest in legalising smuggled vehicles remained unaffected. The FBR issued the notification for the vehicles amnesty scheme late on March 5 – the same day the PPP-led coalition government approved the bill with a majority vote at the NA standing committee meeting with an assurance that it would move it in the NA the next day for approval.
It is interesting to note that the impossible became possible only after the NA standing committee chairman Khawaja Sohail Mansoor decided to not chair the meeting as a matter of principle and walked out. He also took along with him the next chairman Abdul Rahib Godil, thus creating conditions for Nafeesa Shah of the People’s Party to chair the meeting of the committee, which then comfortably passed the bill with the support of PML-N parliamentarians.
FBR Chairman Ali Arshad Hakeem claims he could net more than 3.195 million tax evaders within three months. FBR officials had once said that they would not mind, in fact they would prefer, if the scheme was passed and implemented during the tenure of the caretaker government.
Although the vehicles amnesty scheme amounts to promoting the smuggling of vehicles, the fact remains that the customs department, with its limited manpower, cannot lay hands on smugglers or owners of smuggled vehicles, most of whom are influential people having close connections in the bureaucracy. The argument goes that since the violators neither pay excise duty nor any taxes at any stage, under this scheme, they will at least provide some revenue to the exchequer.
About 150,000 vehicles are expected to be regularised under the new scheme, and the FBR is likely to net Rs10-15 billion in revenue as a result.
A total of 2.8 million smuggled vehicles are plying on roads across the country. But motor dealers do not accept the figures, and say that only 30,000 to 40,000 vehicles may be regularised under the amnesty scheme.
During a campaign against non-custom paid vehicles, the FBR had identified a person who had 618 vehicles registered in his name, but he didn’t have a national tax number (NTN).
This is the second amnesty scheme introduced by the outgoing coalition government. Last year, it gave amnesty to those who wanted to whiten their black money by making investments in the stock market.
The amnesty scheme for smuggled vehicles does not go well with local automobile manufacturers and dealers, who allege the government is encouraging unlawful activities.
All Pakistan Motor Dealers Association has rejected the amnesty scheme, saying the government is promoting smuggling. It says that so far, a 1998 or 2000 model of the Land Cruiser was available for Rs800,000 to Rs900,000 in Balochistan, but after the announcement of this scheme, smugglers increased their rates to Rs1.5-1.6 million. This shows who are the beneficiaries of this scheme.
This advantage would only be available to a particular class which has smuggled or bought smuggled used cars in the past few years and not paid any duty.
Meanwhile, the Competition Commission of Pakistan (CCP) has, in a policy note to the FBR, highlighted the flaws in the policy of legalising smuggled vehicles by paying comparatively less taxes, saying the scheme has placed both the importers of used vehicles and assemblers of new cars at a disadvantage.
Since the government introduces such a scheme from time to time, this may result in the creation of “a grey market for automobiles in the country on a sustained basis”.
Some of the flaws the CCP pointed out are: the allowable age limit for import of a car is three years while there is no age limit for the smuggled/ non-duty paid motor vehicles under the amnesty scheme. As a matter of fact, the persons who have violated the law by not paying taxes and duties have been incentivised to import motor vehicles of their choice without imposition of any allowable age restriction on them.
The policy is discriminatory against persons importing motor vehicles through normal channels, to the extent that the facility of duty and tax concessions has not been extended to the vehicles imported in violation of the ‘Import Policy Order’ via normal channels through a custom station. On the other hand, the smuggled vehicles anywhere in Pakistan, but outside the premises of custom stations, have been allowed to avail the facility of duty and tax concessions under the scheme.