ISLAMABAD: Disclosing that the government had profiles of 15 million suspected tax evaders, Finance Minister Shaukat Tarin informed the Senate on Friday that they would be persuaded through a third party to pay taxes or face the law.

Winding up the budget discussion in the upper house of parliament, he said section 203 of the income tax law would be reformed, but asserted that some deterrent provisions against tax evasion would be retained. “We must have the ability to act against wilful tax defaulters,” he stressed.

He said that not the Federal Board of Revenue (FBR), but the third party, like associations of traders, bankers and doctors, would talk to the people paying huge utility bills and holding hefty amounts in their bank accounts.

About arrest of tax evaders, he said it has never been done in the country, but it happens in other parts of the world.

IMF wanted imposition of Rs700bn new taxes, Senate told

He cited the example of arrest and conviction of Peter Graf, father of German tennis star Steffi Graf, for evading tax on her daughter’s income. He also referred to arrests of celebrated British horse-racing jockey Lester Piggott and US-based self-styled businesswoman Leona Helmsley, commonly known as hotel queen, over tax fraud and evasion.

Mr Tarin, however, assured the house that the action against tax defaulters would be taken only after a high-level scrutiny. “We are going to make it satisfactory for everybody because it has become a big issue”, he remarked.

About the much-talked about harassment by the FBR, he said the self-assessment had been restored. If a tax officer thinks something is missing, an audit will be proposed and a third- party random audit of 5-6 per cent of the cases will be carried out.

Referring to the accusations that the budget had been prepared by the International Monetary Fund, he said the IMF wanted imposition of Rs700 billion new taxes, including Rs15bn increase in income tax. But, he added, he resisted the demand.

Earlier, former Senate chairman and Pakistan Peoples Party (PPP) stalwart Mian Raza Rabbani in his speech remarked that it was said that the budget had been prepared by the Wise Men of Gotham, second grade IMF officers, Pakistani employees of the IMF and crony capitalists. “IMF is the new East India Company. Pakistan has willingly bartered its financial sovereignty and knowingly become a colony of financial colonialism.”

He said that while speaking in a TV programme on June 11, the finance minister said that “the Fund has asked Pakistan to present its budget so that the negotiations would continue”.

“This also implies that the debate in both the houses and the voting of the budget in the National Assembly is a farce; the actual budget will be decided at the conclusion of the IMF negotiations. Therefore, sovereignty rests with the IMF and not with parliament,” he remarked.

“It is a matter of shame that in his post-budget press conference, the finance minister says that ‘we have asked for six months’ extension in the construction amnesty scheme’. This again proves that financial decisions are not of the government of Pakistan, but of the IMF.”

Agreement with IMF

Mr Rabbani said the special assistant to the prime minister on finance and revenue in another talk show said that the IMF had reservations over the government’s decision to not increase electricity tariff.

He further said that it was decided that the power tariff would be increased by Rs4 per unit. The electricity rates have already been increased by Rs1.95 per unit and the increase of Rs1.90 per unit has only been delayed.

He said Mr Tarin had also admitted that already the electricity tariff had been increased by 40 per cent under the IMF agreement.

According to him, the government feels that it has an advantage with the United States, in terms of the US withdrawal from Afghanistan. Therefore, it could use its leverage with the US to soften the IMF. “What is the political price?” he asked and noted that military bases, ground support or air corridors to facilitate aerial reconnaissance would be heavy prices to pay.

Mr Rabbani also said the finance minister in his post-budget press conference had said that increase in the petrol price was expected in the future. The petroleum levy under the dictates of the IMF has to be increased up to Rs20 per litre. On June 15, 2021, when the budget was still under discussion, the government had increased the prices of petroleum products by over Rs2.5 per litre.

He questioned sweeping powers for the FBR and customs officers for arresting and prosecuting taxpayers and retailers proposed in the finance bill. He said the income tax law proposed to introduce a parallel system of inquiry and determination of liability and the FBR was being established as a body parallel to the National Accountability Bureau (NAB).

Mr Rabbani said parliament was being asked to give post-facto approval to a record Rs1.248 trillion supplementary grant for expenditure overruns and re-appropriation. He pointed out that in the last fiscal year this figure stood at Rs545bn.

Mushahid Hussain Sayed of the Pakistan Muslim League-Nawaz asked the government to review and reverse its decision to mortgage airports and motorways to get external loans.

“You cannot pledge your strategic assets. This is out of question,” he remarked.

Referring to the situation in Afghanistan in the context of withdrawal of US troops and the ongoing infighting, he said the United States was leaving behind the mess it had created for Pakistan.

Stressing the need for a national approach based on clarity, he noted that the US needed Pakistan more than Pakistan needed it. “We have a strategic space,” he observed.

Referring to allocation of Rs300 million for Afghanistan’s reconstruction, he asked as to why not an amount had been earmarked for reconstruction of health and education facilities in Gaza.

Published in Dawn, June 26th, 2021