ISLAMABAD: The Upper house of the Parliament resounded with resent against 5 percent increase in General Sales Tax on petroleum products and the opposition staged a unified walkout, declaring the government decision unconstitutional.
Terming the move unconstitutional and violation of Supreme Court judgments, PPP Senator Raza Rabbani referred to Article 77 of the Constitution “which states that taxes can only be imposed through legislation.”
On the occasion, Finance Minister Ishaq Dar attempted to woo the opposition with the argument that the government needed the money to offset various issues.
“We would have had to cut the development budget if we did not take this decision,” Dar said, adding that Rs30 billion had already been spent on military operations against terrorists and an estimated $1 billion will be required for rehabilitation of internally displaced persons (IDPs).”
On the legal front, the finance minister quoted sub-section 2(b) of Section 3 of the Sales Tax Act of 1999 to argue that his actions were legal. However, Senator Rabbani pointed out that the Supreme Court recently ruled that the Sales Tax Act does not give the government the power to levy taxes by executive fiat.
Dar then pointed out that the same tactic had been used by the PPP under the Zardari Administration. Rabbani, a constitutional law expert responded: “If something went wrong during our times should be equally condemned and I do that,” going on to argue that if the government disagreed with the judiciary’s interpretation of the Sales Tax Act, it should challenge it in court.”
Rabbani then spoke of the political hypocrisy of the Nawaz administration’s stance on the matter, pointing to the PML-N manifesto which stated that the ruling party believed in increasing tax revenue through income taxes, not consumption taxes. He also said that the rate of taxes imposed on petroleum products with this decision was the highest in Pakistani history.
Dar, in turn, defended the government’s record on petroleum prices, stating that the combined effect of recently announced price cuts would result in a combined Rs400 billion in reduced costs to consumers, which would more than offset the Rs17.5 billion that the government would be able to collect in additional revenue over the next five months through this tax. He added that the tax would cover only a quarter of Rs68 billion revenue shortfall that the government faces as a result of the oil price decreases.
At one point, Dar effectively admitted that the move was an act of desperation. “I did not have any other tools available to me,” he said.
Although there was discussion over the issue, Senate Chairman Nayyer Hussain Bukhari ruled that debate on legal aspects of the sales tax hike be held on Monday. The finance minister also suggested that the Senate could ask the Oil and Gas Regulatory Authority for a briefing on how oil prices are set.
