Editorial: The News - 22 June 2013

SC and GST

The Supreme Court on Friday shot down the main plank of Ishaq Dar’s hurriedly put together federal budget by declaring the General Sales Tax unconstitutional and ordering its immediate withdrawal. A three-member bench headed by the chief justice judged in a suo motu case that the government does not possess the right to impose an additional sales tax. The court also held that the decision to impose nine percent additional sales tax on CNG is also unconstitutional and no additional tax can be imposed without passage of the finance bill. The judgement throws a big spanner in the new government’s financial workshop but – rightly and admirably – Finance Minister Dar has accepted the judgement and the FBR has slashed the prices of petrol, diesel and CNG to the June 1 level. A big question mark hangs in the air about the money collected so far, where it will be spent and how. The court has ordered that it be deposited with the Supreme Court registrar for the time being.
While the judgement may be a temporary hurdle for the new government, it is basically an attempt by the Supreme Court to lay down the proper procedure to impose new taxes. That every tax must be passed by parliament before the people are asked to pay it is a principled position but practically, and in our highly unregulated tax collection milieu, it may be a nightmare for any government to stop vendors from charging ordinary people once an increase is announced. Otherwise goods will disappear from the markets, hoarding will ensue and once the prices increase they will be sold with additional profit.
On this strong argument, Ishaq Dar has relied on a 1931 law – the Provisional Collection of Taxes Act – which allows governments to start charging any tax as soon as it is announced. But that has also been declared unlawful by the apex court. The suo motu case and the SC judgement have thrown the budget-makers and the markets in a spin, while ordinary people may be happy. Yet it is a foregone conclusion that the finance bill will be passed with the increased GST and this hurdle will be crossed in a few days. The best solution would be for the government to come up with a new law to manage imposition of taxes and levies from the day they are announced – in a way that satisfies the judiciary and does not allow black-marketeers and hoarders to play havoc with prices. When today the IMF is in intense negotiations with the new government in Pakistan, the GST fiasco could not have come at a worse time. While the government may not get a few more billions in these days of waiting for the finance bill, some permanent good is likely to come of this – making the taxation process smooth and transparent. The SC had also probably taken up this case to achieve this goal and not to disrupt the working of a newly inducted government.

Security for all?

In a wide-ranging press conference, Interior Minister Chaudhry Nisar Ali Khan touched on national and provincial issues concerned with security. The formulation of a national strategy to counter terrorism and improve security for all is of the highest priority, as well as ironing out some of the more blatant abuses of power by those for whom ‘protocol’ is expressed by the number of armed officers that are deputed to ‘protect’ them. The interior minister announced that Rangers and Frontier Constabulary officers had been withdrawn from protection duties of a number of ‘personalities’ and that henceforward the only security details will be to protect the president, the prime minister and the chief justice. Chaudhry Nisar also announced a ban on the issuance of arms licences – be they of prohibited or non-prohibited bore. It will be recalled that legislators have in their gift tens of thousands of licences to issue every year, something that has done much to proliferate the irresponsible use of firearms nationally.
Of particular note were the interior minister’s comments on the security situation in Sindh (rather the lack of it) and the ongoing carnage in Karachi, a stark reminder of which was provided by the daytime murder of an MQM MP and his son which has led to another shut down of the city and sporadic violence. He gave the Sindh government a one-month deadline in which to put a stop to target killings in Karachi and elsewhere in the province. This is a tall order. If the Sindh government fails to comply – and it is difficult to see how it could within a month even if it really wanted to – then the federal government will ‘offer its services’ for the maintenance of law and order. It is not difficult to read between the lines. Either the Sindh government gets its collective act together and makes a determined and coordinated attempt to end the butchery or the federal government will step in and impose a solution. On a broader note, but again security related, Chaudhry Nisar said that the civil armed forces had been told to present their recommendations as to how they were going to tackle security issues within two days – a very brisk order of business. Again in contrast to the piecemeal approach to the entire spectrum of security issues by the previous government, there seems to be evidence of joined up thinking in what the minister is proposing. If he really can get agencies better coordinated then it will be for the public good. If he really can force peace – of sorts – in Karachi then millions of people are going to breathe a sigh of relief. There is a new broom at the interior ministry, and an awful lot of sweeping up to do.