The most common tool for extracting benefits from the state in favour of particular person or group in Pakistan is the Statutory Regulatory Order (SRO).
Back in 2014, for example, the SRO 115(1)/2014 of 19-2-2014 literally suspended the Finance Act 2013 the Parliament to allow existing taxpayers, keep on evading taxes by just paying small amounts.
This represented a glaring example of how rulers, in connivance with crooked and complicit bureaucrats, used the SROs for quick benefits to themselves or the business groups they directly or indirectly belonged to.
A detailed study of losses caused by SRO for the Indus Consortium reckons that the cumulative losses because SROs (exemptions, non-taxation of benefits given to elites) during the last four decades could come up to over Rs. 100 trillion.
At one stage in 2013, following SROs were in force, largely to suit civilian and military-owned enterprise under various pretexts.
# Sixth Schedule of Sales Tax Act, 1990 [sales tax exemptions]
# 646(I)/2005 (zero rating),
#First Schedule of FED [8% for sugar], 1007(I)/2005 [sales tax exemption],
#172(I)/2006 [sales tax exemption],
# 880(I)/2007 [sales tax exemption],
# 863(I)/2007(zero rating),
# 76(I)/2008 [sales tax exemption],
#539(I)/2008 [sales tax exemption],
# 542(I)/2008 [sales tax exemption],
# 549(I)/2008 (zero rating),
# 551(I)/2008 [sales tax exemption],
# 26(I)/2008 [sales tax exemption],
# 811(I)/2009 (zero rating),
# 164(I)/2010 [sales tax exemption],
# 727(I)/2011 [sales tax exemption],
# 125(I)/2011 [reduce rate of 5% for textile, carpet, leather, sports and surgical],
# 125(I)/2011(zero rating),
# 408(I)/2012[sales tax exemption],
# 608(I)/2012 [reduce of 5% for black tea],
# 79(I)/2012 [reduce rate of 5% for tractors],
# Third Schedule of Federal Excise Act, 2015[exemptions of goods and services];
The Finance Act 2013 essentially required the banks to share transactions, deposits exceeding one million rupees. But the vested interest – epitomised by Sharifs, former finance minister Ishaq Dar and their political partners Asif Zardari – simply consigned the Act to dustbin. Dar also silenced the State Bank of Pakistan and the Financial Monitoring Units – the two key institutions to check suspicious transactions and accounts.
But the then PML-N government used the SRO 115(1)/2014 of 19-2-2014 to upend the Finance Act. Ishaq Dar had in fact reprimanded the then State Bank Governor for publicly talking of the amounts involved in the daily money laundering transactions.
Interestingly, before presenting the Finance Bill, 2013, FBR issued many beneficial notifications, especially for sugar and steel industries related to persons in power. How would otherwise be laundering of illegitimate funds, cash withdrawals from ghost accounts worth 10s of millions of rupees possible, as reported by the Joint Investigation Team (JIT)?
The then Chairman FBR had on May 13, 2014 admitted before the Senate Standing Committee on Finance & Revenue that exemptions and concessions given to the mighty ones from 2008 onwards amounted to a staggering Rs. 5,500 billion. The oversight by the Financial Action Task Force (FATF) in a way has come as a blessing in disguise for this hapless country where the unholy nexus of cartels comprising politicians, generals, bureaucrats, industrialists has milked country’s resources to the hilt.
Another case study of rule through SROs is the Monetisation policy in 2012 for all Grade 19 to 22 officials which allowed monetized transport allowance. 2012. But soon thereafter, SRO 569(I)/2012 was issued on 26 May 2012 providing that government officials in Grade 20-22 would pay just 5% tax on this allowance as a separate block of income. Using this as a cover, almost all bureaucrats continued “abusing” authority by using official or government pool cars with drivers. They found the cunning SROway – routed through the Federal Bureau of Revenues – to sidestep the Monetisation policy and continue living of public expense.
At the same time, after the Finance Act 2013 the flying allowance of PIA pilots was clubbed with their salaries “ in case of allowance exceeding basic salary.” But the Finance Minister did not treat the mighty bureaucrats the same way, thus allowing them to live off the public funds, points out Dr.Ikramul Haq in one of the string of articles on the issue.
Pakistan at the moment is clearly in the clutches of an “unholy alliance of lawmakers, law-keepers and law-breakers i.e. politician, bureaucracy and businesses tycoons. Only a revolutionary can dismantle this elite capture that continues to thrive through SROs.