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What New Finance Bill 2022 means

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Muhammad Arif : Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), Former Head of FSCD SBP, Former Head of Research ArifHabib Investments and Member IFSB Task Force for development of Islamic Money Market, Former Member of Access to Justice Fund Supreme Court of Pakistan

The National Assembly on 14th January 2022, Thursday passed the Finance (Supplementary) Bill, 2021, termed widely  as a “mini-budget”, despite vociferous protests by the Opposition over rejection of their proposed amendments and disagreement over the vote count.

The session, which began at 4pm and ran well past 11pm, also voted on the State Bank of Pakistan (Amendment) Bill, 2021, as part of a 64-point agenda. The SBP bill too received the lower house’s approval.

The Opposition’s amendments to the finance bill were all rejected. When voting first took place, 150 members voted in favor of the amendments, while 168 voted against them. Upon a recount due to the Opposition’s objections, there were 146 votes counted in favor of the amendments, and 163 counted against them.

The government had an edge of 18 parliamentarians to get the bill passed.

The National Assembly is comprised of 342 lawmakers, of which the government MNAs numbers 182 and the Opposition MNAs number 160.

In today’s session, 14 of the government’s lawmakers are absent and 10 from the Opposition side.

The approval of the supplementary finance bill was necessary to ensure Pakistan’s sixth review of the $6 billion Extended Fund Facility (EFE) gets cleared by the IMF’s Executive Board, which is scheduled to meet later this month to decide the disbursement of a $1-billion tranche.

On Tuesday, the lower house of Parliament had formally begun a general debate on the “mini-budget” which saw the government’s coalition partners joining the Opposition to voice concerns over possible implications of the new taxation measures.

Prime Minister Imran Khan arrived in Parliament to attend today’s session, walking in to “boos” by the Opposition benches, and a loud thumping of desks by the treasury benches. Leader of the Opposition in the National Assembly Shehbaz Sharif was also in attendance.

The government’s amendments to the proposed bill were approved by the National Assembly. The amendments include:

  • No general sales tax will be imposed on a 200 gram carton of milk.
  • A 17% general sales tax will be imposed on formula milk worth Rs500.
  • Tax on imported vehicles has been increased from 5% to 12.5%.
  • The federal excise duty on all imported vehicles will remain unchanged.
  • A 2.5% duty will be charged on locally manufactured 1,300 cc vehicles, which was previously around 5%.
  • Duty on locally manufactured 1,300 to 2,000cc cars was also reduced to 5% from 10%.
  • A 10% duty will be imposed on locally manufactured cars greater than 2,100 cc.
  • No sales tax will be imposed on iodized salt and red chilies.

Former prime minister and PML-N stalwart Shahid Khaqan Abbasi addressed the House to say: “Kindly let it be known in Parliament why there was a need to present the mini-budget?”

“Why are you placing such a heavy additional burden of taxes on the people?”

Abbasi proposed that “instead of announcing what will get dearer, why not tell us what will not”. He said fuel costs have risen, as have power costs.

Tarin, while addressing the session, remarked that it is being questioned why the bill is being moved in Parliament.

“This is all part of documentation which the government seeks to do,” he said, adding: “Documentation will let us know who has how much income.”

“When Rs280 billion of the total Rs343bn (budget) will be refunded, what is all this hue and cry about?” he asked.

“The Opposition’s outcry is baseless,” Tarin said.

“This is not a money game […] it is being said this will lead to a storm (of inflation),” he said.

Tarin clarified that bread loaves, milk, etc., will no longer be taxed, as previously proposed.

He said that unless Pakistan has an 18%-20% tax-to-GDP ratio, it will not be able to have 6%-8% growth.

The finance minister went on to say that taxes on laptops have been withdrawn from the proposed bill.

Tarin said that past governments approached the IMF several times and it is now being said that the IMF deal has “ruined” Pakistan.

“We have two big parties sitting here, who approached the Fund 13 times. They tell us we have pawned off our sovereignty.”

“We only went to the IMF out of necessity. There was no other option but to go to the IMF,” he said.

Responding to PML-N Secretary-General Ahsan Iqbal’s remark that the government had “forced a car driver to switch to a motorcycle and motorcycle owners to use bicycles” due to rising inflation, Tarin said that an increase in car sales had been witnessed.

Tarin said that taxes on fertilizers and agricultural chemicals have been withdrawn.

“We wish for an inclusive and stable growth,” he said.

The minister said the government aims to bring fundamental changes and asked for the Opposition’s support.

Meanwhile, Iqbal continued to voice his opposition to the way voting had been carried out, demanding a recount, under Rule 276.

He argued there must be a recount when the Opposition demands it.

“I will record my protest. You are the guardian of Parliament. You are not a representative of the government. You are a representative of Parliament,” Iqbal said to the speaker.

At this, the speaker said he used his powers under Rule 29 (residuary powers of the speaker) of the rules of procedure, which states: “All matters not specifically provided for in these rules and all questions relating to the detailed working of these rules shall be regulated in such manner as the Speaker may, from time to time, direct.”

Iqbal said that the speaker does not have room for his own reasoning in a matter. “You will have to do a recount, whenever demanded,” he reiterated.

PML-N lawmaker and former speaker of the National Assembly Ayaz Sadiq said that there are clear rules as well as parliamentary traditions when it comes to voting.

“The speaker must not listen to the secretariat staff on voting,” he said.

“You are insulting Parliament,” Sadiq said, adding that when he was speaker, whenever the PPP asked for a recount, he would allow it.

Iqbal claimed that government lawmakers have left, which is why the speaker was not conducting a recount.

“This may be your opinion. I have respect for the laws,” Qaiser said.

Later, Advisor to the PM on Parliamentary Affairs Babar Awan stood up to say that counting had taken place “twice” and that the speaker’s ruling is “correct”.

PML-N’s Ahsan Iqbal and Shahid Khaqan Abbasi, PPP’s Bilawal Bhutto Zardari, Naveed Qamar, Abdul Qadir Patel and Shazia Marri,  MNA Mohsin Dawar, and JUI-F’s Shahid Akhtar Ali moved amendments to the bill, which were all opposed by Tarin.

Bilawal’s amendments consisted of a withdrawal of taxes from naan and other tandoor-based and baked goods, as well as restaurants. He also sought an amendment whereby imports of multimedia goods and laptops not be taxed.

In addition, MQM’s Kishwar Zehra moved amendments.

“This budget had become a bane for the section of society that MQM represents,” she said, adding that the MQM had called attention to this.

“I have incorporated the amendments, so the MNA must withdraw these,” Tarin said.

Tarin convinced Zehra to withdraw her amendments after which she agreed to do so.

Bilawal observed that “members from Karachi” have made some amendments.

“If you are a representative of Karachi then reject the entire mini budget,” he said.

After amendments were rejected, the bill was presented for approval by Parliament.

The speaker instructed the copies of the amended bill be circulated among the assembly members.

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