Huzaima Bukhari & Dr. Ikramul Haq
No taxation without representation is a cardinal principle—accepted by every civilized nation—embodied in Article 77 of the Constitution of Pakistan. It is perpetually and flagrantly violated—a lamentable act that remains unnoticed at public level. The guilty of this misdeed are the members of parliaments, who are required to act within the four corners of supreme law of the land. However, they have been delegating their power of levy of taxes to the Federal Government or Federal Board of Revenue (FBR).
Human Rights Commission of Pakistan (HRCP) highlighted this vital issue in a meeting, held on July 27, 2009 in Islamabad, by recommending “an amendment in constitution to make it mandatory for the Federal Board of Revenue (FBR) to take prior approval of the Parliament before issuance of any taxation related amendments, SROs, notifications and changes in tax laws”.
It appears that even HRCP is not aware of correct position of law. Article 162 debars even the National Parliament to grant tax exemptions or concessions without the prior approval of the President. The power to issue Statutory Regulatory Orders (SROs) has been delegated unconstitutionally to an executive authority. How can Parliament delegate a power which it cannot exercise itself without the prior sanction of the President?
Authority to levy taxes or extend any kind of exemption vested in the Federal Government [used through FBR] under delegation of power is gross violation of Article 77 read with Article 162 of the Constitution that says:
“162. Prior sanction of President required to Bills affecting taxation in which Provinces are interested: – No Bill or amendment which imposes or varies a tax or duty the whole or pat of the net proceeds whereof is assigned to any Province, or which varies the meaning of the expression “agricultural income” as defined for the purposes of the enactments relating to income-tax, or which affects the principles on which under any of the foregoing provisions of this Chapter, moneys are or may be distributable to Provinces, shall be introduced or moved in the National Assembly except with the previous sanction of the President.”
It is a matter of record that since 1973 every finance bill was presented in the National Assembly in utter violation of Article 162 but nobody ever agitated this issue. Notwithstanding the fact that correct constitutional position as far as taxes are concerned was not known to the HRCP, its recommendation that parliament should oversee sub-ordinate legislation, such as rules made under enactments deserve immediate attention of all—especially the legislators.
Tax system is one of the fundamental elements of a constitutional democracy. The important questions such as who is to be taxed, how much and for what purposes, are essentially political questions. These kinds of questions are always resolved through a political process. How tax obligations are to be imposed, administered and enforced are constitutional questions. The imposition, administration and enforcement of taxes raise problems about the rule of law, proper division of powers, and the role of judiciary and so on.
The implementation of Rule of Law determines the failure or success of a society. In the tax context, it means that taxes shall be imposed through a proper consultation method, through parliamentary process, rather than through administrative discretion. Article 77 says that no tax shall be levied for the purposes of the Federation except by or under the authority of the Act of Parliament. Thus excessive use of administrative discretion and delegation of legislative authority to executive has rendered the entire tax system of the country unconstitutional. The so-called wizards sitting in the FBR have been playing havoc with the tax laws by issuing infamous SROs and administrative instructions—granting exemptions or modifying the same, even levying taxes and the garb of rule-making powers.
Tax administrative authorities should be given powers to deal with tax evasion and avoidance, but unfettered administrative discretion to alter the law passed by the parliament is to negate the principles contained in Article 77 and 162 of the Constitution. Tax system and tax laws should be framed and enacted through a democratic process and once they are passed should be properly implemented through tax administration. All the segments of society should adhere to the rule that nobody is above the law. In Pakistan tax laws are meant only to fleece the poor for the luxuries of the rich. The privileged classes pay no taxes on their collossal incomes and wealth.
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The writers, tax lawyers, are members of visiting faculty of Lahore University of Management Sciences (LUMS).