ZAHEER ABBASI

ISLAMABAD: Federal Board of Revenue said on Thursday that it is ready to consider and grant tax exemptions in the larger interest of the country after the Senate Standing Committee on Finance sought its opinion on issuance of tax-free bonds to arrange financing for House Building Finance Corporation (HBFC).

A meeting of the Finance Committee chaired by Senator Saleem Mandviwalla took a briefing on the financial health of the HBFC and how the corporation established to provide financing for houses to the low-income group, Rs480 billion circular debt, and why Federal Consolidated Fund was regulated through presidential rules as a stop-gap arrangement instead of an Act of the Parliament.

The committee was informed that a proposal of issuance of tax free bonds was forwarded to the government and Federal Board of Revenue to mobilise finances for HBFC but the proposal was not taken seriously. Upon this, the committee sought FBR's viewpoint and Member FBR Rahmat Ullah Wazir stated, "Although we are withdrawing tax exemptions and concessions, yet we are ready to grant tax exemption in the larger interest of the country."

The meeting was informed that HBFC is not viable in its present structure because of lack of finances. The committee also invited well-known Chartered Accountant Syed Muhammad Shabbar Zaidi. Zaidi stated there are only two options to make it viable, either the government allows it to issue a tax-free bond or provides a subsidy to it. The Finance Ministry did not support the proposal of providing subsidy to the housing sector because commercial banks are there to help the consumers.

A sub-committee was also constituted to probe Rs480 billion circular debt paid by the present government soon after coming to power. A two-member sub-committee headed by Mohsin Aziz would look into the matter of the circular debt from initiation of the summary to audit and payment of the amount and would submit a report to the committee within 60 days. The sub-committee was constituted after Water and Power Ministry failed to satisfy the main committee of the finance on the issue of circular debt during a string of committee meetings.

The committee also recommended to the government to adopt a Parliamentary Act to regulate inflows and outflows from Federal Consolidated Fund.

Secretary Finance Dr Waqar Masood said since 1935, the whole system of Federal Consolidated Funds has been regulated through its own rules. He also argued there is no need of legislation to regulate the Fund because it would not have any impact on its functioning.

Waqar Masood said that the ministry is also working on Financial Code and it will be ready by December 2016. The Financial Code, he added, is under review to update the entire code and align it with the new realities and requirements faced by public finance management.

He added that the rules made by the President comprehensively cover the payments of moneys into and withdrawal from Consolidated Fund and Public Accounts, and other related matters. These rules include the General Financial Rules, the Treasury Rules, GP Fund Rules, Accounting Policy and Procedures Manual, etc.

The secretary finance stated that in addition to financial rules, the federal government has in place regulations/office memoranda that guide the system of financial control and budgeting from planning to post-implementation processes related to development projects, besides other executive orders that are approved form time to time by the competent forums. The custody of Consolidated Fund and Public Account is guided by the rules made by the President under the Constitution, added finance secretary.

The committee also directed State Bank of Pakistan to resolve Najam Korashi's 26-year-old financial matter of compound of interest on 150,000 pounds with a leading bank in the light of a decree as per order of the Supreme Court of Pakistan.