OPINION
Asghar Leghari
Provincial subjects and their discontents
tax the provision of services from the federal domain, and also remained silent on its allocation amongst the provinces. This causes two problems, the first of which is that certain subjects may be considered both a good and a service. There is no clear distinction which leaves this a spectrum with grey areas. Take, for instance, a standard, mass-produced, software that a person buys on a compact disk. Is it categorised as a good? Arguably so. Now take the compact disk out of the equation, and instead imagine simply downloading the software. Does it remain a good? Not so much. Now imagine a software customized to your needs. Is it a good? Most likely not. Similar arguments can be made for toll manufacturing. The second problem arises in cases where a service originates from one province and terminates in another, which province has the right to tax it? Under the current constitutional ith the passing of the Eighteenth Amendscheme, each province exercises legal and executive autonomy on ment, the responsibility for the imposition matters not expressly covered under the Federal Legislative List of sales tax on services was handed over to within its territorial jurisdiction. Naturally, there is a structural the provinces. Similarly, labor welfare, preoverlap in this scheme, as a service may originate in one province viously a concurrent matter, also became and terminate in another, meaning that two provinces lay claim part of the provincial domain. The results on the tax chargeable on the same service. of this devolution have, however, not been free from discontents. Two situations emerge from this, the first of which is that Unsurprisingly, the domain of taxation has seen prompt legisthe taxpayer is subjected to double taxation by each government, lation and the establishment of administrative infrastructure by the or the governments agree upon a mechanism to split revenues provinces. Unfortunately labor welfare has witnessed lethargy, and amongst themselves. For this purpose, the provinces and the what was a transitional arrangement still remains intact. The govfederation have attempted to harmonize their respective sales ernment’s action in one case, and its inaction in the other has created tax regimes under the garb of the ‘National Tax Council,’ but legal complications for businesses. seemingly little headway has been made as of yet. The point being Taxation made here is not what is right or wrong, rather it is important The Eighteenth Amendment carved out the provincial right to to underscore that each government has legitimate claims that overlap with each other. In this period, businesses receiving tax notices from various governments for the same subject matter have approached the courts and obtained stay orders against tax recoveries. Their arguments have ranged from direct challenges to double taxation to larger constitutional arguments about constitutional demarcations including limitations in Asghar Leghari provincial powers while regulating or taxing trans-provincial entities. In most cases, courts have is practicing lawyer restrained recoveries in the interim stage and permitted governments some time to resolve these and partner at Leghari matters. An indirect consequence of this has been the political and legal undermining of the Eigh& Darugar. He can be teenth Amendment. reached at asghar.leghari@ Labour welfare legharianddarugar.com Prior to the Eighteenth Amendment, labour laws including labour welfare contributions to the Workers Welfare Fund, the Companies Profits (Workers Participation) Fund, Social Security Institution and the Employees Old Age Benefits Institutions fell within the concurrent jurisdiction of the federation and the provinces. However, the legislation and infrastructure holding the
For all of the good it has done, the 18th amendment has not been properly utilized and implemented by the provinces, particularly in the case of taxation and labour welfare.
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COMMENT
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