The Carbon Tax Fiasco

Cyril Almeida a columnist in Dawn has penned an excellent article on the recent controversy regarding the petroleum carbon tax. It is a fact that in March 2009 the government had imposed a Petroleum Developmental Levy which resulted in an increase in the price of petroleum goods by a few rupees. The then, newly restored Chief Justice Iftikhar Chaudhry took matters into his own hands and reversed this developmental levy and rightly said “the welfare state had the authority to recover tax on petroleum but not to make profit”.

Having been forced to undo a lucrative indirect petroleum taxation by the Supreme Court the government returned with a new Carbon Tax piggy-backed onto the Finance Bill of 2009 which went through unanimous approval across the parliament with practically not a single politician objecting to this steep rise in petroleum prices in the debate. Interestingly once the Carbon Tax came into effect the Supreme Court knee-jerked to issue an immediate order to stop this implementation of the carbon tax which was actually going to result in atleast a Rs. 10 hike in all petroleum goods across the board.

Having come to a stand-off with the Judiciary, the Presidency in turn reacted with a Presidential order invoking the ‘Petroleum Developmental levy’ while it weirdly choose to back-off from the Carbon Tax, claiming it to be a mistake. At present the stand-off between the Supreme Court and the Presidency has been deferred for a month but it has all the hallmarks in a flamboyant show down between the executive and the judiciary.

It is a fact that the government chooses to indirectly tax this commodity in an attempt to compensate for its mammoth budgetary deficit. Its sad that the government chooses to use this taxation as a source of income as the utilization of petroleum products impacts the lives of the 170 million Pakistanis, the rich and the poor are taxed, prop This indirect taxation impacts the poor more so in proportion to their minimal wage income, while on the flip side the rich easily absorb this escalation but they still squirm through the tax net having paid far lesser than their necessary contribution to the country.

Cyril Almeida quite adequately sums up the present dilemma

It looks rather neat: when CJ Iftikhar was going after the petroleum development levy, the government replaced it with a carbon tax, and when CJ Iftikhar began to look into the carbon tax, the government brought the old petroleum levy back. Except it’s too clever by half. The right thing for the government to have done was to defend the carbon tax in the Supreme Court as legal — parliament approved it, there is no prima facie evidence that it is illegal (however unfair) and a marker could have been laid down regarding the boundaries of the respective powers of the executive, legislature and judiciary. There was always the possibility that CJ Iftikhar would have struck down the carbon tax anyway, but the government could have reassessed its options at that point.

Instead Mr Zardari ordered Attorney General Latif Khosa to make an extraordinary U-turn in court — Latif Khosa told the Supreme Court that the carbon tax was a “mistake”. A mistake? What sort of mistake? Political or legal? We’ll never know.

The battle isn’t over — the new petroleum development levy ordinance will be challenged and CJ Iftikhar can continue to probe the pricing of fuel generally — but already some things are apparent. CJ Iftikhar’s stock is higher than ever, but his court has veered into dangerous separation-of-powers terrain that could undermine institutional stability. Zardari looks bad from both an institutional and a populist point of view. The opposition looks good in the public eye, but has missed a chance to make a stand for strengthening the institutions of democracy

I believe Cyril wraps up his argument quite perfectly, if the parliament has rubber stamped this legislature [irrerespective if its good or bad] then the Supreme Court should not be allowed take matters into their own hands at their own whim, contrary on the flip side, the government itself has now accepted that the ‘Carbon Tax was a mistake‘ reverting to an old Petroleum Development tax of yesteryears, whatever form of musical chairs that is being played is definitely pushing the executive and judiciary into a serious show down, most Anti-Zardari proponents would love to see his head on the chopping block, but I believe he should be nailed for the right reasons and not merely on a ego-istic stand-off between his friends and his foes.

How about if the Supreme Court were to investigate the fact that billions of rupees were made in a mere 10 days with an insider tip which alerted them in advance of the potential increase in petroleum prices allowing the Presidential crooks an opportunity to horde large quantities of oil and sell it off for a handsome profit once the carbon tax was announced.

Credible source have shared reports of an mammoth transaction from one particular financial institution extended to the Presidential front-men. The hedge was for large quantity of oil was made before the finance bill and the trade was immediately finalized in a matter of 10 days resulting in a sweet Rs. 2 Billion profit conveniently pocketed by Mr. Zardari and his team of crooks.

Mr. CJP take this insider trading issue into notice, you will have a far more lethal axe to drive up his skull