The Pakistani stock market saw a significant surge on Thursday, gaining 474 points after positive comments from the Finance Minister during the disclosure of the Economic Survey of Pakistan for the outgoing fiscal year.
(more…)Author: Mrs. Anjum Shahnawaz
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Rupee falls by 23 paisas against dollar
KARACHI – On Thursday, the Pakistani Rupee faced a decline of 23 paisas against the US Dollar, closing at Rs155.92 in the interbank foreign exchange market.
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Remittances remain above $2 billion for 12th straight month
KARACHI: The inflow of workers’ remittances continued their exceptional streak in May 2021, remaining above $2 billion for a record 12th straight month, State Bank of Pakistan (SBP) said on Thursday.
Remittances received during May 2021 amounted to US $ 2.5 billion, 33.5 percent higher than the same month last year. These were also higher than the monthly average of US $ 2.4 billion during July-April FY21.
On a month-on-month basis, workers’ remittances fell by 10.4 percent in May 2021 compared to April 2021. This fall was expected as remittances usually slow in the post Eid-ul-Fitr period. As Eid fell in mid-May 2021 with markets closed a week earlier, there was some front-loading of remittances in April 2021. However, the seasonal decline in May 2021 was less the half the average decline observed during FY2016-2019. In FY2020, remittances experienced an exceptional rise due to the easing of Covid lockdowns in the post-Eid period in Gulf countries.
On a cumulative basis, remittances surged to US $ 26.7 billion during July – May FY21, higher by 29.4 percent over the same period last year. Remittances during the first eleven months of FY21 have already crossed the full FY20 level by $3.6 billion.
Remittance inflows during July-May FY21 were mainly sourced from Saudi Arabia ($7.0 billion), United Arab Emirates ($5.6 billion), United Kingdom ($3.7 billion) and the United States ($2.5 billion).
Record high inflows of workers’ remittances during FY21 have been driven by proactive policy measures by the Government and SBP to incentivize the use of formal channels, curtailed cross-border travel in the face of COVID-19, altruistic transfers to Pakistan amid the pandemic, and orderly foreign exchange market conditions.
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Preparation for Budget 2021/2022 finalized, to be presented on June 11
Despite the ongoing challenges posed by the third wave of the COVID-19 pandemic, the Pakistani government is gearing up to present its third budget for the fiscal year 2021-22 in the Parliament on June 11, Friday.
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SECP proposes exemption of additional CGT on foreign investors
ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has recommended exemption of additional capital gain tax (CGT) on disposal of shares in case of foreign investors, who are not on the Active Taxpayers List (ATL).
The SECP submitted tax proposals for budget 2021/2022 to the Federal Board of Revenue (FBR).
The SECP submitted following proposal in case of CGT:
Exempt foreign investors from applicability of 100 percent additional tax in case their name is not appearing in Active Taxpayers List (ATL) in the Tenth Schedule
Core objectives
Presently, 44 percent of total foreigners investing through PSX are currently not appearing in ATL list as a result of which they are subject to Capital Gain Tax (CGT) @ 30 percent.
For such investors who do not have any other source of income in Pakistan except capital gains, should not be subject to additional 100 percent tax for not being in the ATL
Align it simplified tax regime for Roshan Digital Account (RDA) holders, wherein tax rate applicable for persons appearing on ATL will be charged to RDA holders
Foreigners may be subject to taxation in their home country being resident tax payer therefore, a balanced taxation of their income in Pakistan is essential
Benefit to Economy
The rationale taxation of foreigner’s income from investment will result in inflow of foreign exchange, boosting foreign exchange reserves of the country.
Broaden investor base of capital markets and more liquidity to capital markets by luring foreign investors.
Impact on Tax Revenue
Foreigners represents approximately 5 percent of overall capital market investors trading and removing additional tax will not materially impact tax revenue.
Fresh investments will result in further tax revenue, in case tax incentives are provided.
Comparable regional practices relating to taxability
A brief overview of CGT practices adopted in other regions is provided below:
Country Rate of CGT Bangladesh 15 percent India 10 percent – Long term 15 percent – Short term Malaysia Nil Kyrgyzstan CGT are subject to ordinary income tax rate at 10 percent Nigeria 10 percent Mauritius Corporate: 15 percent if holding period is less than 6 months Individual: 10 percent if income is less than MUR 650,000 & 15 percent if income is more than MUR 650,000 Oman Nil UAE Nil Singapore Nil -
KSE-100 index slides by 370 points on profit taking
KARACHI: The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) fell by 370 points on Wednesday as profit taking was witnessed during the day.
The index closed at 47,778 points from previous day’s closing of 48,148 points, showing a decline of 370 points,
Analysts at Topline Securities said that the equities closed negative. After a slight positive opening profit taking has been witnessed at the bourse as Pakistan’s trade deficit widened by 20 percent to US$3.6 billion in May 2021 compared to US$3.0 billion in April 2021.
E&Ps sector closed down 0.70 percent despite higher international oil prices. KAPCO down by 3.98 percent after announcing DPS of Rs5/share – lower than street expectation. Similarly TRG dented the KSE100 Index by 48 points.
Total traded volume and value for the day stood at 1,355 million shares and Rs23.18 billion, respectively. The volume leader for today’s session was WTL with 716.81 million shares exchanging hands.
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Sales tax incentive granted on supplies by restaurants
ISLAMABAD: The government has announced an incentive on sales tax rate on supplies made by restaurants and eateries on account of takeaway.
The FBR issued SRO 725(I)/2021 dated June 08, 2021 to exempt sales tax in excess of five percent chargeable on supplies made by restaurants and eateries on account of takeaway subject to the condition that no input tax shall be adjusted.
The notification shall remain in force up to June 30, 2021.
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Value added textile exporters demand 50 percent reduction in withholding tax
KARACHI: The association of value added textile exporters on Wednesday demanded to reduce the withholding income tax by 50 percent in order to reduce burden on manufacturers and improve country’s foreign exchange earnings.
In a joint press conference, the exporters demanded the government of restoring Zero Rating – No Payment No Refund System, continuation of Duty Drawback of Taxes (DDT) & Technology Up-gradation Fund (TUF) scheme, reduce WHT rate to 0.5 percent, suspension of Export Development Fund (EDF) surcharge, reduce and fix tariffs of electricity, indigenous gas & RLNG, continuation of duty free import of cotton yarn in the forthcoming Federal Budget 2021-2022.
Zubair Motiwala, Chairman, Council of All Pakistan Textile Mills Associations; Jawed Bilwani, Chairman, Pakistan Apparel Forum; Tariq Munir, Chairman, Pakistan Hosiery Manufacturers & Exporters Association, Rafiq Godil, Chairman, Pakistan Knitwear and Sweater Exporters Association; Feroze Alam Lari, Chairman, Towel Manufacturers Association of Pakistan; Abdus Samad, Chairman, Pakistan Cloth Merchants Association, Zulfiqar Ch., Chairman, All Pakistan Textile Processing Mills Association; Shaikh Shafiq, Former Chairman, Pakistan Readymade Garment Manufacturers & Exporter Association; Khawaja M. Usman, Former Chairman, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association, Amin Allana, Chairman, All Pakistan Bedsheets & Upholstery Manufacturers Association, Yusuf Yaqoob, Chairman, Pakistan Weaving Manufacturers Association participated in the Joint Press Conference held at PHMA today.
The Chairmen of the Value Added Textile Exports Associations apprised that they have submitted Budget Proposals to the Federal Government wherein the top demand is to restore Zero Rating on GST – “No Payment No Refund Regime” through revival of SRO 1125 in letter & spirit as SME exporters have been closed down and decreased by 30% as compared to last year due to imposition of 17% which blocked exporters precious liquidity. They were of the view that the textile exporters are optimistic and hopeful that the Government in the Federal Budget 2021-22 will seriously consider and accept their demands, proposals and recommendations.
They highlighted that despite COVID19, the textile exports have increased by 17.35% as compared to last year and will InSha-ALLAH reach to US$ 15.50 billion in FY 2020-21 owing to incumbent Government’s pragmatic policies – payments of Drawback of Local Taxes & Levies (DLTL) / Duty Drawback of Taxes (DDT), special / competitive tariff and uninterrupted supply of utilities. They stated that It is on record that due to commencement and payments of DLTL Scheme in 2009, the Textile Exports have increased by 7.3% in 2010 and by 35% in 2011. However, in 2012, textile exports were decreased by 10.66% due to withheld payments of DLTL. Therefore it is most crucial that the Government must continue the DDT scheme for the next five years. They demanded that Duty Drawback of Taxes on Garment, Home Textile & Fabric exports should be provide @ 7%, 6% & 5% respectively on shipment basis for next five years to compete in the international market as competing countries are extending same around 12% to 16%. With commitment, the rates will be increased every year by 1% which means 7%, 6% & 5% in 2021-22, 8%, 7% & 6% in 2022-23, 9%, 8% & 7% in 2023-24 and so on, respectively. Further, Incremental DDT, on an increase of 10% exports over previous year, should also be provided @ 2%. This will bring huge investments in textile sector and shall encourage new-comer exporters to invest in textile sector.
They said that with the introduction of Technology Up-Gradation Fund (TUF) scheme in 2009, 30% Capacity of Textile Sector has been enhanced. Therefore, it is imperative to reinstate Technology Up-Gradation Fund (TUF) Scheme for next five years. This will bring up-gradation and advancement in technology leading to production enhancement as well as exports. 0.25% Export Development Fund (EDF) Surcharge is deducted from export proceeds of the exporters for export development since 1992. Collection of EDF surcharge is approx. Rs9 billion annually. Presently Govt. has Rs58 billion in its kitty on account of EDF. Hence, they demanded to the Government to suspend collection of Export Development Surcharge till unutilized amount of Rs58 billion of Export Development Fund (EDF) is exhausted. Exporters fall under Final Tax Regime and required to pay 1% WHT of their export proceeds. They demanded that Withholding Tax (WHT) should be reduced from 1% to 0.5% for exporters as this would also help the exporters in using the cash liquidity for enhancement of the exports.
The present Government had announced separate tariff of gas and electricity for export sectors with an assurance that this tariff will last for 3 years. However, tariff of gas and electricity was enhanced after a year. To compete in the internationally and capture more markets, it is crucial that tariff of Electricity, Indigenous Gas and RLNG for exporters should be fixed at 7.5 cents/kwh, Rs819/MMBTU and $6.5/MMBTU respectively for next five years and the same should be applied countrywide.
Owing to historically low cotton production in the country and severe shortage of cotton yarn, on demand of the Value Added Textile Sector, Government has allowed duty free import of Cotton Yarn till 30th June, 2021. We understand that the Government should continue duty free import of cotton yarn until Pakistan’s cotton production reaches to 14 million bales. They recommend that permission for import of Raw Materials and Intermediate Goods for manufacturing of finished goods meant for export under Duty & Tax Remission for Exporters (DTRE) should be automated and allowed to registered Textile Exporters through Ministry of Commerce Textile Industry’s RDA Cell whose licence is renewed after every two years as RDA Cell, Textile Division, Ministry of Commerce has complete details of textile units i.e. production, exports, machinery, exportable items details including HS Codes, Value, Quantity etc. Subsequently, once RDA Cell approves the permission for import of Raw Materials and Intermediate Goods under DTRE and it should be processed on fast track within 48 hours by Customs, accordingly.
It is pertinent to mentioned that Value Added Textile Exports contribute to around 62% in total exports, provides 42% urban employment particularly to female workforce who mostly are widows and orphans, earns highest foreign exchange and supports approx. 40 allied industries. In this manner, the value added textile industry playing pivotal role to strengthen the economy and prosperity of the country. They were of the view that the exports must remain top priority of the Government as it is the lifeline of economy deserves government’s continuous support. If the Government assures to extend the deserving support to the Value Added Textile Export Sector it has the capacity to achieve the milestone and pledges to enhance its exports by 30% and will reach at US $20 billion in FY2021-22 and shall increase by 25% every year onward 2022-2023 resulting to surplus trade of Pakistan, more foreign exchange earnings & additional employment.
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SECP suggests measures to document real estate sector
ISLAMABAD: Securities and Exchange Commission (SECP) has submitted its tax proposals for budget 2021/2022 for documenting real estate sector and promotion of Real Estate Investment Trusts (REITs).
The SECP submitted following suggestions for documenting real estate sector and promotion of REITs:
(i) Reduce tax on dividend from REITs from 25 percent to 15 percent to synchronize it with mutual funds [First schedule, Part-1, Division-III, paragraph B] of Income Tax Ordinance, 2001.
(ii) Exempt advance tax on property transfers to/from a REIT Scheme u/s 236C and 236K of Income Tax Ordinance, 2001.
(iii) Exemption for CGT provided in clause 99A, Part 1, 2nd schedule be applied to all categories of REITs (mix-use projects) without any sun-set clause
(a) Core objective of the proposals:
• To support government vision for development of housing sector and allied industries
• To promote regulated real-estate sector for promoting documentation and transparency
• To introduce level playing field for regulated sectors
• To remove disadvantage/dis-incentive caused to the REIT sector (Presently 1 licensed REITs, 4 REITs in pipeline and 9 RMCs registered)
• To increase overall tax revenue for FBR and provincial revenue authorities
(b) Direct and indirect impact on tax revenue (impact will be positive)
• Direct tax revenue for FBR increases; example – Tax revenue of Dolmen City REIT is highest tax being paid compared to any other Mall bigger or of same size. In addition, corporate tax from RMC;
• Encourages sector to grow thereby, fostering economic activity through allied industries resulting in higher tax collection;
• Transfer of properties to the REIT structure will also induce proportional tax collection of provincial/local revenue departments;
(c) Benefit for national economy
• Promoting economic activity through regulated, documented and transparent models and moving towards formal economy
• Level playing field for different investment avenues (collective pooled investments through REIT Fund)
• Investor participation in real estate sector with protection of interests under the REIT law vis-a-vis, falling prey to unregulated real estate sector mushrooming in the market
• Increase in revenue for the federal and local governments;
• Disclosure and taxation of property transactions at market value instead of DC rates
• Job creation related to construction, real estate and allied industries;
• Broaden the investor base and size of capital markets;
• Due to mandatory listing, small savers can share profits arising from real estate industry (which currently not available) – tax revenue from trading at stock exchange + CGT.
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Rupee gains nine paisas against dollar
KARACHI: The Pak Rupee gained nine paisas against the dollar on Wednesday on inflows of the foreign currency during the day.
The rupee ended Rs155.69 to the dollar from previous day’s closing of Rs155.78 in the interbank foreign exchange market.
Currency experts said that the inflows of export receipts and workers’ remittances helped the rupee to make gain during the days.