Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • PSX recommends modification in tax laws for Shariah compliant criteria

    PSX recommends modification in tax laws for Shariah compliant criteria

    KARACHI: Pakistan Stock Exchange (PSX) has recommended modification in Shariah compliance criteria under Income Tax laws to make it practically possible to meet the requirement.

    The PSX in its proposals for budget 2021/2022 said that the modification would held the promotion and development of Islamic capital markets by encouraging new listings of companies on PSX through mobilizing resources towards faith-based investor savings.

    Giving rationale, the stock market said that the conditions imposed through the ITO, 2001 are impractical to implement given the inadequate depth of Islamic markets of Pakistan, constraining the taxpayers from achieving the Shariah Complaint status and therefore failing the reforms’ underlying objective – (e.g. 100 percent income from manufacturing operations, financing through licensed Islamic financial institutions only, issuing dividends in last five consecutive years etc.

    Highlighting the background, the PSX said that in 2016, the Federal Government through Finance Act 2016, had introduced certain amendments in the ITO which allowed 2 percent rebate in corporate income tax rate to companies which qualified the criteria for Shariah Compliance specified in Clause 18B of Part II of Second Schedule of ITO.

    Thereafter in January 2017, Rule 231H was inserted in Income Tax Rules, 2002 (Rules) which provided further guidance on the Shariah Compliance criterion mentioned in ITO.

    The objective for this rebate, as explained by Securities and Exchange Commission of Pakistan (SECP) in its press release of July 11, 2016, was to incentivize listed manufacturing companies to become Shariah Compliant and that this was introduced in the ITO as part of reforms, with collaboration of SECP, for promotion and development of Islamic Capital market.

    Thereafter, in November 2018, the corporate regulator introduced the landmark Shariah Governance Regulations 2018 (Regulations), which entailed a comprehensive jurisdictional framework to regulate and govern the corporate sector, including the capital markets, Islamic capital markets, Shariah-compliant securities and Islamic financial institutions.

    The framework was a major break-through to lay the foundation for a true Islamic financial and economic system. The Regulations encompass a number of elements of Shariah governance which are practical to adopt and implement, ensuring long-term sustainability.

    On the other hand, the requirements contained in the ITO, as introduced in 2016, are comparatively stringent and impractical for taxpayers to adopt in letter and spirit, which is ultimately defeating its underlying objective i.e. development of Islamic market in Pakistan.

    Hence, a re-alignment of income tax requirements with the SECP Regulations is critical so as to enable more companies to obtain Shariah Compliant status and avail the accompanying tax benefits.

    Under clause 18B of Part II of Second Schedule of the ITO, 2001, a reduction in corporate tax rate by 2 percent is allowed to a company which meets the criteria specified in the said clause and Rule 231H of the Income Tax Rules, 2002.

    However, the existing compliance requirements are very impracticable and more stringent then the requirements mentioned by SECP in Shariah Governance Regulations, 2018, which makes it practically impossible for the taxpayers to fulfill the criteria and achieve the desired status.

  • Short term tax policies should be avoided to attract investors

    Short term tax policies should be avoided to attract investors

    KARACHI: The government should avoid short term tax policies to ensure stable economic environment so investors can plan their investments in the country.

    Pakistan Stock Exchange (PSX) in its proposals for budget 2021/2022 said that as much as favorable tax treatment, investors need a stable and predictable tax environment.

    When making a long-term investment decision, they need to know what tax treatment their investment will receive over the term of their investment horizon. Otherwise, they may simply decide not to invest or adopt short term trading strategies (like most investors unfortunately tend to do).

    It should also be considered that the changes in policies should be prospective rather than retrospective in nature. One of such example is the amendment made in section 65B of the Income Tax Ordinance, 2001 through Finance Act 2019 where tax credit for investment in plant and machinery for the purpose of balancing, modernization and replacement was reduced from 10 percent to 5 percent retrospectively of the amount invested.

    Therefore, the stock exchange proposed to rectify all such amendments which have retrospective effect so that all the amendments made have a prospective effect.

    It further said that the government must move away from short term measures and frequent changes to tax treatment and adopt long term measures to promote savings and investment and development of the capital market.

  • Total foreign investment surges by over 98pc in 10 months

    Total foreign investment surges by over 98pc in 10 months

    KARACHI: The inflow of total foreign investment into Pakistan has surged by over 98 percent during first 10 months (July – April) 2020/2021 of the current fiscal year owing to massive investments in public debt securities.

    According to data released by State Bank of Pakistan (SBP) on Friday, the total foreign investment into the country increased to $3.736 billion during first ten months of the current fiscal year as compared with $1.884 billion in the corresponding months of the last fiscal year.

    The foreign public investment in debt securities has increased to $2.463 billion during the period under review as compared with the outflow of $234 million in the same period of the last fiscal year.

    The foreign private investment fell by around 40 percent to $1.273 billion during first ten months of the current fiscal year as compared with $2.118 billion in the corresponding months of the last fiscal year.

    The major component of foreign private investment i.e. foreign direct investment (FDI) registered a decline of 32.5 percent to $1.553 billion during July – April 2020/2021 as compared with $2.301 billion in the same period of the last fiscal year.

    The other component of the foreign private investment i.e. portfolio investment in the stock market witnessed a sharp outflow of $280 million during the period under review as compared with the outflow of $182.7 million in the same period of the last fiscal year.

  • IR officer awarded major penalty of removal from service

    IR officer awarded major penalty of removal from service

    ISLAMABAD: Federal Board of Revenue (FBR) has imposed major penalty of ‘removal from service’ an officer of BS-18 Inland Revenue Service (IRS) for misconduct.

    According to a notification issued by the FBR stated that disciplinary proceedings were initiated against Syed Nasir Jamal Shah (IRS/BS-18) Deputy Commissioner-IR, Corporate Tax Office, Lahore under Rule 7 of Civil Servants (Efficiency & Discipline) Rules, 2020 on account of unauthorized absence from duty w.e.f. September 28, 2020; through Direct Show Cause Notice dated January 11, 2021 on the charges of misconduct.

    Syed Nasir Jamal Shah (IRS/BS-18) furnished reply to the show cause notice wherein the officer stated that he applied for leave of 400 days and submitted application to the Commissioner-IR, CTO, Lahore on November 03, 2020 for onward submission to the Member (Admn), FBR, Islamabad and the same was forwarded to the Board on November 09, 2020.

    The officer further stated that the allegation of absence without any intimation is based on some omission in record. The accused officer also requested for opportunity of personal hearing before finalization of the proceedings. Secretary, Revenue Division/Chairman, FBR being Authority in the instant case appointed Member (Admn/HR) as Hearing Officer to grant personal hearing to the accused officer under Rule 17 of Civil Servants (Efficiency and Discipline) Rules, 2020.

    Hearing Officer/Member (Admn/HR) granted personal hearing to the accused officer on March 15, 2021. During the course of personal hearing the accused officer was asked to put forward his defence, but the accused officer did not have anything substantial to elaborate in his defence.

    The contentions of the officer that his higher officers in CTO, Lahore were aware of his leave submission was also found unsatisfactory in purview of the prevailing instruct ions of the government which are very clear i.e. the officer cannot absent himself until and unless the leave applied by the officer is approved by the Competent Authority.

    Reference in this regard is made to Establishment Division’s O.M No.1/34/57-ME dated 12-11-1957 which states that “a government servant should not absent himself from office without leave”.

    Furthermore, Establishment Division’s O.M.No.6/3/81-RI(DI) dated 26-07-1981 states that “a civil servant continues to be in service till his resignation is accepted and cannot absent himself from his duties without proper leave” Establishment Division’s O.M No.15/6/85-R.2 dated 03-03-1986 states that “if a civil servants absents himself from duty, till his resignation is accepted by the Competent Authority, he is liable to be proceeded against under the (Efficiency & Discipline) Rules which may also result in dismissal from Government Service”. Moreover, leave application of Syed Nasir Jamal Shah (IRS/BS-18) was silent about date of availing of the requested leave.

    The failure to comply with the instructions of the government construes misconduct on part of the officer. Furthermore, during the case of personal hearing the accused officer failed to bring up justification/reasons to defend his unauthorized absence from duty. Attitude and conduct of the accused officer was highly casual and irresponsible.

    Information collected from field revealed that he is running his own academy in Lahore, doing business and is not at all interested in government service and keeping this as a standby option.

    After considering the charges framed in the Show Cause Notice and available record including the reply furnished by the accused officer, the Hearing Officer came to the conclusion that the accused officer has nothing new to add in his defence.

    Hearing Officer/Member (Admn/HR) forwarded the case record to the Authority i.e. Secretary, Revenue Division/Chairman, FBR for decision.

    Secretary, Revenue Division/Chairman, FBR being Authority in the instant case has decided the major penalty of “Removal from Service” upon Syed Nasir Jamal Shah (IRS/BS-18) Deputy Commissioner-IR, Corporate Tax Office, Lahore under rule 4(3)(d) of Civil Servants (Efficiency & Discipline) Rules, 2020 with immediate effect.

    The period of unauthorized absence from duty w.e.f. 28.09.2020 of Syed Nasir Jamal Shah (IRS/BS-18) shall be treated as Extra Ordinary Leave (without pay). Outstanding dues/recoverable amount shall be recovered from Syed Nasir Jamal Shah (IRS/BS-18).

    Syed Nasir Jamal Shah (IRS/BS-18) shall have a right to appeal to the Appellate Authority under Civil Servants (Appeal) Rules, 1977 within a period of thirty (30) days from the date of communication of this notification.

  • IR offices issuing incorrect audit notices to avoid time limitation: KTBA

    IR offices issuing incorrect audit notices to avoid time limitation: KTBA

    KARACHI: The offices of Inland Revenue are issuing incorrect audit notices in order to avoid restriction of time limit as defined in the Income Tax Ordinance, 2001, tax practitioners alleged the tax authorities on Friday.

    The Karachi Tax Bar Association (KTBA) in a letter sent to Inland Revenue offices of Federal Board of Revenue (FBR) located in the metropolis strongly criticized the issuance of faulty audit notices for tax year 2015 in order to avoid time restrictions.

    The KTBA wrote letters to chief commissioners highlighting the haste of tax offices in issuing notices under section 122(5) of Income Tax Ordinance, 2001 during past two weeks just to comply with the time limit of initiating audit for tax year 2015.

    The tax bar shared following ‘reasons and grounds’ advanced by the field formation officers to assume resource of ‘definite information’.

    — Not declared any capital hence income declared under Normal Tax Regime (NTR) and Final Tax Regime (FTR) is out of undisclosed sources of capital whereby closing stock is likely to be added as unexplained income.

    — Accretion in wealth is more than income declared/claimed under NTR/FTR and cash available in last year is insufficient either; hence difference is likely to be added as unexplained income.

    — Personal expenditure bears a difference between income claimed under FTR and NTR and cash available in last year is insufficient either; hence difference is likely to be added as unexplained income.

    — Bank deposits and debit entries are huge which do not commensurate to be declared income version and difference is likely to be added as income from other source.

    — Foreign remittance claimed in the return needs to be probed for the purpose of compliance of Section 111(4) of the Income Tax Ordinance, 2001.

    — Capital gain on sale of securities and immovable properties claimed in the returns needs to be probed in line with Section 37(3A) and 37A of Income Tax Ordinance, 2001.

    — Gift (cash or kind) claimed needs to be probed for the purpose of Section 39 (3) of the Income Tax Ordinance, 2001.

    — Total liability in wealth has decreased from previous year which since a liability was definitely paid-off from unexplained source of income and liable to be treated as unexplained expenditure in line with Section 111 of Income Tax Ordinance, 2001.

    — Interestingly a number of such notices have also been issued where audits for the tax year 2015 have already been concluded.

    The KTBA said that notices had wrongly been issued by the field formation without properly appreciating returns of income tax as well as statements of wealth and also without proper application of mind as host of such cases pertains to income from property, salary, dividend etc. and also because the grounds advanced in the notices do not constitute ‘definite information’ within the meaning of Section of 122(8) of Income Tax Ordinance, 2001.

     “As the time limitation prescribed for initiating proceedings for the tax year 2015 draws closer, bar members are afraid of encountering more such weird notices in days to come, which in no way tend to serve the purpose of the Ordinance and are likely to create chaotic situation,” the tax bar said.

  • Stock market gains 341 points on tax incentive hopes

    Stock market gains 341 points on tax incentive hopes

    KARACHI: The stock market gained 341 points on Friday as investors hoped tax incentives in the upcoming budget. The benchmark KSE-100 index closed at 45,915 points as against previous day’s closing of 45,574 points, showing an increase of +341 points.

    Analysts at Arif Habib Limited said that resolution of dispute between the members of ruling party as well as anticipation of tax incentives for the industries in the upcoming budget helped KSE100 index put up a formidable addition of 374 points during the session and ended the session +341 points.

    Deferral of OGDC and PPL for consideration of privatization resulted in a rebound in stock prices of both stocks.

    Banks, Cement and Steel sectors also contributed positively to the Index. The incentives  proposal for the refinery sector gave way to NRL, ATRL and PRL to post gains. Among volumes leaders, WTL led the table with 99.2 million shares, followed by BYCO (67.5 million) and HASCOL (48.3 million).

    Sectors contributing to the performance include Banks (+116 points), E& (+68 points), Cement (+31 points), O&GMCs (+29 points) and Autos (+29 points).

    Volumes declined slightly from 784 million shares to 710.4 million shares (-10 percent DoD). Average traded value also declined by 6 percent to reach US$ 128.2 million as against US$ 135.7 million.

    Stocks that contributed significantly to the volumes include WTL, BYCO, HASCOL, KEL and SMBL, which formed 41 percent of total volumes.

    Stocks that contributed positively to the index include HBL (+32 points), PPL (+31 points), OGDC (+28 points), UBL (+25 points) and PSO (+20 points). Stocks that contributed negatively include HASCOL (-8 points), PIBTL (-6 points), COLG (-4 points), TRG (-4 points) and PSX (-4 points).

  • FBR to refund excess duty, taxes on mobile phone clearance

    FBR to refund excess duty, taxes on mobile phone clearance

    ISLAMABAD: Federal Board of Revenue (FBR) on Friday said that it will refund excess duty and taxes collected on mobile phone clearance due to glitches found in the WeBOC.

    The FBR issued an explanation over excess payment of duty and taxes at the time of clearance of mobile phones.

    The FBR said that recently, in a meeting with PTA, it transpired that the passengers can register up to 5 mobile phones on their passports and in case of high end phones of more than USD 500, the difference of duty/taxes between passport and CNIC registration is about Rs. 9,000/.

    Accordingly, in order to correct this anomaly and to limit the registration of mobile phone against passport up to one set, the WeBOC module was modified through CRF (change request form).

    However, during the process, the exemption of withholding tax was also deleted and thus now the system was showing total taxes on passport as Rs 36,720/-.

    FBR stated that the issue has been taken up with Director (R&A) Karachi and the team is reviewing the module to resolve the issue and restore the previous amount of leviable duty/taxes.

    The issue will be resolved tomorrow afternoon.

    “Due to this glitch in the system, all those who paid more duty would be refunded the excess amount forthwith,” the FBR said.

  • Rupee recovers nine paisas in interbank

    Rupee recovers nine paisas in interbank

    KARACHI: The Pak Rupee recovered nine paisas against the dollar on Friday owing to reduction in requirement of statutory liquidity ratio (SLR) for exchange companies.

    The rupee ended Rs153.36 to the dollar from previous day’s closing of Rs153.45 in the interbank foreign exchange market.

    The rupee was continuously deteriorating against the dollar on resumption of trading after Eid holidays.

    Currency experts said that a day earlier the State Bank of Pakistan (SBP) reduced the requirement of SLR from 25 percent to 15 percent for exchange companies in order to facilitate inflow of home remittances through banking channels.

    Further, the experts said that the inflows of export receipt also helped the rupee to make gain.

    They said that the dollar may rebound in coming days due to payment demand for imports and corporate sector.

  • PSX proposes elimination of capital gain tax to attract investors

    PSX proposes elimination of capital gain tax to attract investors

    KARACHI: Pakistan Stock Exchange (PSX) has proposed time-bound elimination of capital gain tax (CGT) in order to attract new local and foreign investors.

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  • Ayub assumes charge of MD NTDC

    Ayub assumes charge of MD NTDC

    LAHORE: Engr. Muhammad Ayub has officially assumed the charge of Managing Director of the National Transmission and Dispatch Company (NTDC), a statement said on Thursday.

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