Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • Rupee falls by 27 paisas on improving demand

    Rupee falls by 27 paisas on improving demand

    KARACHI: The Pak Rupee fell by 27 paisas against dollar on Monday owing to higher demand for import and corporate payments.

    The rupee closed at Rs160.37 to the dollar from last Friday’s closing of Rs160.10 in interbank foreign exchange market.

    Currency dealers said that the local unit was under pressure because market was opened after two weekly holidays.

    Further, they said that after ease in lockdown the demand was increasing and importers started purchasing dollars for future buying.

    The currency experts said that fall in exports and remittances also put pressure on the local currency.

    Overseas Pakistani workers sent home $1.790 billion in April, compared with $1.894 billion in previous month.

    Pakistan received $18.781 billion in remittances in July-April FY2020, compared with $17.801 billion in the same period last year.

    However, the experts said that the local currency recovered on the back of improved economic indicators.

  • Motor vehicle tax collection plummets by 15 percent to Rs16.73 billion

    Motor vehicle tax collection plummets by 15 percent to Rs16.73 billion

    ISLAMABAD: The collection of motor vehicle tax has registered 15 percent decline during first nine months of current fiscal year, according to data released by the ministry of finance.

    According to fiscal operation for first nine months issued by the finance ministry showed that the provinces had collected Rs16.73 billion during July – March 2019/2020 as compared with R19.64 billion in the corresponding period of the last fiscal year.

    The provinces have mandate to collect motor vehicle tax.

    The lower collection of motor vehicle tax attributed to slowdown in economy and the cases of coronavirus started appearing in the month of March 2020, which resulted in lockdown.

    The major slump in collection recorded by the Punjab province, which posted 19.5 percent decline to Rs9.55 billion during first nine months of current fiscal year as compared with Rs11.87 billion in the same period of the last fiscal year.

    The Sindh province posted 4 percent decline to Rs5.52 billion during July – March 2019/2020 as compared with Rs5.75 billion collected in the corresponding period of the last fiscal year.

    The collection of motor vehicle tax by Khyber Pakhtunkhwa registered 18 percent decline to Rs1.14 billion during first nine months of the current fiscal year as compared with Rs1.39 billion collected in the same period of the last fiscal year.

    The province of Balochistan collected Rs515 million during first nine months of current fiscal year as compared with Rs615 million in the same months of the last fiscal year, showing decline of 16 percent.

  • FBR proposed to ensure CPR for deposited withholding tax

    FBR proposed to ensure CPR for deposited withholding tax

    KARACHI: Federal Board of Revenue (FBR) has been advised to ensure Computerized Payment Receipt (CPR) for deposited withholding tax in order to avert chances of revenue leakages.

    Pakistan Business Council (PBC) in its proposals for budget 2020/2021 submitted to the FBR, said that presently the taxpayer has to deposit the withholding tax deducted fortnightly, i.e. within seven days from the end of each week ending on every Sunday.

    In addition, certain WHT agent do not deposit on time and some agents do not deposit at all. This also includes agencies/govt. organizations in respect of withholding tax, where CPR is not provided hence revenue leakages to government in the absence of withholding tax deposit.

    On the other hand, where withholding tax is deducted by agencies/government organization, but do not provide system (IRIS) generated CPR as they do not enter in the system. Therefore assesse cannot get input benefit due to non-availability of CPR from IRIS system on account of withholding tax in spite of reminders.

    The PBC recommended that timeline of 7 to 13 days should be extended to one week after the month.

    Besides, IRIS system should be applicable for all with holding agent including agencies/government organizations and CPR in respect of withholding tax facing authority should be available from IRIS.

    This will help in ease of doing business and facilitate withholding tax agents.

    Furhter, the proposed amendment will help in controling revenue leakages as well as assesse can claim input tax properly.

    Thus neither it is loss to authority nor the assesse. In the absence of non-availability of CPR , this is an extra cost for doing business.

  • FBR advised to amend withholding tax on prize winnings

    FBR advised to amend withholding tax on prize winnings

    KARACHI: Federal Board of Revenue (FBR) has been advised to amend the income tax law related to withholding tax deduction on prize winnings.

    Pakistan Business Council (PBC) in its budget proposals for 2020/2021 submitted to the FBR said that under Section 156 of the Income Tax Ordinance, 2001 requires a company to deduct 20 percent tax on “prize offered by companies for promotion of sale”.

    The PBC suggested amended in the Section 156 that every person paying prize of prize bonds, or winning from a raffle, lottery, prize on winning a quiz, prize offered by companies for promotion of sale to end consumers, or cross-word puzzle shall deduct tax.

    The PBC said that the clear intention of this section is to capture tax through withholding at source from persons who are recipients of these prizes or winnings; the intention is not to tax any person who belongs to the supply chain of the companies who offer prize for promotion of sales.

    The income of the supply chain i.e. dealers, distributors is subjected to withholding tax in the shape of withholding taxes imposed under separate withholding regimes.

    It is therefore suggested that to clear any ambiguity in law regarding application of this section, it may be amended to add the term “end consumers” to oust any person in the supply chain from the ambit of this section.

  • Karachi Chamber demands lifting lockdown completely as corona cases rise above 40,000

    Karachi Chamber demands lifting lockdown completely as corona cases rise above 40,000

    KARACHI: Business community has demanded complete ease in lockdown on Sunday as cases of coronavirus have increased to over 40,000 in the country.

    The government has started easing lockdown since last Monday but the cases of coronavirus increase at faster pace. The corona cases have increased to 40,151 till May 17, 2020.

    Chairman Businessmen Group (BMG) & Former President Karachi Chamber of Commerce & Industry (KCCI) Siraj Kassam Teli in a statement urged the Sindh Government to completely do away with the ongoing lockdown at least during the last week of Ramadan ul Mubarak in which all the shops and shopping malls be permitted to operate 24-hours a day, which would not only help in dealing with the overcrowding issue at various commercial markets due to limited timings but would enable the small traders/ shopkeepers to recover some of the previous losses suffered by them because of the prolonged lockdown that began from March 23.

    Siraj Teli stressed that the lockdown has to be completely relaxed during the last six days from Monday to Saturday before Eid so that Karachiites could visit commercial markets without any hassle, haste or worries while the shopkeepers could also deal with their customers in an uncrowded atmosphere which was really needed to ensure social distancing, one of the key precautionary measure required to effectively contain further spread of coronavirus pandemic.

    “Subsequently, the lockdown can once again be fully re-imposed during Eid-ul-Fitr holidays and up to May 31 as announced by Sindh Government and from June 1, 2020 onwards, the Sindh government, after reviewing the overall situation, may follow the same formula in which small traders/ shopkeepers are allowed to operate for four days a week from Monday to Thursday and the lockdown remains active on Friday, Saturday and Sunday.

    While appreciating numerous steps taken by Sindh Government since the imposition of lockdown to prevent spread of coronavirus pandemic particularly the hard work by Chief Minister Syed Murad Ali Shah, Chairman BMG regretted that it was really unfortunate to see that during last week when the lockdown was eased, small traders and shopkeepers breached their commitments made to Sindh Government by grossly ignoring the mutually agreed Standard Operating Procedures (SOPs).

    “The Karachi Chamber, being the premier Chamber and actual representative of the entire business & Industrial community, is not only too concerned about the losses suffered by small traders, shopkeepers and the industrialists but also equally worried about the lives of the masses as we cannot afford to run our businesses at the cost of the lives of the innocent public, who could become victim of the life-threatening virus anytime, hence it is the moral and social responsibility of everyone to adopt the SOPs”, Siraj Teli said, while appealing the Small Traders and Shopkeepers from each and every commercial market across Karachi to strictly adhere to all the SOPs at any cost during the remaining days of the ongoing shopping season of Eid ul Fitr as any negligence towards these SOPs would create a disastrous situation, which was already too bad as the number of COVID-19 infected people continues to rise across the country.

    “Meanwhile, the citizens must also be very careful and take necessary precautionary measures so that we all could collectively battle against the life threatening coronavirus pandemic and save our beloved country from further disaster”, he added.

    Siraj Teli further commented, “Since day one, I have been reiterating that Coronavirus is not going to go anywhere and it is going to stay with us for the time being. It has become part of our lives and we will have to live with it. We cannot afford to keep the businesses closed forever so the government and the business community will have to jointly devise ways and means of how to safely get back to daily routine life in the presence of the virus.”

    He was of the opinion that all the SOPs were not just limited to the shopping season of Ramadan only but these must become part of our daily lives and routine business activities.

    He said, “The Sindh government has strived really hard during the last almost two months to contain the spread of coronavirus pandemic. We cannot put all these efforts at stake hence, the shopkeepers must strictly ensure social distancing and take precautionary measures within and outside their business premises which is not only in favor of their own lives and businesses but also in the larger interest of the country. Every single life is very important so we all have to maintain strict discipline and adopt the SOPs which would help us in continuing our businesses in the presence of the virus”.

  • Corporate, super tax rates should be aligned for banks

    Corporate, super tax rates should be aligned for banks

    KARACHI: Federal Board of Revenue (FBR) has been proposed to bring down the corporate tax rate for banks at par with other corporate sector and also treatment of super tax for banking companies aligned with other taxpayers.

    The banks are paying 35 percent income tax whereas the corporate tax rate for other sectors is 29 percent. Likewise, super tax at four percent is applicable on banks.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its budget proposals for 2020/2021 submitted to the FBR, highlighted that the banking sector tax rates are not aligned with the general corporate tax rates.

    Furthermore, through Finance Supplementary (Second Amendment) Bill 2019, Super Tax at 4 percent is made applicable on banks from tax year 2018 to tax year 2021.

    The OICCI recommended that corporate tax rates for the banking sector should be aligned with other sectors.

    Meanwhile, super tax relief, as granted to other industries, should be given to banking sector as well.

    The OICCI also highlighted tax deduction on profit on debt under section 151 of Income Tax Ordinance, 2001.

    Through Circular No.1/2-STB/2019 dated 26th July 2019, FBR has clarified that withholding tax under section 151 shall be deducted on the basis of cumulative profit paid in a tax year.

    The circular is in contradiction with the Act, which requires that withholding tax shall be deducted on payment basis.

    The circular should be withdrawn, to avoid litigation between banks and department.

    There should be a uniform withholding tax rate of 15 percent for all payments of profit on debt.

    The OICCI pointed out Section 165 and 165A of Income Tax Ordinance 2001related to submission of statements and information by the banks.

    The Clause (81A) of Part IV to the Second Schedule was inserted vide the Finance (Second Amendment) Act 2019 to exclude the reporting requirements under section 165 of Income Tax Ordinance, 2001 with respect to withholding tax under section 151 (Profit on Debt) and 231A (Cash Withdrawal) since both the withholding sections are required to be reported under section 165A.

    The clause was abolished vide Finance Act 2019, resulting in duplication of reporting i.e. withholding tax under section 151 and 231A has to be reported, with a threshold, under section 165A on monthly basis and again under section 165 on bi-annual basis, but without any threshold i.e., withholding tax of even Re 1 has to be reported under section 165A.

    Therefore, the OICCI recommended that Clause (81A) of Part IV to the Second Schedule should be restored to avoid duplication of reporting and handling of voluminous data for immaterial withholding tax transactions, which is not clear.

    Alternatively, reporting requirement of section 165A for both these sections (151 and 231A) should be deleted to avoid double reporting.

  • Tax authorities consider reducing minimum tax rate: Zeeshan Merchant

    Tax authorities consider reducing minimum tax rate: Zeeshan Merchant

    KARACHI: Tax authorities have agreed to consider reducing minimum tax rate for corporate sector and individuals in the upcoming budget, especially in the wake of financial losses due to coronavirus pandemic, a senior tax consultant said.

    “In different meetings with Dr. Abdul Hafeez Shaikh, Finance Advisor to Prime Minister, Razak Dawood, Commerce Advisor to PM and senior officers of Federal Board of Revenue (FBR) have agreed to reduce minimum tax rate for providing relief to mitigate adverse impact of coronavirus,” Zeeshan Merchant, former vice president of Karachi Tax Bar Association (KTBA) said this while talking to PkRevenue.com.

    Merchant, who is also honorary consultant to Federation of Pakistan Chambers of Commerce and Industry (FPCCI), said that the actual proposal for the budget 2020/2021 is to reduce minimum tax rate for corporate sector to 0.5 percent and abolish this tax for two years in case of individuals and Association of Persons (AOPs).

    He said that in meetings Dr. Abdul Hafeez Shaikh and Abdul Razak Dawood appreciated the proposals and promised to consider in the budget for providing maximum relief to businesses.

    Merchant further said that the FBR chairperson also pledged to move this proposals after consideration for incorporation in the Finance Bill 2020.

    He said that due to coronavirus and subsequent lockdown many corporate entities would not able to post significant profits or declare substantial losses for the year.

    Merchant further said that the minimum tax applied on turnover when a taxpayer declare lower profit or declare gross losses to the year.

    The FPCCI in its proposals for fiscal year 2020/2021 said that the existing rate of 1.5 percent minimum tax is very high and results in financial hardships to the taxpayers.

    Due to the current economic conditions and its negative impact on productivity, the businesses are not operating at optimum level.

    According to changes vide Finance Act, 2016 threshold of turnover for individual and AOP for turnover tax at the rate of 1.25 percent decreased from Rs50 million to Rs10 million. This had adversely affected the true declaration of turnover and has created hardship for the taxpayers.

    After changes made in Section 113(1) of Income Tax Ordinance, 2001, now companies have to pay turnover tax even in case of gross loss before charging of depreciation. This has adversely affected the industry.

    Under section 113(2) (C) where Minimum Tax paid under sub section (1) exceeds the actual tax payable under Part I, Clause (1) of Division I, or Division II of the first Schedule, the excess amount is carried forward for adjustment against tax liability of the subsequent tax year(s).

    The FPCCI also proposed to reduce the minimum tax rate and enhance the limit of turnover to Rs50 million.

  • Time limit for customs valuation issuance should be fixed

    Time limit for customs valuation issuance should be fixed

    KARACHI: Federal Board of Revenue (FBR) has been recommended to fix time limit for issuance of customs valuation.

    Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021, said that the validity of Valuation Ruling under Section, 25-A of the Customs Act, 1969 is life time utill or unless revised or rescinded by the competent authority and Genuine Importer suffer as the Assessing Offices reject the transaction Values and Increase the Values of Assessments.

    Time limit may be fixed for issuance of Valuation Ruling under subsection 1 of section 25A of Custom Act, 1969, may not be more than 30 days and validity period under subsection 4 of section 25A of the Act should not be more than 90 or 120 days as we have fast internet system in the world over.

    (i) The following proviso may be inserted after subsection 1 of section 25A of the ACT,1969.

    “Provided that the time limit to notify the customs values under subsection 1 of section 25A should not me more than 30 days from date of first initiative of the subject exercise”.

    (ii) The words after the “applicable” in subsection 4 of section 25A should be substituted as; “till ninety days from the date of issuance of determined customs values.”

  • Weekly Review: market likely gain as lockdown eases

    Weekly Review: market likely gain as lockdown eases

    KARACHI: The share market to remain green due to easing of lockdown in the country which will revive economic activity.

    Analysts at Arif Habib Limited said that moreover, SBP announced 100 basis points reduction in policy rate to cushion economic fallout amid lower inflationary readings on account of slowdown in demand and decline in fuel prices which may fuel bullish sentiments.

    That said, rising cases of Coronavirus in Pakistan may again lead to a strict lockdown which would once again put pressure on the index.

    Investors may opt for profit taking in upcoming week before Eid Holidays.

    The benchmark KSE-100 of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.1x (2020) compared to Asia Pac regional average of 10.2x while offering a dividend yield of 8.2 percent versus 3.1 percent offered by the region.

    This past week, the benchmark equity bourse (KSE-100) sustained the 33,000 level and exhibited gains on 5 out of 5 trading sessions (this has happened after 26 weeks).

    Reasons for the positive sentiment include: i) Softening of lockdown announced by federal and provincial governments helped to increase domestic business activity including opening of industries, ii) Pakistan weight in MSCI EM index remained unchanged, iii) Government announced construction of Diamer-Bhasha Dam that will generate demand for Cement and Steel, and iv) Expectation of further rate cut improved activity in highly levered stocks.

    However, Commercial Banks felt the heat on account of expectation of further rate cut which may stress profitability of the banking sector.

    As a result, the KSE-100 index closed at 34,008 points, up by 741 points or 2.2 percent WoW.

    Contribution to the upside was led by i) Oil and Gas Exploration Companies (192 points), ii) Cements (177 points), iii) Fertilizer (148 points), iv) Food and Personal Care Products (61 points), and v) Technology and Communication (57 points). Scrip wise major gainers were FFC (74 points), MARI (73 points), LUCK (66 points), NESTLE (59 points), and OGDC (56 points). Whereas, scrip wise major losers were BAHL (40 points), SNGP (35 points) ABL (20 points), INDU (17 points) and PAKT (14 points).

    Foreigners offloaded stocks worth of USD 10.91 million compared to a net sell of USD 17.82 million last week.

    Major selling was witnessed in Commercial Banks (USD 2.89 million) and Power Generation and Distribution (USD 2.40 million).

    On the local front, buying was reported by Individuals (USD 5.56 million) followed by Mutual Funds (USD 4.97 million). That said, average daily volumes for the outgoing week were up by 15 percent to 219 million shares whereas value traded decreased by 13 percent to USD 40.3 million.

  • FBR advised to make annexure-J mandatory to prevent under reporting

    FBR advised to make annexure-J mandatory to prevent under reporting

    KARACHI: Federal Board of Revenue (FBR) has been advised to make it mandatory the filing annexure-J along with monthly sales tax returns in order to remove disparity between formal and informal sectors.

    Pakistan Business Council (PBC) in its proposals for budget 2020/2021 submitted to the FBR, said that currently only certain persons as defined under Rule 14 to Sales Tax Rules, 2002 are required to file annexure J.

    Annexure J requires taxpayers to file details of stock in hand in terms of value as well as quantity.

    Other taxpayers are encouraged to file the same but there is no mandatory requirement as per applicable laws to file the same.

    “It is feared that registered taxpayers are under reporting or suppressing their actual sales to escape the sales tax charge as currently there is no mechanism to report the details of stock (Raw material, WIP, and Finished Goods).

    The PBC proposed to make it mandatory for all the taxpayers to file Annexure J along with their monthly sales tax return in order to ensure that sales are not suppressed or made without charging proper sales tax.

    It said that the proposed mandatory requirement would help in removing disparity between formal and informal sectors.