Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • Criminal proceedings against officials of RTO-II Karachi in fake sales tax refunds ordered

    Criminal proceedings against officials of RTO-II Karachi in fake sales tax refunds ordered

    KARACHI: Federal Tax Ombudsman (FTO) has directed tax authorities to initiate criminal proceedings against officials involved in processing bogus sales tax refunds.

    In an own motion in bogus refunds, the FTO observed that failure of the Regional Tax Office (RTO)-II Karachi to initiate action against the persons/officials involved in registration of fake refund payment and retrieval of refund already issued prior to issuance of red alert, was tantamount to maladministration.

    The FTO ordered the FBR to:

    — direct the Chief Commissioner Inland Revenue, RTO-II Karachi to investigate and identify the officials involved in registration of fake RP and initiate legal action against those found involved;

    — identify the officers/officials who were involved in processing bogus sales tax refund on the basis of fake and flying invoices and issuing refund pertaining to tax period August 12 and take appropriate criminal/disciplinary action against them.

    — initiate appropriate action including criminal proceedings leading to prosecution of RPO and recovery of amount of Rs3 million, swindled from public exchequer.

    The FTO directed the tax authorities to ensure compliance of the order within 45 days from the issuance of the order i.e. February 24, 2020.

    The tax ombudsman in its own motion initiated investigation in irregularities committed by the FBR field formations in processing and sanctioning of bogus sales tax refunds during the period 2011-2014 identified by Directorate General Intelligence and Investigation of FBR and ‘Red Alerts’ were issued to the field formations concerned but neither any action was initiated against the fake claimants nor their connivers in the department, who were involved in bogus registration, processing and sanctioning of fraudulent refund and issuance of refund cheques, nor against the related officers/officials of bank branches concerned and PRAL management.

    The FBR issued the instance order in the case of M/s Victory International, engaged in the manufacturing of plastic products.
    The investigation of I&I FBR revealed that the RP got registered on November 11, 2010 as a manufacturer of plastic product but claimed refund of Rs3 million for tax period August 2012 on the basis of fake invoices issued by irrelevant suppliers from paper, steel, electric sectors therefore the whole activity chain was treated as engineered with aim to obtain illegal refund.

  • Equity market ends down by 97 points amid profit taking

    Equity market ends down by 97 points amid profit taking

    KARACHI: The equity market fell by 97 points on Tuesday after investors preferred profit taking.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 39,200 points as against 39,296 points showing a decline of 97 points.

    Analysts at Arif Habib Limited said that the market continued the ascent realizing a gain of +570 points during the session, but felt the need to consolidate and book profits, which saw index sliding back by -239 points.

    Cement sector has so far shown the strength, which resisted last week and even made a strong comeback when the despair ended.

    Reports of Cement manufacturers meeting in the coming days to resolve the issues kept the interest alive among investors.

    On the other hand, news of FFC cutting back the price of Urea concerned investors to ditch fertilizer stocks and consider safe havens such as Cyclicals and otherwise Oil & gas chain.

    Cement sector again led the traded volumes with 63.2 million shares, followed by O&GMCs (26.5 million) and Technology (22.7 million).

    Among scrips, MLCF topped the chart with 20.9 million shares, followed by UNITY (20.5 million) and HASCOL (19.2 million).

    Sectors contributing to the performance include Fertilizer (-101 points), Power (-42 points), Banks (-32 points), E&P (+52 points) and Technology (+23 points).

    Volumes increased from 215.3 million shares to 225.2 million shares (+5 percent DoD). Average traded value, however, dipped by 3 percent to reach US$ 56.7 million as against US$ 58.7 million.

    Stocks that contributed significantly to the volumes include MLCF, UNITY, HASCOL, TRG and FCCL, which formed 38 percent of total volumes.

    Stocks that contributed positively include PPL (+23 points), OGDC (+18 points), TRG (+15 points), HASCOL (+15 points) and POL (+14 points). Stocks that contributed negatively include FFC (-44 points), ENGRO (-40 points), HUBC (-37 points), LUCK (-32 points), and EFERT (-17 points).

  • Domestic oil sales fall by 14% on economic slowdown

    Domestic oil sales fall by 14% on economic slowdown

    KARACHI: The domestic oil sales have declined by 14 percent during July – February 2019/2020 due to economic slowdown.

    According to statistics by Oil Companies Advisory Committee (OCAC), the domestic oil sales fell to 11.24 million tons during first eight months of current fiscal year as compared with 13.1 million tons in the corresponding period of the last fiscal year.

    Analysts at Topline Securities said that the lower consumption was largely attributed to economic slowdown.

    The sales of motor spirit (petrol) were flat at 5 million tons during the period under review. However, sales of furnace oil and high speed diesel fell by 33 percent and 14 percent respectively.

    The analysts said that oil sale for Feb 2020 was decline by 26 percent YoY largely driven by a decline in HSD and FO volumes.

    In absolute terms the decline was of 221,000 tons in HSD (-37 percent YoY). The lower consumption is largely attributed to the economic slowdown.

    Ex-FO performance did not fare well as 26 percent YoY and 15 percent MoM decline is expected.

    The slight uptick in FO volumes was witnessed in last month (Jan 2020) at the behest of a significant price decline. Since then FO prices have witnessed a gradual recovery.

    HASCOL remained the top laggard with decline in volumes by 61 percent and 33 percent YoY and MoM, respectively.

    Market share of the company in MS/HSD has declined by 430bps/810bps YoY. Similarly on MoM basis, market share is down by 160bps/250bps.

    APL has gained market share in HSD and MS both by 390bps and 120bps MoM to 13.2 percent and 10.1 percent respectively.

    PSO’s share in MS declined by 2.4 percent to settle at 35.4 percent. SHEL managed to maintain its market share at 11.7 percent mark in MS their main segment.

  • Rupee gains eight paisas on declining import bill

    Rupee gains eight paisas on declining import bill

    KARACHI: The Pak Rupee gained eight paisas against dollar on Tuesday owing to significant decline in import bill.

    The rupee ended Rs154.29 to the dollar from previous day’s closing of Rs154.37 in interbank foreign exchange market.

    Currency dealers said that the shrinking trade deficit and decline in imports helped the rupee to gain value.

    The import bill of the country fell to $31 billion during July – February 2019/2020 as compared with $36.5 billion in the corresponding period of the last fiscal year, showing decline of around 15 percent.

    The falling imports also helped the country to curtail trade deficit. The trade deficit shrank by 27 percent to $15.5 billion during first eight months of the current fiscal year as compared with $21.5 billion in the corresponding period of the last fiscal year.

    The foreign currency market was initiated in the range of Rs154.32 and Rs154.38. The market recorded day high of Rs154.35 and low of Rs154.29 and closed at Rs154.29.

    The exchange rate in open market witnessed no change in rupee value. The buying and selling of dollar was recorded at Rs154.00/Rs154.30, the same previous day’s closing, in cash ready market.

  • Audit firm suspended for misconduct

    Audit firm suspended for misconduct

    KARACHI: The Institute of Chartered Accountants of Pakistan (ICAP) has taken disciplinary action against an audit firm for professional misconduct, suspending its operations and removing its name from the official register for a period of six months.

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  • Persons not on new ATL to pay 100% additional withholding tax

    Persons not on new ATL to pay 100% additional withholding tax

    KARACHI: Persons who have failed to submit their annual income tax returns and declaration of assets for tax year 2019 will pay 100 percent additional withholding tax on certain transactions, sources in Federal Board of Revenue (FBR) said on Monday.

    They said that those taxpayers availing the benefit of reduced rate of withholding tax on the basis of returns filed for tax year 2018 would not more eligible.

    The FBR issued new Active Taxpayers List (ATL) for tax year 2019 including names of those return filers who filed their returns up to February 29, 2020.

    The new ATL included name of 2.53 million taxpayers who filed their returns for tax year 2019. These taxpayers were salaried persons, business individuals, Association of Persons (AOPs) and companies.

    The FBR had extended the last date for filing income tax returns and declaration of assets up to February 28, 2020.

    The sources said that through Finance Act, 2019 a new 10th Schedule to Income Tax Ordinance, 2001 was introduced under which the FBR imposed 100 percent additional withholding tax on those persons whose name were not on the ATL.

    Previously, the law provides for the concept of a non-filer and stipulates higher withholding rates for the same which were adjustable at the time of filing of income tax return.

    This tax regime has created a misconception that a non-filer can go scot free by choosing not to file income tax return.

    The measure was meant to increase the number of filers, however over time the focus shifted to raising additional revenue only.

    The measure had not achieved the desired results as the regime did not provide for any legal framework to ensure filing of return by such non filers.

    In order to remove the aforesaid misconception, the concept and the term of “non-filer” was abolished from the statute, wherever occurring.

    In its stead a separate Schedule is being introduced to specifically provide a legal framework for punitive measures for persons not appearing on ATL and to ensure filing of return by such persons.

    The main attributes of this scheme are as under:-

    — Persons whose names are not appearing on the ATL will be subjected to hundred percent increased rate of tax.

    — The withholding agents will clearly specify the names, CNIC or any other identification of such persons in the withholding statement so that legal provisions to enforce return can come into effect.

    — Where a withholding agent is of the opinion that hundred percent increased tax is not required to be collected on the basis that the person was not required to file return, the withholding agent shall furnish an intimation to the Commissioner setting out the basis on which the person is not required to file return.

    The Commissioner shall accept or reject the contention on the basis of existing law. In case the Commissioner fails to respond within thirty days, permission shall be deemed to be granted to not deduct tax at hundred percent increased rate o Where the person’s tax has been deducted or collected at hundred percent increased rate and the person fails to file return of income for the year for which tax was deducted, the Commissioner shall make a provisional assessment within sixty days of the due date for filing of return by imputing income so that tax on imputed income is equal to the hundred percent increased tax deducted or collected from such person and the imputed income shall be treated as concealed income.

    — The provisional assessment shall be of no effect if the person files return within forty five days of completion of provisional assessment and the provisions of the Ordinance shall apply accordingly. Where return is not filed within forty five days of provisional assessment, it shall be treated as final assessment and the Commissioner shall initiate penalty proceedings for concealment of income.

  • FBR unearths benami properties worth Rs8bn of politically exposed persons

    FBR unearths benami properties worth Rs8bn of politically exposed persons

    ISLAMABAD: Federal Board of Revenue (FBR) has unearthed benami properties amounting Rs8 billion of politically exposed persons (PEP), according to data made available on Monday.

    The anti-benami zones of the FBR have attached 6 immovable properties and finalized 10 cases against PEP. The FBR summoned 140 politically exposed persons to explain the source of income for purchasing properties. The anti-benami zones filed six references against PEPs.

    According to details around 35 beneficial owners have been detected to have benami properties as PEPs. The highest number of cases detected in Lahore zone while five each cases detected in Karachi and Islamabad.

    These PEPs have purchased properties in the names of 90 benamidars. The highest number of 56 benamidars of PEPs was identified by Lahore zone, 24 by Karachi and 10 by Islamabad.

  • Banking sector profitability grows by 20% in 2019

    Banking sector profitability grows by 20% in 2019

    KARACHI: Banks have posted 20 percent growth in profitability during 2019 despite economic slowdown, analysts said on Monday.

    The analysts at Topline Securities said that 2019 has been an exceptional year for the banking sector with profitability increasing by 20 percent or Rs30 billion to reach Rs177 billion, in spite of economic slowdown.

    The primary driver this year has been the net interest income which has increased by 27 percent from Rs486 billion to Rs620 billion, mainly due to higher interest rates. Weighted average Policy Rate in 2019 remained 12.2 percent compared to 7.2 percent in 2018.

    In absolute terms, the highest yearly profit was earned by MCB bank (Rs23.8 billion) followed by UBL (Rs19 billion) and NBP (Rs16.6 billion). However in terms of earnings growth BIPL came out on top with 247 percent growth followed by MEBL with 73 percent and AKBL with 58 percent growth.

    Out of 17 listed banks the analysts have not taken SILK, SMBL and BOK in the analysis whose results have not been announced.

    As mentioned Net Interest Income (NII) of the banks remained major earnings driver in 2019. In Pakistan rising interest rates bodes well for banks as around 34 percent of deposits are non-remunerative (Current Deposits on which banks give no return) that leads to a higher spread.

    Top banks with the highest growth in NII are BIPL (78 percent), MEBL (65 percent) and SCBPL (50 percent).

    Non funded income has increased by a mere 7 percent. Prime reason for the limited increase was the lack of capital gains given the under performance of the market.

    Secondly, given the tough economic conditions lower payouts resulted in lower dividend income from portfolios.

    However, the cover came through forex income which improved by around Rs7 billion or 20 percent as the banks capitalized on the volatile exchange rate in 2019.

    Cost to income for the year decline to 57 percent from 60 percent. Besides above average increase in income, a number of banks exercised cost rationalization measure in order to endure the current economic slowdown.

    The lowest cost to income ratios belonged to SCBPL (30 percent), MEBL (46 percent) and MCB (48 percent). The lowest increase in non interest expenses was achieved by SCBPL growing by a mere 5 percent followed by 6 percent by MCB and 10 percent by JSBL.

    As expected provisions for the listed banks have increased by 63 percent or Rs17 billion to reach Rs44 billion in 2019.

    The increase has been a mix of diminution in value of investments and loan related charges. The analysts believe that loan provisions would be higher given the prevalent economic conditions and high interest rates.

    Tax expense for the listed banks went up by Rs37 billion to Rs128 billion in 2019. Effective taxation in 2018 was at 38 percent which increased to 42 percent on account of payment of super tax for 2017.

    The analysts said that the year 2020 is expected to be a transitionary year for banks and lot will depend upon the timing and quantum of the interest rate cut.

    Higher than expected inflation numbers have pushed back industry consensus of a cut by few months compared to earlier estimates of a likely cut in 1Q2020.

    Margins of banks in Pakistan are typically affected with falling rates as floating saving and fixed deposits normally go down, whereas, remunerative deposits (34 percent of total deposits) remain unaffected.

    This time in falling interest rate scenario, banks’ NIMs will come under pressure sooner as they have not managed to invest fixed coupon high yielding long tenor PIBs as compared to last time. It is evident from T-bills/PIBs investment ratio of 1.7x this time compared to average of 0.8x last time.

    Banks with strong deposit franchises with a high mix of Current Accounts are likely to be in the limelight due to lower exposure to minimum deposit rate.
    They expect credit growth to improve going forward partially offsetting impact of NIMs contraction. Banks’ credit growth was muted at 3.4 percent in 2019.

    However, they expect growth of 10 percent in 2020 and 13 percent in 2021.

  • Stock market surges by 1,313 points on slowdown in inflation

    Stock market surges by 1,313 points on slowdown in inflation

    KARACHI: The stock market surged by 1,313 points on Monday owing to slowing down in inflation growth. The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 39,296 points as against 37,984 points showing an increase of 1313 points.

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  • Rupee falls by 14 paisas against dollar on import demand

    Rupee falls by 14 paisas against dollar on import demand

    KARACHI: The Pak Rupee ended down by 14 paisas against dollar on Monday owing to higher demand of foreign currency for import and corporate payment.

    The rupee ended at Rs154.37 to the dollar from last Friday’s closing of Rs 154.23 in Interbank foreign exchange market.

    Currency experts said that the market was opened after weekly holidays. The demand for the greenback was higher from importers and corporate buyers.

    The foreign currency market was initiated in the range of Rs154.40 and Rs154.45. The market recorded day high of Rs154.40 and low of Rs154.34 and closed at Rs154.37.

    The exchange rate in open market witnessed no change in rupee value. The buying and selling of the dollar was recorded at Rs154.00/Rs154.30, the same closing level of last Friday, in cash ready market.