KARACHI: Passengers or crew members found involved in illegal trading of currency, gold or precious stones to be convicted with up to 14 years imprisonment along with huge amount of fine and penalty.
(more…)Author: Mrs. Anjum Shahnawaz
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Minimum tax to apply on non-resident PE companies
KARACHI: The minimum tax on turnover has been proposed to impose on non-resident companies having permanent establishment (PE) in Pakistan.
The amendment in Section 113 of the Income Tax Ordinance, 2001 has been proposed through Finance Bill, 2020.
According to EY Ford Rhodes Chartered Accountants the Section 113 of the Ordinance levies minimum tax on a person based on his turnover where such person is not liable to pay tax due to various reasons listed therein.
However, the levy of minimum tax in case of corporate taxpayers, is only applicable on resident companies.
This means that foreign companies having a permanent establishment in Pakistan (including a branch) are not subject to minimum tax.
The Finance Bill 2020 has now proposed to include non-resident companies having a permanent establishment in Pakistan under the domain of minimum tax on turnover.
Consequently, such companies would be required to compute minimum tax under Section 113 of the Ordinance for determination of their ultimate tax liability.
It may be noted that in the matter of levy of tax on non-resident persons, as per Section 107 of the Ordinance, the provisions of the Avoidance of Double Tax Agreement between Pakistan and the respective country would prevail over the provisions of the Ordinance.
It needs to be appreciated that in most of the agreements Pakistan has signed with other countries, a permanent establishment of a non-resident in Pakistan would be taxable only on net income basis.
“Therefore, the applicability of minimum tax in case of a non-resident person having a permanent establishment in Pakistan may be put to a question where a avoidance of double taxation treaty prevails,” they said.
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FBR to get information of all persons entering, leaving Pakistan for broadening of tax base
KARACHI: Federal Board of Revenue (FBR) will get access to information of all persons entering or leaving Pakistan from federal investigation agency and bureau of emigration for the purpose of broadening of tax base.
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KCCI urges K-Electric to stop load shedding
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has expressed serious concerns of electricity shortfall which caused massive losses to trade and industry.
Agha Shahab Ahmed Khan, President KCCI urged the K-Electric to immediately stop the ongoing load shedding spell and focus on improving the infrastructure, particularly power generation capacity and distribution network which is in a terrible state.
In a statement issued, Agha Shahab pointed out that due to K-Electric’s poor performance, almost all the localities of Karachi and also the seven industrial zones have to suffer unannounced load shedding and power failures every day for many hours that results in substantial losses.
“The industries have suffered badly due to the outbreak of coronavirus and the subsequent lockdown for more than two months and now, K-Electric has also resorted to massive load shedding, which poses threat to the already staked survival of industries,” he said and asked ‘What is the motive behind carrying out immense load shedding in an extraordinary situation?’
“The unannounced and prolonged load shedding by K-Electric would prove to be the last nail in the coffin of industries and the economy”, he opined and added that People from different walks of life, who have been inhabiting in various localities, sought KCCI’s assistance to exert pressure on K-Electric’s management so that uninterrupted power supply in every area could be ensured.
He stressed that K-Electric must adopt measures on war footing to minimize the hardships being suffered by the citizens and the business community of the largest city of Pakistan which contributes a lion’s share of more than 70 percent revenue to the national exchequer. Karachiites are already under tremendous mental pressure due to coronavirus pandemic and their sufferings multiply further when they have to go through prolonged load shedding every day and night.
President KCCI said that K-Electric has been earning huge profits of billions of rupees every year but unfortunately, it has not been adequately investing on improving the dilapidated distribution network which was in a very bad shape as every year whenever the electricity demand shoots up in the city during summer season, K-Electric fails to deal with the situation and the public pays the price for this failure in shape of load shedding.
Agha Shahab further advised that as Monsoon season is just ahead and heavy rainfalls have been forecasted by the Metrological Department, K-Electric must act sensibly and responsibly, avoid repeating mistakes and adopt stringent measures to ensure uninterrupted and safe power supply during the rainy season. “Dozens of people were electrocuted during last year’s Monsoon season and the same situation may happen this year as well because no safety measures have been adopted so far hence K-Electric’s management must take up this matter on priority and devise effectively strategies to save precious lives in case the city undergoes torrential rains”, he added.
Agha Shahab requested Prime Minister Imran Khan, Governor Sindh Imran Ismail, Chief Minister Sindh Murad Ali Shah and other concerned ministers at the Federal and Provincial levels to review the situation and issue strict directives to K-Electric to improve its infrastructure and ensure uninterrupted power supply to public and also the business and industrial community who are already suffering terribly because of the outbreak of coronavirus pandemic.
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Weekly Review: Stock market likely to stay in green zone
KARACHI: The stock market likely to stay in green zone during next week as coronavirus cases are receding and investors are optimistic on inflows from international financial institutions.
Analysts at Arif Habib Limited said that the market to remain positive in the upcoming week.
Since COVID-19 cases have started to decline day-on-day basis, investment sentiment is expected to improve. With inflow of funds from ADB and World Bank, PKR/USD parity is expected to stabilize in the upcoming week.
With monetary policy announced we expect investors to cherry pick scrips from Cements, OMCs and Fertilizers sector.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.2x (2020) compared to Asia Pac regional average of 12.6x and while offering DY of ~6.5 percent versus ~2.8 percent offered by the region.
The market commenced on a positive note this week. However, sentiments turned negative amid plunge in international oil prices during the mid-week.
Furthermore pressure from downturn in international markets owing to concerns over a possible second wave of COVID-19 was also felt in local bourse.
With monetary aid received during the week from ADB and World Bank worth USD 1bn followed by current account turning surplus with USD 13 million in May 2020, sentiments shifted towards green side.
Along with this, SBP’s announcement of 100 bps cut provided further fuel to sentiment. Furthermore, extension in FATF’s deadline also provided breather to investors.
The market settled at 33,939 points, gaining 501 points (up by 1.5 percent) WoW.
Sector-wise positive contributions came from i) Fertilizer (326 points), ii) Cements (108 points), iii) Power Generation & Distribution (46 points), iv) Oil & Gas Marketing Companies (34 points) and Auto Assemblers (31 points).
However, sector-wise negative contribution came from i) Commercial Banks (90 points), ii) Tobacco (13 points) and iii) Pharmaceuticals (8 points). Scrip-wise positive contributions were led by FFC (101 points), ENGRO (95 points), DAWH (78 points), EFERT (47 points) and HUBC (44 points).
Foreign selling continued this week clocking-in at USD 9.9 million compared to a net sell of USD 4.8 million last week. Selling was witnessed in Fertilizer (USD 2.7 million) and Commercial Banks (USD 2.6 million).
On the domestic front, major buying was reported by Insurance Companies (USD 7.0 million) and Mutual Funds (USD 3.4 million). Average Volumes settled at 177 million shares (down by 23 percent WoW) while average value traded clocked-in at USD 35 million (down by 16 percent WoW).
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FBR urged to allow time extension making audit notice compliance
KARACHI: Pakistan Tax Bar Association (PTBA) has urged the tax authorities to allow time extension to taxpayers for making compliance in audit notices of tax year 2014.
In a letter sent to Ms. Nausheen Javaid Amjad, Chairperson, Federal Board of Revenue (FBR) on Friday, the PTBA urged to grant an extension of time under Section 214A of the Income Tax Ordinance, 2001 to complete the amendment of assessment proceedings for the tax year 2014 in order to provide sufficient time to taxpayers for compliance of such notices issued by the department in the best possible interest of the taxpayers at large.
The apex tax bar said that it had been brought to the notice that the officers of Inland Revenue had initiated amendment of assessment proceedings by issuing various notices under Section 177/174/176/122 of the Ordinance, ibid in the last month of June 2020 to the taxpayers for the year 2014 as the said tax year is going to be time barred as on June 30, 2020 under Section 122(2) of the Income Tax Ordinance, 2001.
Furthermore, the said notice have been issued with a short margin of only 2-3 days for compliance (which is not possible) and the officers are also reluctant to allow sufficient time to the taxpayers and their respected authorized representatives to respond against the notices in order to finalize it till June 30, 2020 to achieve budgetary targets by the end of this month.
The tax bar said: “This, once again, put the credibility of the FBR officials in question as there were six years available to those officers to complete the assessment proceedings after filing of income tax returns for the tax year 2014 but the department has been slept over all this time and now suddenly awake just to show efficiency by issuing such vague notices in order to complete the proceedings before it gets time barred.”
The PTBA informed the FBR chairperson that it had been held in a number of judgments as well as many directions had been given from time to time by the board to the officials to provide sufficient time/opportunity to the taxpayers to defend their case and provide sufficient explanation before an adverse order is passed against them. “But this has not been adhered to in the prevailing situation as the officers of FBR are busy in achieving their budgetary targets as well as to show their efficiency at the end of the financial year.”
Hence, such notices issued by the department not only torment the taxpayers but also lacks confidence of the taxpayers / consultants upon the department, it added.
“Nevertheless, the current pandemic situation of COVID-19 prevailing all over the country where many of the businesses and areas are still in lockdown situation, the taxpayers are unable to reach their as well as FBR offices to respond such notices issued by the department in such a short compliance period.”
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Commissioner IR empowered to amend assessment without definite information
KARACHI: Commissioners of Inland Revenue have been empowered to amend assessment on the basis of best judgment and make dis-allowances without specific supporting evidence.
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Petroleum prices increased up to 66 percent; Petrol enhanced to Rs100.10/liter
ISLAMABAD: The federal government has increase prices of petroleum products (POL) up to 66 percent effective from June 26, 2020.
According to new prices issued by the ministry of finance the maximum increase has been witnessed in kerosene oil by 66.08 percent to Rs59.06 per liter from previous price of Rs35.56 per liter.
Second major change has been witnessed in Light Diesel Oil that has been enhanced by 46.77 percent to Rs55.98 per liter from previous rate of Rs38.14 per liter.
The price of petrol has been increased by 34 percent to Rs100.10 per liter from previous rate of Rs74.52 per liter.
The price of High Speed Diesel has been increased by 26.58 percent to Rs101.45 per liter from Rs80.15 per liter.
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FPCCI advises central bank to bring down interest rate to 5 percent
KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has advised the State Bank of Pakistan (SBP) to bring down the key policy rate at 5 percent considering the prevailing situation due to coronavirus.
FPCCI president Mian Anjum Nisar on Friday appreciated the SBP for slashing key policy rate by 100 basis points to 7 percent in an unscheduled meeting of Monetary Policy Committee which has so far slashed the key interest rate by 6.25 percent from 13.25 percent since March 17, 2020.
He said the rate cut is a welcome move, but only 100bps (basis points) cut is not enough. In the prevailing circumstances, interest rate at 7 percent is not feasible for the businesses, he said.
“FPCCI hopes the central bank will consider the plights of the business community and rates would be brought to 5 percent soon,” he added.
He said that the businessmen’s apex body welcomes the central bank’s move to cut the interest rates by 1 percent, urging it to bring discount rate to at least 5 percent in line with global financial trend.
“This is commendable step of the State Bank, as it has now started shifting toward supporting trade and industrial growth and employment generation which is not possible without sizeable cut in key policy rate,” he added. He said that the banks should now also be advised to follow the lines of SBP immediately accordingly.
“The banks should be instructed to revise KIBOR on a monthly basis instead of quarterly basis to pass on the benefit of lower rates speedily to the trade and industry, which are struggling to survive, Mian Anjum Nisar suggested and added that the impact on banks on their deposits will be insignificant.
FPCCI President said that the reduction in policy rate by 6.25 percent since March 17, 2020 is commendable step of the government in the present situation that will positively affect cost of doing business and will encourage the investors and industrialists to make new investment in the country.
The president FPCCI also said that the pandemic COVID-19 has affected the global economy and pushed to the depression resulting contraction in the economic activities and a threat to unemployment.
He asked the SBP to go the extra mile in these arduous times and leave no stone unturned in providing relief to the financially distressed businesses.
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KCCI declares policy rate cut insufficient
KARACHI: Karachi Chamber of Commerce and Industry (KCCI) is not satisfied with one percent interest rate cut by the State Bank of Pakistan (SBP) and said it is very little reduction.
Chairman Businessmen Group (BMG) and Former President Karachi Chamber of Commerce & Industry (KCCI) Siraj Kassam Teli and President KCCI Agha Shahab Ahmed Khan, have expressed disappointment over a meager reduction of just one percent in Policy Rate by the State Bank of Pakistan, terming it “too little, too late”.
They stated that for a long time even before the pandemic, KCCI has consistently demanded to bring the policy rate to down to 4 percent in one go rather than in instalments.
Reduction in policy rate in bits and pieces did not provide the much needed thrust to economy whereas a one-time major reduction to 4 percent could have triggered growth and accelerated economic activities.
Reduction in policy rate in bits and pieces is not enough to provide stimulus to the economy hence, it is necessary to significantly reduce the interest rate in a single step, to rescue the trade and industry which is going through an unprecedented crisis.
Revision in policy rate to 7 percent will effectively mean the interest rate for large scale borrowers will be 8 percent to 9 percent after adding the bank’s spread while it will not be less than 10 percent to 12 percent for smaller entities.
In a statement, Siraj Teli and Agha Shahab pointed out that the business and industrial community is going through difficult times and many will not be able to survive through the economic crisis.
Nearly all major economies have supported businesses by reducing their policy rates to as low as zero percent realizing the gravity of a global economic meltdown and its impact on businesses.
It is surprising that the decision makers at the SBP and the governor do not have the perception of ground realities of Pakistan and the serious economic challenges the country will have to face in the near future if growth does not pick up soon.
They opined that there is now ample justification for meaningful reduction in policy rate because the inflation has declined sharply due to a steep fall in prices of crude oil, commodities and raw materials, while the demand has also been suppressed.
Therefore, it is imperative to support the business and industrial community at such a critical time through further reduction in policy rate.
Chairman BMG and President KCCI underlined the fact that KCCI had expressed reservations to the Prime Minister of Pakistan on various occasions and also to Governor State Bank of Pakistan during his last visit to KCCI before pandemic about astronomically high interest rates which stifled growth and increased cost of doing business.
They hoped that realizing the gravity of the situation, the State Bank would once again review its Monetary Policy at the earliest and revise the policy rate downward by another 300 basis points to provide much needed thrust to economy and trigger growth in the face of upcoming challenges created by Covid-19 pandemic that has affected the entire world.