ISLAMABAD: The adverse impact on the economy due to COVID-19 has forced the State Bank of Pakistan (SBP) to adopt flexible monetary policy stance, according to Pakistan Economic Survey 2019/2020 released on Thursday.
(more…)Author: Mrs. Anjum Shahnawaz
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Zero-rating elimination provides impetus to FBR collection
ISLAMABAD: Elimination of zero-rating regime on five export oriented sectors has provided impetus to tax collection during current fiscal year, said Pakistan Economic Survey 2019/2020 issued on Thursday.
The survey said that tax collection of Federal Board of Revenue (FBR) has witnessed a remarkable turnaround during the current fiscal year after posting negative growth of 0.4 percent in FY2019.
The overall FBR tax collection grew by 10.8 percent to Rs3,300.6 billion during July-April, FY2020 against Rs 2,980.0 billion in the comparable period last year.
Within the total, the domestic component of tax revenue collected by the FBR grew by 14.7 percent to stand at Rs 2,777.7 billion in first ten months of the current fiscal year against Rs 2,421.1 billion in the comparable period last year.
“The rise in tax collection is attributed to various policy initiatives implemented at the start of FY2020 such as charging sales tax on more items at the retail price under 3rd Schedule, reinstatement of taxes on telecom services and an upward revision of tax rates on various salary slabs.
“In addition, an upward revision in the federal excise duty (FED) rates and the abolishment of the zero-rating regime on five export-oriented sectors provided further impetus to FBR tax collection.”
Direct Taxes
The net collection of direct taxes has registered a growth of 14.1 percent during the first ten months of FY2020. The net collection has increased from Rs 1,071.7 billion to Rs 1,223.2 billion.
The bulk of the tax revenues of direct taxes is realized from income tax. The major contributors of income tax are withholding tax, voluntary payments and collection on demand.
Indirect Taxes
The gross and net collections of indirect taxes have witnessed a growth of 11.4 percent and 8.9 percent respectively. It is accounted for 62.9 percent of the total FBR tax revenues.
Sales Tax
Within indirect taxes, net collection of sales tax increased by 15.7 percent. The gross and net sales tax collection during July-April, FY2020 has been Rs 1,424.8 billion and Rs 1,348.4 billion respectively, showing a growth of 20.1 percent and 15.7 percent respectively.
In fact, around 55.0 percent of total sales tax was contributed by a sales tax on import during July-April, FY2020, while the rest was contributed by the domestic sector.
Federal Excise Duty
The collection of federal excise duties (FED) during July-April, FY2020 has recorded 12.0 percent growth. The net collection has stood at Rs 206.1 billion during July-April, FY2020 as against Rs 184.0 billion during the same period last year.
The major revenue spinners of FED are cigarettes, cement, services and beverages.
Customs Duty
Customs duty has registered a negative growth of 6.8 percent and 6.5 percent in gross andnet revenues respectively.
The net collection has decreased from Rs 558.9 billion duringJuly-April, FY2019 to Rs 522.8 billion during July-April, FY2020.
The major revenuespinners of customs duty have been vehicles, mineral fuels, iron and steel, electricalmachinery, plastic, edible fruits etc.
Impact of COVID-19 on FBR Tax Collection
COVID-19 pandemic has casted a significant impact on revenue collection efforts of FBR.
During the first eight months of FY2020, FBR recorded total revenue collection of Rs 2,738 billion with a growth rate of 17.5 percent over last fiscal year. FBR was able to achieve 91.4 percent of its (first revised) target for the period.
However, after the outbreak of COVID-19 pandemic, an average negative growth rate of 13.4 percent was recorded during March 2020 and April 2020 as compared to last year as well as compared to the projected collection.
The situation is likely to exacerbate further during the month of May and slight recovery is expected in the last month of the financial year because of usual lumped government spending.
Assessment of the full impact of COVID-19 on FBR’s tax collection merits analysis of the various expected and projected revenue figures prior to the time of crisis emergence.
FBR’s target which stood at Rs 4,807 billion was revised downwards to Rs 3,908 billion keeping in view the economic slowdown consequent to the pandemic.
The aforementioned revision had thus forecasted a revenue loss of Rs 899 billion. Nevertheless, the actual shortfall is expected to be higher than what has been projected.
The Federal Government has recently announced an incentive package for the construction sector, fulfilling the longstanding demand of builders and developers for fixed income tax and declaration of the construction sector as an industry.
The package would not only revive the construction industry but also serve as a catalyst to enhance business activity in forty different economic sectors. Furthermore, FBR is also striving for simplification of laws and procedures to reduce the cost of doing business and lower administrative burden.
The total impact of COVID-19 pandemic is yet to be determined. The dynamic and challenging nature of the crisis necessitates an equally dynamic and vigorous strategy that is capable of being evolved in response to the demands made on it.
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LSM may fall massively on constrained economic environment
ISLAMABAD: The production of large scale manufacturing (LSM) may fall massively during the current fiscal year as it already registered a decline of 5.4 percent during July – March 2019/2020.
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Agriculture sector grows by 2.67pc despite lower production of cotton, sugarcane
ISLAMABAD: The agriculture sector provisionally grew by 2.67 percent in 2019/2020 despite fall in production of cotton and sugarcane, revealed by Economic Survey 2019/2020 released on Thursday.
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Outlook is not promising: Economic Survey 2019/2020
ISLAMABAD: The economic outlook is not very clear as well as doesn’t seem promising as COVID may dampen exports demand besides expectations of capital flight, according to the Pakistan Economic Survey 2019/2020 released on Thursday.
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Foreign exchange reserves slip by $215 million
KARACHI: Pakistan’s foreign exchange reserves have declined by $215 million to $16.705 billion by week ended June 05, 2020, State Bank of Pakistan (SBP) said on Thursday.
The foreign exchange reserves of the country were at $16.92 billion by week ended May 29, 2020.
The foreign exchange reserves held by the SBP fell by $266 million to $10.096 billion by week ended June 05, 2020 as compared with $10.362 billion a week ago.
The central bank attributed the decline to the government external debt repayments of $301 million during the week.
The foreign exchange reserves held by commercial banks however increased by $51 million to $6.609 billion by week ended June 05, 2020 as compared with $6.558 billion a week ago.
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Equity market gains 64 points amid selling pressure
KARACHI: The equity market gained 64 points on Thursday amid selling pressure was seen in energy scrips.
The benchmark KSE-100 index of Pakistan Stock Exchange (PsX) closed at 35,129 points as against 35,066 points showing an increase of 64 points.
Analysts at Arif Habib Limited said that the market traded in a narrow range between -70 points and +188 points, closing the session +64 points.
E&P sector saw selling pressure that has been the case since international oil prices have faced resistance in the past couple of sessions.
Fertilizer, Cement, Steel and Textile sector scrips performed well today on the back of positive expectations from upcoming Budget, whereas Banks and E&P sectors saw profit booking.
Cement sector led the volumes with 44.4 million shares, followed by Chemical (31.8 million) and Technology (27.7 million).
POWER topped the volumes with 19.2 million shares, followed by TRG (14.5 million) and UNITY (10.8 million).
Sectors contributing to the performance include Fertilizer (+60 points), Cement (+44 points), E&P (-46 points), Banks (-36 points) and Food (-23 points).
Volumes increased from 218.6 million shares to 270.6 million shares (+24 percent DoD). Average traded value also increased by 9 percent to reach US$ 52.6 million as against US$ 48.3 million.
Stocks that contributed significantly to the volumes include POWER, TRG, UNITY, EPCL and MLCF, which formed 24 percent of total volumes.
Stocks that contributed positively to the index include DAWH (+27 points), FFC (+25 points), LUCK (+25 points), MEBL (+20 points) and ENGRO (+20 points). Stocks that contributed negatively include UBL (-32 points), HBL (-24 points), OGDC (-22 points), NESTLE (-18 points), and PPL (-15 points).
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Rupee weakens by four paisas against dollar
The Pakistani Rupee faced a decline of four paisas against the US Dollar on Thursday, closing at Rs164.59 in the interbank foreign exchange market.
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Economic Survey: GDP growth projected at negative 0.38 percent
ISLAMABAD: The GDP growth for current fiscal year has been estimated negative 0.38 percent, according to Pakistan Economic Survey for 2019/2020 released on Thursday.
The survey stated that although, provisional GDP growth rate for FY2020 is estimated at negative 0.38 percent, however, macroeconomic stabilization measures undertaken by the government over the past year resulted in significant reduction in Saving-Investment Gap which was mainly driven by reduction in trade deficit and increase in workers’ remittances.
It is also mentionable that fiscal deficit remained contained in first three quarters of FY2020.
Historically, Private Consumption had significantly contributed in Pakistan’s economic growth.
The pattern was likely to continue, however, due to COVID-19, private consumption suffered significantly.
In percentage of GDP, it dropped to 78.5 percent in FY2020 compared to 82.9 percent in FY2019.
Private Investment as a percentage of GDP dropped to 9.98 percent from 10.29 percent in FY2019 while Public Investment (including General Government investment) has shown improvement as it remained 3.8 percent compared to 3.7 percent last year.
However, there was 13.2 percent growth in Public Investment (including General Government investment) during FY2020, while it declined by 21.6 percent last year.
The economy of Pakistan like other economies has a diverse structure with three main sectors -agriculture, industry and services.
The agriculture sector, as mentioned earlier, grew by 2.67 percent.
The crops sector has witnessed positive growth of 2.98 percent during FY2020 mainly due to positive growth of 2.90 percent in important crops.
According to Pakistan Bureau of Statistics, fourth quarter has been estimated by keeping in view the lockdown situation faced by the industrial sector due to COVID-19.
Significant impact has been observed in the manufacturing sector, particularly Large-Scale manufacturing and Small-Scale Manufacturing.
The provisional growth in industrial sector has been estimated at -2.64 percent mainly due to a negative growth of 8.82 percent in mining and quarrying sector and decline of 7.78 percent in large-scale manufacturing sector.
Due to lock down situation in the country, the growth estimates of Small-Scale Industry for FY2020 are 1.52 percent.
Similar to the industrial sector, services sector of the economy has also witnessed significant impact of the lock down situation in the country due to COVID-19, particularly in Wholesale and Retail Trade and Transport Sectors.
The services sector has declined provisionally at 0.59 percent mainly due to 3.42 percent decline in Wholesale and Retail Trade sector and 7.13 percent decline in Transport, Storage and Communication sectors.
Finance and insurance sector witnessed a slight increase of 0.79 percent.
The Housing Services, General Government Services and Other private services have contributed positively at 4.02, 3.92 and 5.39 percent respectively.
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Sindh excise asks taxpayers to pay dues to get 25pc exemption
KARACHI: Sindh Excise Department has urged taxpayers to pay their dues till June 30, 2020 and avail exemption of 25 percent.
In a statement on Thursday, Provincial Minister for Excise and Taxation and Narcotics Control and Parliamentary Affairs Mukesh Kumar Chawla said that the Sindh Excise Department has introduced an online queue management system in view of the Sindh government’s health advisory to facilitate taxpayers.
“Tax defaulters should deposit their taxes and dues before June 30, as all the offices of the Sindh Excise Department are open as per the routine with one-third of the staff,” he said.
He said that in the current financial year till May, Rs 4602.548 million from Karachi, Rs 372.033 million from Hyderabad, Rs 231.850 million from Sukkur, Rs 80.380 million from Shaheed Benazirabad , Rs 83.467 million from Larkana and Rs. 46.629 million from Mirpurkhas were received in term of Motor Vehicle Tax.
Provincial Minister Mukesh Kumar Chawla further said that in terms of professional tax, Rs 419.515 million from Karachi, Rs 25.020 million from Hyderabad, Rs 25.723 million from Sukkur, Rs 11.511 million from Shaheed Benazirabad, Rs 23.960 million from Larkana and Rs 7.041 million from Mirpurkhas were received.
Giving the details of property tax collection, Provincial Minister for Excise & Taxation and Narcotics Control & Parliamentary Affairs Mukesh Kumar Chawla said that Rs 1678.884 million from Karachi, Rs 69.532 million from Hyderabad, Rs 33.102 million from Sukkur and Rs 9.186 million from Shaheed Benazirabad, Rs.22.137 million from Larkana and Rs.9.778 million from Mirpurkhas were recovered.
He said that the offices of Sindh Excise Department were open for collection of all taxes including professional tax and property tax.
He requested the taxpayers to get their challans and deposit their taxes and take the advantage of the 25 percent exemption in their taxes.