KARACHI: Enfrashare Pakistan Private Limited and Telenor Pakistan, one of Pakistan’s top mobile network operators, have signed an agreement to develop connectivity infrastructure, a statement said on Tuesday.
(more…)Author: Mrs. Anjum Shahnawaz
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Consumer financing loses pace on housing, car loan shocks
KARACHI: The consumer financing has lost pace in fiscal year 2018/2019 to total loans of Rs57.3 billion as compared with Rs86.5 billion in preceding fiscal year. The major drag came from auto and house financing segments, State Bank of Pakistan (SBP) said in its annual report on Pakistan Economy 2018/2019.
The SBP issued the report a day earlier, stating that the auto and housing financing suffered due to the government’s ban on non-filers from purchasing/ registering assets such as cars and residential properties (above Rs 5 million), several price hikes of cars, and rising interest rates.
The anticipation of new product launches and phasing out one popular model also played their part, as some customers may have adopted a wait-and-see approach.
The SBP data shows that the car financing fell to Rs22.2 billion in fiscal year 2018/2019 as compared with Rs43.3 billion in preceding fiscal year. Similarly, housing loans fell to Rs10.4 billion in 2018/2019 as compared with Rs22.3 billion in the preceding fiscal year.
The SBP said that since interest rates were on an upward trajectory, the substantial increase in installment amount compelled borrowers to either opt for high equity participation ratio or avoid bank financing altogether.
Apart from these factors, the popularity of ride hailing services, which itself was an early contributing factor to the rise in auto financing, also seemed to have reached its saturation level, thereby negatively contributing to the growth in advances.
The SBP said that in terms of outstanding portfolio, Islamic banks were able to keep their share intact at around 46 percent as of June 2019. However, in flow terms, the increase stemmed mainly from conventional banks where medium-sized players dominated.
Nonetheless, the ban on non-filers on purchasing property (above Rs. 5.0 million) kept this segment suppressed during the year. As per industry sources, the increased price levels also eroded the capacity of many households to afford residential units in close vicinity of urban centers.
Moreover, as per anecdotal evidence, consistent interest rate hikes during the year significantly raised the installment amount for potential borrowers, many of whom stand disqualified due to the breach of the maximum required debt-burden ratio.
Compared to other segments, personal loans and consumer durables performed better. The flow of FY19 for consumer durables was historically highest, but price impact mainly explained this phenomenon, as there was more than double-digit inflation in consumer durables during the year.
The argument also gets support from the fact that while banks received around 20 percent lower applications, the average loan size of accepted applications more than doubled to Rs 2.8 million in FY19 from Rs 1.2 million last year.
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PTBA urges FBR to extend return filing date up to December 31
KARACHI: Pakistan Tax Bar Association (PTBA) has urged the Federal Board of Revenue (FBR) to extend the last date for filing income tax returns up to December 31, 2019 for salaried and business individuals as around 1.6 million returns cannot be filed by October 31, 2019.
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Opposition to CNIC condition because of misjudgment
KARACHI: State Bank of Pakistan (SBP) on Monday said opposition from traders against CNIC condition on sales transactions was because of misunderstanding.
In its annual report on State of Pakistan Economy, the SBP said that as part of the Finance Bill 2019, the federal government proposed an amendment in the Sales Tax Act of 1990.
Initially, the registered persons were required to issue a serially numbered tax invoice at the time of the sale of goods. The invoices had to include the name, address and registration number of the supplier and recipient of the goods; the date of issue of the invoice; the description and quantity of goods; value of the sales tax applied; and the price inclusive and exclusive of the GST.
According to the amendment, which was to become effective from 1st August, 2019 (but was later delayed), the requirements were elaborated further and the registered persons were instructed to record NIC number or NTN of the recipients unregistered with FBR for sales tax in addition to the details being recorded of the registered recipients.
A relaxation from this clause was granted for sales up to Rs 50,000, provided that the recipient is an ordinary customer (i.e. a person who is buying goods for his or her own consumption and not for the purpose of reselling).
The amendment caused significant unrest in the market, with a majority of the businesses taking a stance against it. Protests were arranged by the associations across the country and the government was asked to abolish the CNIC restriction.
However, much of the opposition against the reforms arose because of the misunderstanding about the announced measures.
In this regard, the following points are important:
— The CNIC/NTN condition only pertains to sales of businesses that are registered with FBR. Those firms which are working informally do not need to ask for CNIC details from their purchasers, as they do not file tax returns. However, if those firms procure raw material from a registered firm, then they would have to provide the requisite CNIC details to the supplier.
— The buyer does not have to be a registered person. Registered firms can continue to transact with unregistered buyers; the only addition is that they would have to document the CNIC of the buyer in question.
— Sellers only have to record the NTN/CNIC number on the invoice; physical copies of the identity cards are not required. According to news reports, some businesses were fearing that they would have to keep photocopies of the recipients’ CNIC for record purposes, stating that such a measure would unjustly increase their operating and storage costs. However, no such provision has been proposed in the Finance Act.
— No action will be taken against the business if the CNIC/NTN details are found to be incorrect upon subsequent inspection. The following provision is to be made part of the Sales Tax Act upon its revision: “Provided also that if it is subsequently proved that CNIC provided by the purchaser was not correct, liability of tax or penalty shall not arise against the seller, in case of sale made in good faith.” It was later clarified that no action would be undertaken without the approval of the Chief Commissioner of the respective jurisdiction. Lastly, even if action against the seller is warranted, it would be taken only after necessary action has been taken against the person who provided the non-genuine CNIC. A further clarification released by FBR explained that the NIC/NTN of the buyer with respect to taxable supplies to an unregistered person shall be deemed to have been reported in good faith provided that:
(i) The tax invoice complies with the requirements ofsection 23(b) of the Act;
(ii) Payment made by or on behalf of the unregistered purchaser of the amount of the tax invoice, inclusive of sales tax and applicable further tax, is deposited into the supplier’s declared business bank account;
(iii) The NIC provided by the purchaser is found authenticated by NADRA; and
(iv) The NIC/NTN provided is not of the employee of the seller or of his associates as defined under the Income Tax Ordinance, 2001.
— The documentation clause would not result in the halt of purchasing by end-consumers. This is because ordinary buyers are exempted from such a condition, provided that the value of their purchases is up to Rs 50,000.
— The amendment would not result in any price hike, given that no additional tax measures have been adopted under the Finance Bill 2019.
— Sales tax filers feel that registered businesses have been unfairly tasked with the burden of identifying the nonfilers.
According to FBR, if the documentation efforts are not expanded to identify those individuals that are not paying any taxes, then the tax burden on existing registered enterprises would continue to remain high.
— The condition would not be enforced on small businesses in the cottage industry. According to the revised definition followed by FBR, a cottage industry player is one that: does not have an industrial gas or electricity connection; is located in a residential area; does not have a total labor force of more than ten workers; and has an annual turnover from all supplies not exceeding two million rupees.
It is important to note that such structural reforms are unpopular in nature (and were thus delayed earlier) as these might increase businesses’ transaction costs, create liquidity issues, and affect overall economic activity in the short term.
In particular, the introduction of the CNIC condition for sales tax purposes has faced serious resistance (including threats of lockdowns and protests) from traders across the country.
The FBR has since then issued clarification circulars and engaged with the businesses on various forums to help clarify the matters and take feedback. Therefore, it is important to build capacity within the FBR and to further digitize its functions to streamline procedures.
Moreover, the authority needs to continue the dialogue with relevant stakeholders for ensuring smooth implementation of policies, and alleviate regulatory and policy mistrust.
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SBP emphasizes more efforts for taking Pakistan out of FATF grey list
KARACHI: Dr. Reza Baqir, Governor State Bank of Pakistan (SBP) on Monday emphasized on putting more effort against money laundering and terrorist financing to ensure that Pakistan is out of grey list in the next meeting of FATF.
While inaugurating the conference on Anti-Money Laundering (AML)/ Combating Financing of Terrorism (CFT) and Trade-Based Money Laundering (TBML), Dr. Reza Baqir, Governor State Bank stated that significant progress has been made between May and September 2019 to meet the action plan items set by Financial Action Task Force (FATF) in different areas to demonstrate effectiveness of AML safety regime of Pakistan.
There was a major rethink of the approach being taken by the authorities in early to mid 2019. Consequently, a number of steps were taken to significantly strengthen our approach to making progress on these issues.
He however, stressed for the need of putting more effort to make progress on remaining areas to ensure that Pakistan is out of grey list in the next meeting of FATF.
He was speaking to the conference conducted by SBP and Asian Development Bank today at SBP, Karachi in a collaborative effort to mitigate the risks of money laundering and financing of terrorism.
Speaking at the conference, the Governor informed the audience that since the grey-listing, State Bank has arranged many AML/CFT outreach and awareness programs for its regulated entities and stakeholders and that the conference is a useful platform to understand the AML/CFT challenges being faced globally and the best practices followed in mitigating such challenges.
In the context of implementing AML/CFT requirements, the Governor urged the financial sector to make efficient use of technologies for assessment of risks, controls and ongoing monitoring of financial transactions and enhance capacity by continuous training of their employees.
Dr. Baqir emphasized that trade based money laundering poses complex and sophisticated challenges and that SBP inspection teams conducted thematic inspections of banks with respect to export and import of specific goods.
He also referred to State Bank’s framework for managing risks of trade based money laundering and terrorist financing which has been issued to encourage authorized dealers (banks) to effectively manage the trade based money laundering and terrorist financing risks.
Ms. Xiohang Yang, Country Director ADB, and Mr. Mohsin Ali Nathani, President & CEO HABIBMETRO Bank also spoke on the occasion. Ms. Yang stated that ‘AML/CFT is a critical issue for trade finance, which is why ADB’s Trade Finance Program is playing an increasing role in this space. She stated that ADB has a strong commitment to work with Pakistan’s banking sector and the SBP on this issue.
Ms. Yang further stated that the FATF has identified enhanced capacity building/training in AML/CFT as an immediate priority requirement and they are pleased to partner with the SBP and thankful to HABIBMETRO Bank for organizing the same.
Mohsin Ali Nathani, President & CEO HABIBMETRO Bank while addressing the conference added, ‘Enhancement of AML & CFT efforts through increased awareness and strengthened systems, controls and processes is imperative for our country and the banking sector. HABIBMETRO Bank is pleased to organize this conference and bring together relevant stakeholders from the region, regulator and banking sector to re-affirm our collective commitment to mitigating the risks of Money Laundering and Terrorism Financing.’
During the conference several prominent speakers and panelists discussed the requisites and obligations with regard to AML and CFT, including Terrorism Financing Risk Assessments, Transnational Risks in Trade Based Money Laundering (TBML), risks posed by DNFBPs & NPOs and Ultimate Beneficial Ownership.
The conference also included a detailed discussion on the impact of Trade Based Money Laundering and the repercussions of the same for the banking sector especially in the context of grey listing.
The conference was organized by HABIBMETRO Bank and attended by the Deputy Governor State Bank of Pakistan, Country Head Asian Development Bank and international experts in the field of AML/ CFT and trade from the United States, Australia and UAE.
Participants included CEOs and senior management of Banks, DFIs, Microfinance Banks and Exchange Companies and representatives from the SBP, Financial Monitoring Unit (FMU) and Securities & Exchange Commission of Pakistan (SECP).
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FBR issues alert as smuggled vehicles may take advantage of political march
ISLAMABAD – The Federal Board of Revenue (FBR) issued a cautionary alert on Monday, raising concerns about the potential transportation of smuggled vehicles during a political rally organized by the Jamiat Ulema-e-Islam-Fazl (JUI-F).
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FBR reminds banks of providing complete information of account holders
ISLAMABAD: Federal Board of Revenue (FBR) has issued reminder to banks for complying with the certain regulatory regime and provide complete information of account holders.
Chairman Federal Board of Revenue (FBR) Syed Muhammad Shabbar Zaidi issued a letter to the Heads of all banks wherein reference to the earlier sent letter dated October 1, 2019 has been given and it has been stated that bank’s role is to act as a trustee/ custodian on behalf of the various customers for the acquisition of T-Bills, PIBs etc.
No information in this respect has been received so far.
This reminder letter is being written for the reason that FBR is obliged to ensure in order to comply with various regulatory requirements including those inducted by FATF that there is proper compliance of various regulatory environments.
There are indications in various cases, especially being those related to individuals that the amount held under these accounts are not appropriately disclosed in the individual personal income tax returns.
Chairman FBR has further stated that there are instances of ‘Bond Washing’ whereby the ‘interest accrued’ is transposed as capital gain to avoid withholding requirement on interest where State Bank of Pakistan is to act as withholding agent.
Chairman FBR has stated that such securities are acquired by persons other than banks by under ‘Investor Portfolio Securities’(IPS) system.
State Bank of Pakistan identifies the bonds and securities held by the bank as custodian or trustee of another entity including an individual.
It is for this reason that the amount is reflected as an off-balance sheet item in the records and financial statement of the bank.
It is important to note that since the investment remain off-balance sheet therefore it is highly important for the fiscal regulatory authority to ensure that all related fiscal aspect being disclosure of wealth and withholding as required under the law is assured.
Chairman FBR has again requested all the banks to provide the information as soon as possible.
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SBP forecasts subdued growth with high inflation
KARACHI: State Bank of Pakistan (SBP) on Monday forecast subdued GDP growth with high inflation for the current fiscal year.
The central bank in its Annual Report 2018/2019 (State of the Economy), said that macroeconomic stabilization will continue to be the cornerstone of economic policies during 2019/2020.
Real GDP growth is likely to remain subdued, though the early signs of recovery are already visible. Development spending may play a pivotal role, since there has been an observed tendency that Pakistan’s GDP growth and PSDP spending move in the same direction, and similar has been the case in 2018/2019.
On this note, it is worth highlighting that the government has budgeted a greater outlay for PSDP during the year compared to the actual spending in FY19.
Other triggers may include an improvement in market sentiments vis-à-vis the IMF program. A better showing by the agriculture sector compared to last year, and further improvement in the current account balance, may also improve the final outcome, the SBP said.
Inflation, meanwhile, is expected to exceed its annual projection by the Planning Commission of Pakistan for FY20.
While demand pressures have generally subsided, cost-related impact may be more pronounced in the first half of the fiscal year, taking the cue from oneoff adjustment in prices of utilities and other FY20 budget-related measures.
By the second half, further supported by the end of deficit monetization by the government, price pressures may begin to recede, setting the tone for considerably lower inflation in FY21. However, crossborder tensions (which have flared up intermittently since Q3-FY19 and worsened during Q1-FY20) represent an upside risk to this outlook, given their tendency to drive up food inflation.
At the same time, the global slowdown may pose a downside risk to the outlook, especially if international oil prices fall more sharply than anticipated.
The external sector’s outlook is positive on the whole, albeit being subject to both upside and downside risks. The current account deficit, after shrinking on YoY basis during FY19, is anticipated to subside further in FY20.
Exports are projected to pick up during the year, conditional on demand conditions among the country’s major trading partners and buoyancy in commodity markets.
In particular, onset of fiscal stimulus and successful resolution of trade negotiations involving major economies would be instrumental in supporting global consumer demand, which would in turn bode well for exporting partners, including Pakistan, along with improved prospects of foreign investments.
The FTA-II with China and preferential trade agreement with Indonesia may also give a boost to exports. Decline in imports would be instrumental in improving the current account as the policy induced import compression would continue on top of subdued prices, barring any adverse shock from international oil prices.
Moreover, workers’ remittances are expected to remain robust in FY20 on the back of measures taken and incentives given to overseas Pakistanis remitting under the Pakistan Remittance Initiative (PRI).
The outlook for the fiscal sector, by contrast, is not straightforward. The FY20 budget looks to fix the deficiencies of the tax system and represents an earnest effort to increase documentation.
It envisages a sizeable reduction in the deficit, by enhancing revenues and squeezing expenditures. However, achieving the ambitious tax collection target in the middle of a broader economic slowdown may present a challenge.
Moreover, even if things pan out more or less according to plan, the fiscal deficit may be in the neighborhood of 7 percent nevertheless, implying that there would still be some way to go before fiscal consolidation is achieved. That said, the government is expected to make a concerted effort to meet the IMF’s quarterly targets, implying a measure of fiscal discipline.
On an optimistic note, the private sector would be mindful that even as the economy rebalances and there is reduced demand in some sectors, new opportunities are simultaneously opening up in other areas.
For example, imports of many consumer items and finished goods are shrinking due to a combination of regulatory duties and exchange rate depreciation. This generates an opportunity for domestic companies to step in and fill in this demand in the short to medium term.
Moreover, alignment of the exchange rate represents improved prospects for export-oriented enterprises. The government’s stated commitment to foster the ease of doing business and pursue investor-friendly policies is also welcome.
Meanwhile, domestic investors should also be looking to tap underserved markets and segments. Beyond provision of traditional goods and services, innovation must be the new watchword.
It is especially encouraging to see that proactive, technology-driven domestic startups have already ushered in a positive disruption in industries ranging from banking (fintechs) to transportation (ride hailing apps) and consumer goods and food (delivery apps), to name just a few. Such examples may inspire those investors who have been sitting on the fence for some time now to abandon the wait and-see mode, and take positions sooner rather than later.
In the grand scheme of things, a collective shift in sentiment and more optimism could prove to be a much needed catalyst for the revival of economic activities.
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FBR bars officials from interacting with taxpayers; notification issued
ISLAMABAD: As per the directives of Syed Shabbar Zaidi, chairman, Federal Board of Revenue (FBR), an official notification has been issued on Monday to bar tax officials from direct interaction with taxpayers.
The official memorandum sent to offices of Inland Revenue and Pakistan Customs, the FBR said that the ban has been imposed keeping in view the prevailing perception of FBR and also to do away with fake communication from some quarters and to build the confidence level taxpayers.
It has been decided that no officer/official of the FBR Headquarters or its field formation will contact any taxpayer or businessman in any form i.e. physical visit, telephonic/mobile calls, SMS or email etc. except when legally authorized to do so. However, the authorized communication will only be made through legal notice or official communication with QR Code/Bar code, the FBR added.
The FBR said that the policy would come into force from November 01, 2019 and any officer/official found indulged in such activities would be proceeded under the Government Servant (Conduct) Rules, 1964 read with Government Servant (E&D) Rules, 1973.
The notification said that the directives would apply to all formations of FBR being Inland Revenue (Income Tax, Sales Tax and Federal Excise Duty) and Customs.
The FBR advised taxpayers, business community and trade bodies to assist in implementing the policy by reporting to FBR any contravention of these directives.
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Stock market gains 204 points in mixed trading activities
KARACHI: The stock market gained 204 points on Monday in mixed trading activities during the day.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 33,862 points as against 33,657 points showing an increase of 204 points.
Analysts at Arif Habib Limited said that end of rollover week saw market activity picking pace with the benchmark index trading near 34,000 level after an initial jolt of 85 points earlier in the session.
At a time, market went up by 350 points (crossing 34k level briefly) and ended the session +204 points.
Cement sector performed well due to the news of deferment of axle load policy for a year, resulting in cement sector scrips trading at and near upper circuit, although recently announced financial results were poorer than expectation. Mainly fertilizer and banking sector scrips saw selling activity.
Cement sector led the volumes table with 22.7 million shares followed by Transport (15.1 million) and Engineering (14.4 million).
Among scrips, PIBTL led trading volumes with 12.7 million shares, followed by TRG (7.6 million) and FCCL (7 million).
Sectors contributing to the performance include Cement (+72 points), Banks (+66 points), O&GMCs (+32 points), Pharma (+17 points), Power (+15 points), E&P (-23 points) and Fertilizer (-20 points).
Volumes declined from 170.9 million shares to 135.5 million shares (-21 percent DoD). Average traded value, on the other hand, registered a slight increase of 2 percent DoD to reach US$ 26.3 million as against US$ 25.8 million.
Stocks that contributed significantly to the volumes include PIBTL, TRG, FCCL, HASCOL and UNITY, which formed 29 percent of total volumes.
Stocks that contributed positively include LUCK (+29 points), HBL (+27 points), BAHL (+21 points), PSO (+16 points) and FCCL (+14 points). Stocks that contributed negatively include FFC (-17 points), COLG (-12 points), MARI (-10 points), BAFL (-10 points), and PPL (-10 points).