Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • FBR to launch crackdown against non-compliant professionals

    FBR to launch crackdown against non-compliant professionals

    KARACHI: Federal Board of Revenue (FBR) will initiate action against professionals including lawyers, doctors and chartered accountants, who are not on the Active Taxpayers List (ATL).

    Sources in FBR told PkRevenue.com that Section 114 of Income Tax Ordinance, 2001 explained persons or companies required to file their income tax returns.

    The FBR sources said that on the directives of the government the tax machinery had launched massive drive against undocumented economy and tax evasion.

    The sources said that professionals had also come under the FBR radar under the ongoing drive.

    They said that return filing is a mandatory for a resident person registered with any chamber of commerce and industry or any trade or business association or any market committee or any professional body including Pakistan Engineering Council, Pakistan Medical and Dental Council, Pakistan Bar Council or any Provincial Bar Council, Institute of Chartered Accountants of Pakistan or Institute of Cost and Management Accountants of Pakistan.

    The sources said that many professionals are working in the undocumented economy and receiving fees without issuing invoices.

    Sources in Regional Tax Office (RTO)-II Karachi told that recently survey teams had pointed out many businessmen, doctors, chartered accountants, cost accountants, lawyers and other professionals were not paying taxes as per their income.

    The sources said that in some cases investigation had been conducted where professionals were taking huge sum of amount from companies as benefits, besides frequently going abroad.

    Some FBR officials told that they had filed suits regarding against decisions of the board and lawyers hired for the cases demanded payment in cash instead banking transactions.

    The sources said that the filing of income tax returns has been extended up to August 02, 2019 for all the categories of individuals and companies.

    After the expiry of date the FBR will launch mega drive against the non-compliant professionals, the sources added.

  • No action against companies for gold, valuables recovery: SECP

    No action against companies for gold, valuables recovery: SECP

    ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Tuesday strongly refutes the reports attributing the commission for taking action against companies to recovery gold and other valuable properties.

    In a statement the SECP said, being the apex regulator of the corporate sector, the SECP is taking all necessary steps to ensure beneficial regulation and growth of capital market and corporate sector in Pakistan.

    SECP strongly refutes news items appearing in a section of the press attributing any purported action against companies to recover gold and other valuable properties.

    “No crackdown of any sort is being planned or under consideration of the Commission,” it said.

    It is also clarified that SECP does not regulate or enforce Income Tax Ordinance, 2001 or Benami Transactions (Prohibition) Act, 2017.

    SECP powers are restricted to offences provided in the SECP Act, 1997, and other administered legislation as provided in its Schedule.

    The recently notified Rules, i.e. the “SECP (Search and Seizure) Rules, 2019” are a requirement of law under section 31 of the SECP Act, 1997, which merely lays down strict procedures for use of powers by the SECP’s investigation officers.

    It is reiterated that these powers are restricted to investigations ordered by the Commission under the SECP-administered legislation. As wrongly reported in a section of the media no new powers have been bequeathed to the SECP.

    It is clarified that the powers of search and seizure and forced entry have been part and parcel of the SECP Act, 1997, since the establishment of the Commission.

    It is stressed here that recently notified Rules are aimed at helping the Commission to curb any potential misuse of authority by the investigation officers.

    The Rules, inter alia, require investigation officers to first seek authorization, in writing, from the Commission, comprising of five Commissioners for the purpose of search and seizure. Further, in certain circumstances, the order from the relevant magistrate is also required.

  • Stock market gains 113 points amid low volumes

    Stock market gains 113 points amid low volumes

    KARACHI: The stock market gained 113 points on Tuesday amid low volume and selling pressure.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 33,856 points as against 33,743 points showing an increase of 113 points.

    Analysts at Arif Habib Limited said that the market went up today by 308 points but unable sustain the selling pressure and went down to 86 points.

    Last half hour of trading brought the market back in positive territory. Overall volumes remained low at 60 million shares for the third consecutive session.

    Cement sector led the volumes table with 12 million shares, followed by Chemical with 10 million shares.

    LOTCHEM, on the back of all time high product margins, remained in demand and made highest volume with 6.2 million shares, followed by MLCF (5.6 million).

    Index drivers such as ENGRO, HUBC and LUCK saw selling pressure near market close that kept the upside in index in check.

    Sectors contributing to the performance include E&P (+66 points), Fertilizer (+11 points), Pharma (+8 points), O&GMCs (+8 points), Cement (+5 points).

    Volumes increased merely by 1 percent DoD to reach 60.15 million as against 59.6 million. Average traded value also increased by 3 percent to reach US$ 15.4 million as against US$ 15 million.

    Stocks that contributed significantly to the volumes include LOTCHEM, MLCF, KEL, DGKC and TRG, which formed 37 percent of total volumes.

    Stocks that contributed positively include PPL (+33 points), OGDC (+22 points), DAWH (+20 points), POL (+12 points) and LUCK (+8pt). Stocks that contributed negatively include UBL (-19 points), ENGRO (-10 points), INDU (-8 points), DGKC (-5 points) and SHFA (-3 points).

  • Rupee ends down on import payment demand

    Rupee ends down on import payment demand

    KARACHI: The Pak Rupee ended down by six paisas against dollar on Tuesday due to higher demand for import and corporate payments.

    The rupee ended Rs157.38 to the dollar from previous day’s closing of Rs157.32 in interbank foreign exchange market.

    The foreign currency market was initiated in the range of Rs157.50 and Rs157.75 against the dollar. The market recorded day high of Rs157.70 and low of Rs157.35 in interbank foreign exchange market.

    The exchange rate in open market also witnessed depreciation in rupee value by 20 paisas.

    The buying and selling of dollar was recorded at Rs156.70/Rs157.70 from previous day’s closing of Rs156.50/Rs157.50 in cash ready market.

  • FBR not to reduce GST below 17 percent on petroleum products

    FBR not to reduce GST below 17 percent on petroleum products

    KARACHI: Federal Board of Revenue (FBR) to maintain general sales tax at 17 percent on all petroleum products in coming months as agreed by the Pakistani authorities with the International Monetary Fund (IMF).

    Pakistan has committed with the IMF for taking many steps for curbing powers of authorities in issuing statutory regulatory orders (SROs), eliminating exemptions and maintaining GST on petroleum products at 17 percent.

    Through SRO 700(I)/2019 dated June 30, 2019, the FBR notified sales tax at 17 percent on supply of all petroleum products for the month of July 2019. The petroleum products are included: petrol, high speed diesel, kerosene oil and light speed diesel oil.

    The Letter of Intent (LoI) presented by Pakistan for IMF loan program, the country assured the fund of eliminate the legal authorization for the executive to grant tax exemptions/concessions through Statutory Regulatory Orders (SROs) without prior National Assembly approval.

    “We understand that the use of SRO needs to be subject to greater scrutiny and limited discretion. To that end, we have adopted the necessary revisions and amendments to the various relevant tax ordinances to further limit or eliminate the use of SROs to genuine emergencies, in line with best international practices,” according to the LoI.

    The authorities have also assured the Fund of refraining from issuing any SRO reducing the GST rate below 17 percent on petroleum products.

    For Modernize the Public Finance Management Framework, Pakistan has adopted an organic budget law that will minimize variance in budget authorizations during the year, which shall also require ex-post parliamentary approval, restrict virements, expand the content of annual budget statements, define accounting standards, and provide the legal basis for a well-defined cash management system and establishment of a treasury single account (TSA).

    For Enforcing fiscal discipline, this will include strengthening the enforcement mechanism of the FRDLA through aligning the annual report presented by the Minister of Finance (MoF) to the National Assembly with the content and analysis prescribed in the Act. “Also, we will expand the capacity of the MoF for macro-fiscal work. Moreover, proper identification and monitoring of fiscal risks from SOEs, PPPs, IPPs and development projects will be strengthened through the establishment of a fiscal risk unit in the MoF, which will work in coordination with the PPP Authority.

    “We are aware that PPP projects, while bringing great benefits, can also be the source of important risks. Thus, we are committed to strengthening the PPP legal framework. To this end, we are conducting a legal analysis of the current system to determine if amendments to the PPP law are required or, alternatively, whether enacting secondary legislation is sufficient, drawing on the expertise of our development partners.

    “We will also make sure that proposed financial vehicles such as the Pakistan Infrastructure Bank is created in line with best international governance standards.”

    Pakistani authorities informed the Fund about creating a Treasury office that would conduct sound commitment controls and cash management, closely coordinating with the debt management unit.

    “We will strengthen the debt management office and will ensure greater coordination across the different relevant units. Elements of this strategy will include centralizing the issuance and management of public debt and developing a new Medium-Term Debt Strategy. To support our consolidation efforts and reduce our financing requirements, we will lengthen the maturity profile of public debt and will introduce new market instruments to widen the investors’ base, also transparently accounting for all borrowing and contingent liabilities.

    “We will ensure that any collateralized public external debt or external arrears would be properly accounted.”

  • Elimination of zero rating, other policy and administrative measures to generate Rs733.47 billion

    Elimination of zero rating, other policy and administrative measures to generate Rs733.47 billion

    KARACHI: Federal Board of Revenue (FBR) to generate additional revenue of Rs733.47 billion during current fiscal year after abolishing zero-rating of sales tax and other policy and administrative measures.

    Pakistan has outlined its strategy for enhancing revenue collection before the International Monetary Fund (IMF) through eliminating exemptions, distortion and other policy and administrative measures.

    These budgetary measures likely enhance tax to GDP ratio by 1.7 in the fiscal year 2019/2020.

    The FBR will generate additional revenue of Rs222.77 billion from measures taken through budget 2019/2020 in the sales tax, which included:

    Petroleum products levy increase to 15 PRs (and set as a floor) and

    GST rate at 17 percent (set as a floor)

    Cancel SRO # 480 and bring steel sector, edible oil and medium to large retailers to 17 percent GST regime

    Extend the list of products under the retail price taxation – Third Schedule (home appliances, paint.., currently under SRO # 480)

    Cancel SRO#1125 and bring exportable sectors to standard GST regime at 17 percent rate, with immediate cash refund for exported goods only

    Remove certain items from exemptions (packaged food), and apply GST tax at 17 percent.

    Increase GST on sugar from 8 percent to 17 percent

    Redefine the exemption available to Cottage Industry

    An additional amount of Rs90.114 billion estimated under Federal Excise Duty (FED) through following measures:

    0.2 Increase of FED on cigarettes and remove the third tier.

    Introduce FED on cigarettes coming from non tariff areas

    Increase/introduce FED on sugary drinks to 13 percent

    Increase FED on cement from 1.5 Rs per kg to 2 Rs

    Additional amount of Rs324.98 billion estimated through eliminating exemptions and other distortions in Income Tax, such as

    Personal Income Tax (PIT): lower the threshold to Rs400,00 and Rs600,000 for non-salaried and salaried individuals respectively, increase tax rates Increase in rate of minimum tax u/s 113 from 1.25 to 1.5 percent

    Extend the regime of higher withholding tax rates for non-filers

    Resume Telecom withholding rate

    Change in income tax regime of Services sector (banks and insurance companies)

    Abolish BMR credit incentives

    Increase the holding period liable to tax for capital gain tax on immovable properties and securities

    Taxation of gifts from unrelated person at standard PIT rate

    Aligning value of immovable properties with the market rates

    Reduction of number of withholdings and simplification of procedures

    Amortization of expenditure in BOT projects over useful life of the project instead of current 10 year amortization

    Long term lease hold right may be considered as purchase of property

    Taxation of formal agricultural sector within the scope of federal government

    Rationalization of tax credit available to Non-profit organizations (NPOs)

    An amount of Rs60 billion has been estimated to be generated through measures taken under Customs duty:

    Increase in Additional Customs Duty Rate on finished and luxury goods

    Withdrawal of exemption on import of LNG and subjected to 5 percent duty

    Revenue administrative measures to generate Rs 35.6 billion through following steps:

    Implement Track and Trace system for Tobacco Products

    Automated monitoring of GST and income at retail (point of sale)

    Changes in ADCIR mechanism

    Separation of audit & adjudication functions

    Making procedure for prosecution easier

    Enabling and strengthening FBR field formations

    Cleansing of databases and integration to enable effective data mining

    Enabling efficient enforcement through investment in FBR

    Infrastructure and process reengineering

    Taxpayer education and facilitation

  • Prize bonds, bearer instruments to be registered

    Prize bonds, bearer instruments to be registered

    KARACHI: Pakistani authorities have assured International Monetary Fund (IMF) of registering prize bonds and other bearer instruments to eliminate the use of these instruments in potential illegal activities and tax avoidance.

    The IMF issued Pakistan country report on Monday following successful $6 billion loan program.

    In order to make the program successful the Pakistani authorities had assured the fund of strengthening governance and the control of corruption.

    The priorities include:

    Strengthening the effectiveness of anticorruption institutions. A national committee has been established to implement the recommendations from the UNCAC 2017 report.

    A task force will review the institutional framework of the anticorruption institutions to enhance their independence and effectiveness in investigating and prosecuting corruption cases.

    A study will be conducted on establishing a dedicated AML unit in the Federal Investigation Agency (FIA). Upgrading the financial investigation capacities of law enforcement agencies will be also prioritized.

    Moreover, the authorities are pursuing agreements on information exchange with foreign countries to complement efforts to recover unlawful assets.

    An Asset Recovery Unit in the Prime Minister’s Office is cooperating with the FBR’s International Taxation Unit in identifying assets abroad owned by Pakistani residents, in line with the OECD Convention on Mutual Administrative Assistance on Tax Matters.

    Advancing anti-corruption efforts through the enhanced used of AML tools, including by (i) ensuring that banks and other reporting institutions improve their capacities to identify politically exposed persons and apply enhanced due diligence measures and (ii) providing adequate resources to the Financial Monitoring Unit to improve the dissemination of financial intelligence that can be used to support corruption investigations.

    Moreover, asset declarations of high-level public officials will be comprehensive in scope (i.e., assets beneficial owned or located abroad), filed with a central federal agency, electronically searchable, and appropriately verified.

    “Registering prize bonds and other bearer instruments to eliminate their use in potential illegal activities/tax avoidance,” the report said.

  • Key points of Pakistan’s revenue driven fiscal consolidation

    Key points of Pakistan’s revenue driven fiscal consolidation

    KARACHI: The International Monetary Fund (IMF) has highlighted points of Pakistan’s budget 2019/2020 which envisaged a substantial revenue driven fiscal consolidation.

    “The FY 2019/20 budget envisages a substantial fiscal consolidation. The primary deficit is expected to decline to 0.6 percent of GDP, from estimated 1.8 percent of GDP in FY 2018/2019,” the IMF said in the country report on Pakistan issued on Monday after a successful $6 billion loan program for the country.

    The report said that the envisaged fiscal consolidation will be largely revenue driven:

    a) Sales tax measures are mostly focused on simplifying the system by eliminating numerous exemptions and preferential rates and enhancing the sales tax of petroleum products. In particular, exemptions granted to four export-oriented sectors for domestically sold products will be eliminated, together with non-essential food related products exemptions.

    Moreover, preferential rates related to sugar, steel sector, edible oil, medium and large retailers will also be eliminated and aligned with the standard 17 percent sale tax rate.

    b) Income tax measures will aim at widening the tax base and closing the loopholes that are fostering tax avoidance.

    The income tax threshold will be reduced for salaried and non-salaried individuals to PRs 600,000 and PRs 400,000 respectively, and the tax rate at the top of income distribution increased.

    The collection of withholding tax on telecom services that had been stalled in the court will be resumed, and tax credit available for machinery investment and to non-profit organizations will be rationalized.

    The FBR will also align the value of immovable properties with market rates and specify conditions under which the long-term lease hold will be considered as the purchase of property.

    In addition, the minimum tax rate will increase and taxation of gifts from unrelated persons will be introduced.

    c) Federal excise duties on certain products will be introduced or increased (cigarettes, sugary drinks, cement); while

    d) custom duty measures will eliminate the exemptions on import of liquified natural gas and increase the additional custom duty for finished and luxury goods.

    e) Revenue administration measures will support policy implementation. The emphasis will be given to the modernization and digitalization of FBR functions, improvement of the database and the streamlining of legal procedures.

    To strengthen the collection of excises on cigarettes and eliminate illicit trade, the track-and-trace system will we implemented in the second quarter of the year.

  • Pakistan assures IMF of strengthening taxation on real estate, agriculture income

    Pakistan assures IMF of strengthening taxation on real estate, agriculture income

    KARACHI: Pakistan has assured International Monetary Fund (IMF) of removing distortion in taxation system and strengthening taxation on real estate and agriculture income.

    The IMF on Monday issued country report on Pakistan after successful $6 billion loan program.

    The report said that a large deficit would require aggressive revenue collection.

    A multi-year effort will aim to revamp tax policy and tax administration. With less than 1.5 million taxpayers filing tax returns and tax compliance generally very low, tax policy and tax administration measures will center on broadening the tax base while maintaining a low tax rate, aiming to ensure progressivity of the tax system.

    The country has agreed to increase additional 4 to 5 percent tax to the GDP by end of 3-year IMF program in order to bring Pakistan tax ratio in line with peer Emerging Markets.

    Key measures include:

    — Tax policy reforms

    In the near term, measures include removing exemptions and preferential treatment to reduce distortions in the tax system and broaden the tax base.

    These include the removal of General Sales Tax (GST) exemptions and preferential rates, except for basic food and medicines, a measure that will significantly improve revenues.

    Greater inter-provincial harmonization and coordination of GST will also simplify filing procedures and increase compliance.

    Overtime, the Pakistani authorities are committed to taking steps to transform the GST into a broad-based VAT and making the PIT fairer and more progressive by raising the upper-end of the PIT structure and consider eliminating Personal Income Tax (PIT) tax credits and deductions for the higher income brackets.

    In addition, other tax policy measures include:

    (i) further strengthening taxation on real estate and on agricultural turnover or income by provinces;

    (ii) ensuring equivalent taxation of all sources of income; and

    (iii) eliminating distortionary withholding taxes.

    The report said that the tax administration reforms to bolster the authorities’ efforts to collect taxes.

    “Implementation of a full, risk-based audit framework will be facilitated by the recent reversal4 of legal provisions limiting the use of tax audits and will be supported by an increase in legal penalties for noncompliance.

    Moreover, licenses for the track-and-trace system for excises on cigarettes will be issued by end-September 2019 (structural benchmark), with a system roll out by end-March 2020.

    The authorities are also considering options to make Pakistan’s tax administration less fragmented and more business friendly, including through the creation of a new semi-independent national tax authority to collect the main revenue sources.

    Finally, the country has committed to not granting further tax amnesties (continuous structural benchmark).

  • FBR urged to allow filing amnesty scheme declarations

    FBR urged to allow filing amnesty scheme declarations

    KARACHI: Federal Board of Revenue (FBR) has been urged to allow those persons to file their declarations who have paid duty and taxes under amnesty scheme 2019 by due date.

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