Author: Faisal Shahnawaz

Pakistan Customs launches swift consignment clearance system to improve ease of doing business

KARACHI: Pakistan Customs on Monday launched the swift consignment clearance software for improving ease of doing business and trading across the border indices of the country.

The system namely ‘WeBOC Global’ was inaugurated by Member Customs Dr Jawwad Uwais Agha at Custom house, Karachi.

He introduced the key features of the newly developed ICT system which was attended by a large number of the senior officers of Pakistan Custom and members of the WeBOC-Glo Project team.

The new version of Customs clearance system was deployed at early in the morning May 13, 2019 which has immediately replaced the previous version of WeBOC clearance system.

This will be a modern and technologically advanced version of WeBOC which is an end to end automated online goods clearance system home grown by Pakistan Customs in 2011.

With the introduction of new WeBOC system, the Custom clearance system of Pakistan will enter into the club of modern, upgraded and technologically advanced Custom clearance system of the world, the Member said.

The WeBOC-Glo in addition to new modules and functionalities will be plugging the deficiencies of earlier clearance system pointed out during the course of time in internal reviews and ICT Gap Analysis by the World Bank.

Components of Release 1.0 of the WeBOC-Glo were introduced by Iftikhar Ahmad, Collector/Convener of the project which included 13 modules and functionalities.

The major modules included:

(1) the Development of Electronic Data Interchange (EDI) with Terminal Operators for Export LCL Cargo, which will reduce dwell time at ports

(2) the Quota Management of Bulk Export Cargo, which will facilitate auto debiting of assigned quota,

(3) the establishment of IT interface with Ministry of Foreign Affairs for automation of Exemption Certificates,

(4) the availability of WeBOC Glo on Chrome and Edge to provide convenience to users,

(5) the enhanced Security Features, to safeguard the User IDs and relevant data of importers /exporters,

(6) the unified Screens for MIS Officers, to ensure speedy processing,

(7) the search engine for TARIFF and relevant SROs to empower users in Tariff and import/export policy information for correct filling and assessment of GDs,

(8) the update on Containers Status, to allow traders the facility to keep track of containers,

(9) Improved User Interface, aimed at making the system more user friendly and less time consuming and

(10) the Glo Insight which strengthens the statistical Scrutiny and monitoring of Customs transactions through business intelligence and data analysis tools for informed decisions making.

In addition to above, the WeBOC-Glo will be instrumental in closure of old Customs clearance system by automating areas that had remained outside its scope so far.

(1) the Export Processing Zone, whose import and export clearance along with the role and functions of EPZA have been automated for the first time,

(2) the GD Filing Without NTN, which will facilitate individual importers, Small and Medium Enterprises (SME) promoting e-Commerce in Pakistan,

(3) the Exceptional GD Filing, which caters to all scenarios where auto clearance were held up due to peculiar taxation regimes on items or specific orders of superior courts.

The team has been further instructed by Dr Agha to plan launch of Release-2of WeBOC Glo by the first week of July, 2019.

The Release-2 will include further important modules like DTRE, Bulk Exports and Exports through Courier.

With the development of these modules all the processes related to export will be fully automated which will definitely facilitate export sectors.

Release-2 will also include E-Auction Module, for auction of confiscated goods in line with modern concepts of Auction.

Oil imports contribute the major share in Imports Bill. All the processes like Import, storage, transportation and transit of Oil will also be covered in Release-2 Similarly PCA Entity based Audit module will also be part of it, which will dramatically enhance money trial analysis and be handy in detection of money laundering.

Initial work has already been done on these modules and they are under different stages of development.

Some less important modules will be launched in Release-3 by Mid September which will complete automation of all the Customs processes under WeBOC-Glo.

Earlier, Dr Jawwad Agha conceived the idea of up gradation and functionally advanced new Customs system and had put in place a two tier setup, the WeBOC-Glo Domain team and Oversight and Approval Team, in December, 2018.

In view of highly technical nature of the task officers having vast professional experience and well grounded in automated work environment were grouped together.

The team lead by Collector Dr. Iftikhar Ahmad (project team leader) included: Additional Collectors Shafqat Niazi, Sanaullah Abro, Ms Mona Mehfooz, Ali Zaman Gardezi and Deputy Collector Ms Nausheen Riaz Khan.

The project team leader said that packed and strict timeline was given to undertake the Businesses Process Re-Engineering (BPR), development of new modules and functionalities of the WeBOC Glo.

He added that the project team had to put in long hours on weekend, over and above their regular work assignments, to meet the deadlines, while Agha continuously monitored the progress and provided his full support to project team. Within short time of four months, WeBOC-Glo project team under guidance of oversight and Approval team, consisting of senior officers of Customs succeeded in accomplishing the task of development of 13 different modules and functionalities of new version.

User Acceptance Tests (UATs) with relevant stakeholders have been completed too. The PRAL’s Business Analysis and software Development Units provided able resource support and remained instrumental in the achievement.

With the launch of the WeBOC-Glo, the Customs department moves further ahead as the leading public sector organization mag use of modern technology for hassle free public service delivery.

The system ensures transparency, efficiency, professionalism and further reduces the interaction with taxpayer besides providing tech ability for future integration with artificial intelligence for RMS analysis.

May 13, 2019
OGDCL discovers huge deposits of gas in Sindh

KARACHI: Oil and Gad Development Company Limited (OGDCL) has discovered huge amount of gas at exploratory well Mangrio 01, District Tando Muhammad Khan, Sindh Province.

In a statement on Monday, the company said that the structure of Mangrio Well 01 was drilled and tested using OGDCL’s in house expertise.

The well was drilled down to the depth of 2676 meters. The well has tested 10.44 MMSCFD gas, 120 BPD condensate through choke size 32/64” at Wellhead flowing pressure 2085 psi from lower Guru B-Sand.

The discovery of Mangrio Well is the result of aggressive exploratory strategy adopted by the company.

“It has opened a new avenue and would add to the hydrocarbon reserves base of the OGDCL and of the country,” it added.

May 13, 2019
Secured transactions registry established in SECP

In a significant development aimed at improving access to credit for small businesses and the agriculture sector, the Securities and Exchange Commission of Pakistan (SECP) has officially established the Secured Transaction Registry (STR). This registry will record charges and security interests created by entities on their movable assets, facilitating easier and more secure access to loans.
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May 13, 2019
Stock market plunges by 816 points on IMF loan agreement

KARACHI: The stock exchange plunged by 816 points on Monday on report of finalization of loan program with IMF.

The benchmark KSE-100 index closed at 33,900 points as against 34,717 points showing a decline of 816 points.

Analysts at Arif Habib Limited said that index saw a major draw down of 937 points, post Pakistan entering IMF program.

The sessions commenced on a positive note and market at first increased by 511 points before plunging ~1400 points.

Last half hour of trading showed some buying activity that resulted in an unadjusted closing of -784 points.

Stocks, all and sundry, became target of Investors’ wrath. Besides conclusion of IMF program, the market was also faced with MSCI Review that had negative implications for stocks that form part of MSCI EM Index.

Several stocks hit lower circuit, important among those included SSGC, MLCF, PIOC, DGKC, GHNI etc. Banking sector remained unscathed in relative terms and scrips like MCB, HBL, UBL, MEBL traded in green zone.

Sectors contributing to the performance include E&P (-159 points), Fertilizer (-157 points), Banks (-93 points), O&GMCs (-69 points) and Cement (-68 points).

Volumes increased significantly from 39.3 million shares to 121.2 million shares (+209 percent DoD). Average traded value also increased by 202 percent DoD to reach US$ 37.5 million as against US$ 12.4 million.

Stocks that contributed significantly to the volumes include KEL, MLCF, BOP, PIBTL, and UNITY, which formed 29 percent of total volumes.

Stocks that contributed positively include MCB (+18 points), HUBC (+12 points), NATF (+3 points), SYS (+3 points) and SRVI (+1pt). Stocks that contributed negatively include FFC (-73 points), OGDC (-51 points), POL (-47 points), ENGRO (-36 points) and PPL (-36 points).

May 13, 2019
Rupee ends unchanged in interbank forex market

The Pakistani Rupee (PKR) remained stable against the US Dollar (USD) in the interbank market on Monday, closing at Rs141.40, the same level as last Friday, despite swirling rumors about a potential downturn following discussions between Pakistani authorities and the International Monetary Fund (IMF) regarding a new loan program.
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May 13, 2019
KTBA suggests full fledged VAT, reduction in sales tax rate to 10pc

KARACHI: Karachi Tax Bar Association (KTBA) has suggested the tax authorities for introduction of full fledged value-added tax (VAT) and reduction of sale tax rate up to 10 percent in order to discourage under invoicing, corruption and smuggling.

The KTBA recently organized pre-budget seminar to formulate tax proposals for budget 2019/2020. Saud-ul-Hassan, Director Tax at EY Ford Rhodes presented issues pertaining to sales tax.

He said that the VAT system was adopted for documentation of economy. However, presently the Sales Tax Act, 1990 is a blend of numerous, included:

— exemption; zero-rating, subsidized/reduced rates;

— fixed tax regimes, extra tax, further tax, value addition tax;

— withholding tax provisions;

— various restrictions on claiming input tax; and

— various special regimes.

He recommended that all the distortions in VAT system should be removed and full fledged uniformed VAT system should be adopted.

“This will provide a level playing field for all registered persons and restore their confidence,” he said and added that it would ensure proper documentation of economy and a genuine increase in the tax to GDP ratio.

Highlighting the higher sales tax rate at 17 percent, he said that it was coupled with various increasing conditions such as further tax, extra tax, minimum VAT etc.

Further restrictions on claim of input tax, the sales tax cost (effective rate) is further enhanced. “Such outlook on a tax compliant person promotes tax evasion in the masses,” he added.

It is suggested that the tax rate may be brought down to 15 percent and gradually up to 10 percent. “The reduced rate will encourage the unregistered persons to get themselves registered.”

“It will also result in broadening of tax base and documentation of economy and discourage under invoicing, corruption and smuggling,” he added.

Pointing out the issue of extra tax levied on certain goods, which disallowed input tax, he said recommended that in order to reduce the cost of doing business the extra tax should not be levied on goods sold to manufacturers for their own use.

He said that through the Sales Tax General Order 27 of 2014, the FBR had exempted the supply of parts and accessories to the automobile manufacturers from the levy of extra tax, however, other manufacturers have not been granted similar exemption.

May 13, 2019
IMF to provide $6 billion to Pakistan under 39-month Extended Fund Arrangement

KARACHI: International Monetary Fund (IMF) will provide $6 billion under 39-month extended fund facility (EFF) to Pakistan, a statement said on Sunday.

In response to a request by the Pakistani authorities, an IMF mission led by Ernesto Ramirez Rigo visited Islamabad, Pakistan from April 29 to May 11 to discuss IMF support for the authorities’ economic reform program.

At the end of the visit, Mr. Ramirez Rigo made the following statement:

“The Pakistani authorities and the IMF team have reached a staff level agreement on economic policies that could be supported by a 39-month Extended Fund Arrangement (EFF) for about US$6 billion.

“This agreement is subject to IMF management approval and to approval by the Executive Board, subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments. The program aims to support the authorities’ strategy for stronger and more balanced growth by reducing domestic and external imbalances, improving the business environment, strengthening institutions, increasing transparency, and protecting social spending.”

The IMF said that Pakistan was facing a challenging economic environment, with lackluster growth, elevated inflation, high indebtedness, and a weak external position.

“This reflects the legacy of uneven and procyclical economic policies in recent years aiming to boost growth, but at the expense of rising vulnerabilities and lingering structural and institutional weaknesses.

“The authorities recognize the need to address these challenges, as well as to tackle the large informality in the economy, the low spending in human capital, and poverty. In this regard, the government has already initiated a difficult, but necessary, adjustment to stabilize the economy, including thorough support from the State Bank of Pakistan.

“These efforts need to be strengthened. Decisive policies and reforms, together with significant external financing are necessary to reduce vulnerabilities faster, increase confidence, and put the economy back on a sustainable growth path, with stronger private sector activity and job creation.”

The IMF said that the EFF aims to support the authorities’ ambitious macroeconomic and structural reform agenda during the next three years.

“This includes improving public finances and reducing public debt through tax policy and administrative reforms to strengthen revenue mobilization and ensure a more equal and transparent distribution of the tax burden.

“At the same time, a comprehensive plan for cost-recovery in the energy sectors and state-owned enterprises will help eliminate or reduce the quasi-fiscal deficit that drains scarce government resources.

“These efforts will create fiscal space for a substantial increase in social spending to strengthen social protection as well as in infrastructure and human capital development. The modernization of the public finance management framework will increase transparency and spending efficiency. Provinces are committed to contribute to these efforts by better aligning their fiscal objectives with those of the federal government.”

The IMF further said that the forthcoming budget for FY2019/20 is a first critical step in the authorities’ fiscal strategy.

“The budget will aim for a primary deficit of 0.6 percent of GDP supported by tax policy revenue mobilization measures to eliminate exemptions, curtail special treatments, and improve tax administration.

“This will be accompanied by prudent spending growth aimed at preserving essential development spending, scaling up the Benazir Income Support Program and improve targeted subsidies, with the goal of protecting the most vulnerable segments of society.”

The IMF said that the State Bank of Pakistan will focus on reducing inflation, which disproportionately affects the poor, and safeguarding financial stability.

“A market-determined exchange rate will help the functioning of the financial sector and contribute to a better resource allocation in the economy. The authorities are committed to strengthening the State Bank of Pakistan’s operational independence and mandate.”

The IMF said that an ambitious structural reform agenda will supplement economic policies to rekindle economic growth and improve living standards.

“Priority areas include improving the management of public enterprises, strengthening institutions and governance, continuing anti-money laundering and combating the financing of terrorism efforts, creating a more favorable business environment, and facilitating trade.

“To improve fiscal management the authorities will engage provincial governments on exploring options to rebalance current arrangements in the context of the forthcoming National Financial Commission.”

May 12, 2019
FBR suggested to abolish FTR for commercial importers

KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish Final Tax Regime (FTR) for commercial importers and other segment of the economy in order to make the taxation system equitable.

FBR sources said that suggestions had been received from business community and large business houses to eliminate the FTR and presumptive tax regime.

The sources said that large private sector entities and chartered accountants urged the newly appointed chairman Shabbar Zaidi, who is also a chartered accountant and had represented Institute of Chartered Accountants of Pakistan (ICAP), to status of normal tax regime for commercial importers should be restored.

The ICAP in its tax proposal for tax year 2019/2020 said that certain sectors/goods are being taxed under the presumptive/value added/ fixed/ final tax regimes.

Pakistan Business Council (PBC) also said that the presumptive/value added/fixed/final tax regimes are taxing turnover as opposed to income. In addition, entities availing this regime are not required to file tax returns.

“Under garb of the FTR, massive evasion of customs duties and sales tax are taking place putting the formal sector under undue pressure.”

The informal economy has outgrown the formal economy and the major driver of this has been the FTR.

The FBR said that the chartered accountants were strongly supporting elimination of FTR for commercial importers and recommended: “commercial importers status under Normal Tax Regime as introduced through the Finance Act, 2018 should be restored.”

They said that the presumptive/ value added/ fixed / final tax regime should be replaced with a normal tax regime.

Income has to be the only basis for taxation and option to exit the tax chain should not be available for whatever reason.

May 12, 2019
FBR recommended imposing environmental tax on industries producing polluting materials

KARACHI: Federal Board of Revenue (FBR) has been suggested to impose environmental tax on industries producing non-renewable and polluting materials.

Pakistan has a wide range of industries, which are involved in usage and production of nonrenewable, polluting materials that are extremely harmful for our environment.

“There are many entities, AOPs and sole proprietors who are not taxed because they either do not have taxable income or, they do not intend to disclose it properly while conducting their businesses that are damaging country’s environment,” said Institute of Chartered Accountants of Pakistan (ICAP) in its tax proposals for budget 2019/2020..

The institute recommended that higher tax should be levied at non-renewable, polluting inputs and outputs, such as coal, automobiles, chlorine, phosphate detergents, chemical pesticides, chemical fertilizers, lead acid batteries and plastic etc.

“As an incentive, the organizations taking measures to preserve the environment may be made eligible for a tax credit,” it further suggested.

Pakistan is already lacking behind other developed and developing countries who are taking measures to safeguard their ecosystem.

“Introduction of this tax and tax credit would not only increase tax revenue and encourage multiple entities to file their return of income in order to avail the tax credit, but Pakistan will also be recognized as a country, which is taking an initiative to safeguard the environment,” ICAP suggested.

May 12, 2019
ACCA opposes tax amnesty, recommends enforcement on available information

KARACHI: Association of Chartered Certified Accountants (ACCA) Pakistan has opposed tax amnesties and suggested the tax machinery to use available information with proper enforcement.

“Tax Amnesties without proper penal clauses had been a failure. With the strengthening of OECD, they should be done away with and focus should instead be shifted on using the organization’s platform to retrieve necessary information and ensure proper enforcement of applicable laws and regulations,” the association recommended this in its tax proposals for budget 2019/2020.

ACCA has presented detailed recommendations for bringing structural reforms in the taxation system while opposing any amnesty scheme in the presence of plethora of information maintained by the Federal Board of Revenue.

For the structural reforms following measures have been suggested by the ACCA:

• A single tax return for all taxation affairs of a taxpayer which all authorities can utilize to obtain the relevant data.

• Harmonization of taxation laws in the country.

• Resolving issues within IRIS to make it more user friendly

• Integration of Federal and Provincial Revenue Authorities’ systems and databases

Structural Reforms

• Reducing the discretionary powers vested in FBR officials and shifting towards an objective criteria based approach

• Developing the existing policy of differential tax treatments and incentives for filers while penalizing non-filers

• Introducing impact on economic sectors (GDP development) and numbers of decisions upheld at the appellate forums along with collections target as a performance evaluation criteria for FBR functionaries

• Ensuring time limits adherence as specified in the laws and rules particularly pertaining to refund matters

• Facilitating the tax payers

• Introducing confidence by establishing a swift response complaint resolution cell to deal with corruption and harassment of tax payers

• Change in discretionary powers of FBR for moveable and/or immovable property including bank accounts attachment to improve ease of doing business and trust of taxpayers in the tax apparatus. Limit the attachment powers to only cases involving concrete information re asset disposal.

• Ensuring no post remains vacant for more than two weeks to avoid delays in resolving tax-payers issues arising out of transfers, postings and additional charges, etc.

• Limiting charge on a single post in FBR to a maximum of two (2) years to discourage the corrupt practices and collaborations.

• Effective enforcement should be ensured by working on maximum automation of the taxation system.

• Effective enforcement should be ensured by working on maximum automation of the taxation system.

• Hiring and training of adequately qualified staff with ongoing capacity building should be focused on to ensure efficient and productive results from the tax apparatus.

• Appointing independent officials as Commissioner Appeals ideally from the judicial service and qualified accountants practicing taxation from various bodies including ACCA.

• ACCA is the largest Global accountancy body, which is now the largest in Pakistan too. Including ACCA members practicing taxation within the definition of accountant members for the Appellate Tribunal Inland Revenue will further strengthen the competition and meritocracy.

• Hiring and training of adequately qualified staff with ongoing capacity building should be focused on to ensure efficient and productive results from the tax apparatus.

• Limiting charge on a single post in FBR to a maximum of two (2) years to discourage the corrupt practices and collaborations.

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