President of Pakistan, Dr. Arif Alvi, has called upon the business community to fulfill their tax obligations, emphasizing that this would play a pivotal role in reducing the budget deficit and enabling greater allocation of funds for development projects. His remarks came during a meeting with a delegation from the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Regional Office, Lahore, in Islamabad on Monday.
(more…)Author: Faisal Shahnawaz
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FBR advised making declaration of fund source mandatory for foreign remittances
KARACHI: Federal Board of Revenue (FBR) has been advised to make it mandatory the declaration of source of funds for foreign remittances.
Association of Chartered Certified Accountants (ACCA) in its tax proposals for budget 2019/2020 recommended changes to Section 111(4) of Income Tax Ordinance, 2001 regarding foreign exchange remitted from outside Pakistan.
The association recommended amendment:
“to any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect … and a declaration along-with evidence of the source of funds.”
It said that this will continue to promote the inflow of foreign exchange remittances towards the country while stopping the misuse of the provision to whiten/launder black monies and de-incentivizing genuine tax paying businesses.
“This way, the ‘non enquiry’ clause which has been extensively abused, will be abolished sans the current monetary limit while still retaining the tax relief for foreign exchange remittance.
The ACCA further said that the minimum tax on turnover is charged irrespective of the net profit or loss.
This often gives rise to a situation where businesses end up paying double taxes on their revenues and profits as well as loss making businesses facing additional cash-flow pressures by paying this tax.
The current rate of 1.25 percent applicable generally except for a few sectors, should be brought down to 0.4 percent.
The now deleted exception in case of a gross loss needs to be reinstated in line with the principles of natural justice and equity.
This will facilitate the business eco-system contributing to a growth in GPD which can lead to increased revenue collections for the treasury.
The association further highlighted Section 138 and 140 of the Ordinance regarding recovery of tax through attachment of bank accounts and/or property or arrest.
It said that currently, the allowance for the commissioner to attach the property of the taxpayer before expiry of notice period on “satisfaction” of the commissioner regarding possible removal, cancellation or disposal of attachable property is misused in many cases to harass the businesses.
This change can bring an end to this, increase taxpayers’ trust in the tax apparatus and improve the ease of doing business in the country.
“Any such attachment of any movable/immovable property before expiry of the notice period may only be authorized by the Commissioner in the presence of objective evidence, which should be shared with the taxpayer.”
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SRB suspends sales tax registration of four freight forwarders
KARACHI: Sindh Revenue Board (SRB) has suspended sales tax registration of four freight forwarders for defaulting payment and non-compliance of filing sales tax returns.
The SRB issued suspension notices to the following freight forwarders:
Muhammad Rafique (M/s. Rafique Brothers)
M/s. Prime Ocean Cargo Management Company (Pvt) Limited
M/s. Shahnoor Weavers
Muhammad Tahir Imam (M/s. ST Logistics International)
The SRB said that Muhammad Rafique (M/s. Rafique Brothers) had failed to make payment of Sindh Sales Tax on Services for the period from July 2011 till to date. Further the company also failed to file return electronically for the tax periods February 2017 to December 2018 and July 2011 to April 2013.
The SRB asked the company that the notice would be revoked in case it takes remedial action by May 24 by making payment and filing true and correct returns for the said periods. Otherwise the case shall be proceeded for cancellation in case remedial action was not taken by May 25, 2019.
In case of M/s. Prime Ocean Cargo Management Company (Pvt) Limited, the SRB said that the company had failed to file returns for the period July 2016, December 2015, March 2015, June 2013, March 2013, September 2012, August 2012, June 2012, May 2012, April 2012, March 2012, February 2012, January 2012, December 2011, October 2011, September 2011, August 2011, July 2011.
The SRB directed the company to take remedial action by May 24, 2019. “In case of non-satisfactory response or failure to take remedial measures as suggested above on or before May 25, 2019 the case shall be further preceded for cancellation of registration wit the SRB.”
In the case of M/s. Shahnoor Weaver, the SRB said that the company had failed to make payment since July 2011 till date. Further, the company had failed to e-filer sales tax returns for tax periods from July 2011 to June 2015 and from August 15 to December 2018.
The SRB directed the company to take remedial action by May 26, 2019. “In case of non-satisfactory response or failure to take remedial measures as suggested on or before May 27, 2019, the case shall be further preceded for cancellation of registration with the SRB.”
In the fourth case of Muahmmad Thair Imam (M/s. ST Logistics International), the SRB said that the company had failed to make payment of sales tax on services from July 2011 till date. Further, the company also failed to e-filer sales tax returns for the said period.
The SRB has directed the company to take remedial action by May 23, 2019. “In case o non-satisfactory response or failure to take remedial measures as suggested on or before May 24, 2019 the case shall be further preceded for cancellation of registration wit SRB,” it added.
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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.
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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.
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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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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).
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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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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.
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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.”