Author: Faisal Shahnawaz

Finance Bill 2019: Final Tax Regime withdrawn

ISLAMABAD: The government has decided to withdraw Final Tax Regime (FTR) and bring various sectors into the documented economy.

The FTR has been proposed to be abolished through Finance Bill, 2019 as part of budget 2019/2020, which was presented on Tuesday.

The Federal Board of Income tax by its inherent nature is tax charged and levied on income.

However presently persons involved in certain transactions are not required to pay tax on their actual profit.

Instead, the tax collected or deducted on these transactions is treated as final tax liability.

This regime is available persons to such as commercial importers, commercial suppliers of goods, contractors, persons deriving brokerage or commission income and persons earning income from CNG stations.

“The tax collected or deducted from the aforesaid persons shall now be treated as minimum tax liability except for exporters, persons winning prizes and sellers of petroleum products.”

This measure is designed as a first step for gradual phasing out of the final tax regime and transition to income based taxation for all persons.

June 12, 2019

Finance Bill 2019: Tax card for business individuals, salary income less than 75pc for tax year 2020

ISLAMABAD: The government has proposed new tax slabs for business individuals in tax year 2020 through Finance Bill 2019.

The tax card will also be applicable in case of salary persons where total salary income is less than 75 percent of the total income.

The Finance Bill 2019 was presented on Tuesday as part of federal budget 2019/2020.

Following are the tax card for business individuals and salaried persons having salary income less than 75 percent:

S. No	Taxable Income	Rate of Tax
01	Where taxable income does not exceed Rs400,000	0%
02	Where taxable income exceeds Rs400,000 but does not exceed Rs600,000	5% of the amount exceeding Rs. 600,000
03	Where taxable income exceeds Rs600,000 but does not exceed Rs1,200,000	Rs10,000 plus 10% of the amount exceeding Rs600,000
04	Where taxable income exceeds Rs1,200,000 but does not exceed Rs2,400,000	Rs70,000 plus 15% of the amount exceeding Rs1,200,000
05	Where taxable income exceeds Rs2,400,000 but does not exceed Rs3,000,000	Rs. 250,000 plus 20% of amount exceeding Rs2,400,000
06	Where taxable income exceeds Rs3,000,000 but does not exceed Rs4,000,000	Rs370,000 plus 25% of the amount exceeding Rs3,000,000
07	Where taxable income exceeds Rs4,000,000 but does not exceed Rs6,000,000	Rs620,000 plus 30% of the amount exceeding Rs4,000,000
08	Where taxable income exceeds Rs6,000,000	Rs1,220,000 plus 35% of the amount exceeding Rs6,000,000

June 12, 2019

Budget 2019/2020: sales tax zero-rating abolished

ISLAMABAD: The government has abolished sales tax zero-rated by rescinding SRO 1125(I)/2011 for export sectors. However, new mechanism of refund has been introduced which would be paid at the time of realization of exports.

SRO 1125(I)/2011 provides for zero-rate of sales tax on inputs and products of five export-oriented sectors i.e. textile, leather, carpets, sports goods and surgical goods.

The objective was to resolve delay in refund payments. However, zero7 rating has created loophole and the benefit is being availed by unintended beneficiaries / non-exporters. Reduced rates for finished goods is also harming revenues.

Huge misuse of SRO on import of fabric and processed fabrics has been reported. To streamline and prevent revenue leakage SRO 1125 is being rescinded.

SRO 1125 be rescinded, thus restoring standard rate of 17 percent on items covered under SRO.

The rate of sales tax on local supplies of finished articles of textile and leather and finished fabric may be raised from current 6 percent for integrated businesses, and 9 percent for others, to 15 percent and 17 percent, respectively.

Zero-rating of utilities (gas, electricity and fuels) allowed to these export oriented sectors through various sales tax general orders be withdrawn.

Refund of sales tax to these sectors be automated, thus ensuring that the sales tax paid on inputs is immediately refunded. Refund Payment Orders (RPOs) shall be immediately sent to SBP for payment as soon as these are generated.

Ginned cotton which is presently exempt is proposed to be subjected to reduced rate of 10 percent

In addition to above, it is also proposed to rescind notification No. SRO. 769 (I)/2009, dated 4th September, 2009, which grants zero-rating on import and supply of polyethylene and polypropylene for manufacture of mono filament yarn and net cloth, being similar in nature to SRO 1125, and that granting zero-rating to local supplies is to be discouraged.

June 11, 2019
Budget 2019/2020: salary, pension increased up to 10 percent

ISLAMABAD: The government has announced increase up to 10 percent in salary and pension in the federal budget 2019/2020.

Hammad Azhar, State Minister for Revenue presented Budget 2019/2020 on Tuesday and announced following relief measures for government employees and pensioners.

Ad-hoc Relief Allowance at 10 percent on running Basic Pay of BPS 2017 to civil government employees in BPS grade 1 to 16, and employees of Armed Forces Civil employees BPS 17 – 20 will be given ad-hoc Relief Allowance at 5 percent.

Civil employees in BPS 21 and 22 will receive no increase in pay as they have decided to sacrifice for the sake of improvement in economic situation of the country.

Increase in net pension at 10 percent will be given to all civil and armed forces pensioners of federal government.

Special conveyance allowance for disabled employees will be enhanced from Rs.1,000 per month to Rs.2,000 per month.

Special pay admissible to SPS/PS/APS to Ministers, Ministers of State, Parliamentary Secretaries, Additional Secretaries, and Joint Secretaries will be enhanced by 25 percent.

In addition to the above, minimum wage is being increased to Rs.17,500 per month.

June 11, 2019
Budget 2019/2020 at glance

ISLAMABAD: Following is the glance of budget 2019/2020.

June 11, 2019
Budget 2019/2020 with massive tax burden presented

ISLAMABAD: The present government on Tuesday presented its first budget with total outlay of Rs 7,022 billion for the fiscal year 2019-2020, registering growth of 30 percent against the revised budget of Rs 5.385 trillion for current fiscal year (2018-2019).

State Minister for Revenues Hammad Azhar presented the budget in the National Assembly, amid protest by the Opposition parties.

The minister said that total federal revenues have been estimated at Rs 6,717 billion which is 19 percent higher than the previous year’s revenues of Rs 5,661 billion.

The collection of revenues by Federal Board of Revenue (FBR), he said are estimated to be recorded at Rs 5,555 billion which are 12.6 percent of Gross Domestic Product (GDP). In order to achieve the revenue collection target the government introduced massive budgetary measures across the board.

The minister of state said out of total revenue collections, an amount of Rs 3.255 trillion would be distributed among the provinces under 7th National Finance Commission (NFC) Award which is 32 percent higher than the current year’s share of Rs 2.465 trillion.

He said Net Federal Revenues for the upcoming fiscal year have been estimated at Rs 3.46 trillion against the revenues of Rs 3.07 trillion during current fiscal year which is 13 percent higher.

Similarly, he said the federal budget deficit would be Rs 3.56 trillion whereas the provincial budget surplus is estimated to be at Rs 423 billion for the year 2019-2020.

June 11, 2019
Rupee weakens by Rs1.36 against dollar

KARACHI: The Pak Rupee weakened by Rs1.36 against the US dollar on Tuesday as demand persists for import payment.

The rupee closed at Rs151.47 to the dollar from previous day’s close of Rs150.11 in interbank foreign exchange market.

Currency experts said that the rupee declined due to weak economic conditions.

They said that the economic survey launched yesterday presented bleak picture of Pakistan’s economy.

The exchange rate also witnessed depreciation in rupee value.

The buying and selling of dollar was recorded at Rs151.00/Rs152.00 from previous day’s closing of Rs150.10/Rs150.40 in cash ready market.

June 11, 2019
Government borrows Rs3.2 trillion from SBP in 10 months: Economic Survey

ISLAMABAD: The government has borrowed Rs3.2 trillion from State Bank of Pakistan (SBP) for budget financing during first ten months of current fiscal year, Economic Survey of Pakistan revealed.

The survey released a day earlier stated that during July 01, 2018-April 26, 2019 government borrowed Rs 1,073.0 billion for budgetary support compared to Rs 850 billion in the same period last year, of which, government has borrowed from SBP Rs 3,204.7 billion as compared to Rs 1,316.1 billion last year.

On the other hand, government retired Rs 2,131.7 billion to scheduled banks against retirement of Rs 466.1 billion in last year. Net government sector borrowing thus remained at Rs 908.0 billion during the period under review compared with Rs 813.6 billion last year.

During the period 01 Jul-26 Apr, FY2019 money supply (M2) increased by Rs 625.3 billion (growth of 3.9 percent) compared with Rs 601.8 billion (4.1 percent) in comparable period of last year.

Net Domestic Assets (NDA) is the main contributor to M2 growth.

Net Foreign Assets (NFA) point contribution is negative and stood at (-5.5 percent) during the period under review compared with (-3.3 percent) in the same period last year.

NDA point contribution has increased to 9.4 percent compared with 7.4 percent last year. NDA point contribution growth partially offset by NFA negative growth, thus overall money supply grew by 3.9 percent during the period under review.

On the other hand, reserve money posted an expansion of Rs 488.0 billion (growth of 8.9 percent) during 01 Jul-26 Apr, FY2019 against Rs 260.5 billion (5.4 percent) last year.

SBP’s NDA posted a growth of 22.5 percent compared with 18.18 percent during the same period last year, whereas, SBP’s NFA decreased by Rs 743.8 billion compared with contraction of Rs 473.7 billion in the comparable period last year.

Therefore, reserve money growth stemmed from NDA of the SBP whereas NFA outstanding stock remained negative during the period under review.

Within Broad Money, NFA of the banking sector further contracted to Rs 882.4 billion during 01 Jul-26 Apr, FY2019. During same period last year, it was contracted by Rs 475.4 billion.

Therefore, SBA and scheduled bank’s NFA remained negative during the period under review.

During the period 01 Jul-26 Apr, FY2019 NDA of the banking sector registered an expansion of Rs 1,507.7 billion (growth of 9.3 percent) compared with Rs 1,077.2 billion (7.7 percent) during the comparable period last year.

NDA of SBP increased by Rs 1,132.5 billion as compared with Rs 661.5 billion during same period last year.

The NDA of scheduled banks witnessed an expansion of Rs 375.1 billion compared to expansion of Rs 415.7 billion in the same period of last year.

Government sector borrowing and private sector credit mutually impacted NDA growth of the banking system, which was more than offset the contraction in NFA of the banking system.

Consequently, broad money growth increased to 3.9 percent during 01 Jul-26 Apr, FY2019 as compared to 4.1 percent during the comparable period last year.

Credit to Public Sector Enterprises (PSEs) increased by Rs 312.1 billion during the period 01 Jul-26 Apr, FY2019 against Rs 153.2 billion during the same period of last year.

June 11, 2019
World Bank helps Sarena Hotels to obtain global business certification for gender equality

ISLAMABAD: International Finance Commission (IFC), a member of the World Bank Group, is partnering with one of the largest hotel chains in South Asia, Serena Hotels Pakistan, to help it become the first company in Pakistan to obtain the leading global assessment and business certification for gender equality—EDGE (Economic Dividends for Gender Equality), a press release said on Tuesday.

Currently, in Pakistan, only about one in four women work and just 7 percent of the country’s workforce is female.

The certification evaluates companies’ workplace gender equality performance against global and industry benchmarks, helping them become a gender equal environment to work in, invest in, and do business with. EDGE currently works with nearly 200 organizations in 50 countries and 23 industries.

“Our collaboration with IFC on gender-smart initiatives will allow us to help our women Associates, while benefiting from attracting and utilizing their talent in our Company. Most importantly, it will allow us to further improve the workplace where all Associates are viewed as equal, so that we have a more productive, engaged, loyal, and skilled team. Gender equality is a win-win for both our Associates and business,” said Aziz Boolani, CEO of Serena Hotels in Pakistan.

Headquartered in Islamabad, Serena Hotels Pakistan, a recipient of “Employer of Choice for Gender Balance-2018” employs 12 percent women in a workforce of 1,900.

Through the EDGE gender assessment process and with support from IFC, the group aims to further enhance gender balance by creating more opportunities for women’s employment, capacity building of high-potential women Associates to leadership training and skill development of women at community level for entrepreneurship.

“There’s no doubt that companies can deliver greater business impact and be more competitive by fostering an equitable and inclusive workplace for women and men,” said Nadeem Siddiqui, IFC’s Senior Country Manager in Pakistan.

“We hope more companies in Pakistan will discover the strength of the business case for greater gender equality in the workplace.”

June 11, 2019
Share of indirect taxes increases to 60.9 percent: Economic Survey

ISLAMABAD: Despite claims of authorities to increase the share of direct taxes in total revenue, the share of indirect taxes further increased to 60.9 percent in 2018/2019.

The Economic Survey 2018/2019 launched a day earlier, stated that the tax structure in Pakistan is skewed towards indirect taxes.

The share of indirect tax to FBR tax collection remained static around 60 percent over the last one decade.

“For fiscal year 2018/2019, the share of indirect tax collection set at 60.9 percent.”

Within indirect taxes, sales tax posted a growth of 11.8 percent in FY2018 against 2.0 percent increase in FY2017.

Strong aggregate demand and pass through of high international oil prices contributed in sales tax collection during FY2018.

The share of sales tax which constituted 64.4 percent of indirect taxes during FY2018 reduced gradually from 72.3 percent in FY2014.

Similarly, share of sales tax in total FBR tax is gradually coming down since FY2014 from 44.2 percent to 38.6 percent during FY2018.

“For FY2019, sales tax collection target set at Rs 1,700 billion which is 14.5 percent higher than last year collection and (constitute 63.0 percent of indirect tax and 38.3 percent of FBR tax collection target).”

The share of custom duty in indirect taxes has increased gradually from 17.6 percent in FY2014 to 26.4 percent in FY2018.

It is pertinent to mention that the maximum statutory rates of customs duty have been gradually reduced from 125 percent in FY1988 to 20 percent in FY2016 till date.

Consequently, the share of custom duty in FBR tax collection has reduced gradually from 45.7 percent in FY1991 to 15.8 percent in FY2018.

Custom duty collection momentum continued with the same pace and registered a growth of 22.5 percent in FY2018 against 22.8 percent in FY2017.

High aggregate demand, increase in general income level, high imports, higher commodity prices, exchange rate depreciation and fiscal measures such as regulatory duties on non-essential imports and an increase in additional custom duty by 1 percent led to increase in growth of custom duty.

Custom duty collection is estimated at Rs 735.0 billion for FY2019 which reflects an increase of 20.8 percent over last year actual tax collection.

On the other hand, the share of federal excise duty in indirect taxes declined by 9.3 percent in FY2018.

The tax base of Federal Excise Duty (FED) contracted over the years and now is restricted to only few commodities like cigarettes, cement, beverages, and international travel etc. Share of FED in total FBR tax collection has also fallen from 10.1 percent in FY2009 to 5.6 percent in FY2018.

FED registered a growth of 7.9 percent in FY2018 compared to 5.2 percent in FY2017. Collection from cement mainly fueled this growth momentum. FED is projected to Rs 265.0 billion which is 24.1 percent higher as compared with actual last year collection.

The projected share is 6.0 and 9.8 percent of FBR and indirect tax collection, respectively for FY2019.

June 11, 2019