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PTBA declares implementing digital payment not practical

Pakistan Tax Bar Association (PTBA) has demanded the Federal Board of Revenue (FBR) extend the implementation of digital mode of payment for corporate entities the system is not practical to use at present for many business entities.

The digital mode of payment has been made mandatory from November 01, 2021. The FBR has already made necessary amendments to relevant tax laws to implement the digital payment system.

The PTBA in its letter to FBR chairman Dr. Muhammad Ashfaq on Friday, October 29, 2021, stated that the new provision of law was promulgated through Tax Laws (Third Amendment) Ordinance, 2021, where a new sub-section (la) was inserted in Section 21 of the Income Tax Ordinance, 2001.

“The condition for allowable expenditure through digital mean is a contradiction with the other modes of payment through banking channels, which is historically remained in practice and accepted under the provisions of the Income Tax Ordinance, 2001 and this provision of law is incorporated without taking the stakeholders into confidence and it is not practically possible for many business houses,” the PTBA said.

The apex tax bar pointed out the following reasons that will make the new provision impractical:

(i) It is impossible to make payment to goods carriage/transport sector by the digital means, which will create complete unrest in the goods carriage and transport sector.

(ii) Presently, port terminal charges, wharfage charges, charges for clearance of delivery orders are paid in advance through crossed cheques or payorders. It will not be out of place to mention here that the port terminal operators and shipping lines, are unaware and are not ready for implementation of the ‘digital mode of payment.’

(iii) It is routine business practice that advance against delivery of goods, the buyer submits its payment by way of post-dated cheques, which normally accepted by the other party and inherently a secured way of making payment. We are afraid that this law of ‘digital mode of payment’ is surely going to hamper the business activities, as it does not cater the situation and solution of such transactions.

(iv) The similar issues are likely to arise and are to be faced by the companies for making payments to the growers of various agricultural crops such as fruits, sugarcane, rice, cotton, wheat, etc.

(v) The various banks have fixed their own limitation on the quantity of making digital / online payments in a day and have also fixed the threshold of the amount and they do not allow to exceed the threshold limit fixed by them. In our view, this also needs a proper campaign without which the implementation of the law is not possible.

(vi) The digital mode of payment is also impractical and is likely to affect the business transaction in the cases where petty cash payments, in aggregate exceed millions of rupees, which cannot be made digitally.

(vii) It will not be out of place to mention that online transactions are still considered as unsecured mode, due to various type online frauds and hacking of software.

The PTBA said that in the presence of the conventional banking transactions, the move is likely to create lots of troubles for the corporate sector.

“It is therefore, suggested that the mandatory condition of digital mode of payment for companies should be allowed along with other conventional modes of payment for at least one year and time limit for updation of business bank accounts under Section 114 of the Income Tax Ordinance, 2001 may be extended till June 30, 2022 for the smooth running of businesses.

KTBA highlights issues in implementing digital payments

October 30, 2021
SBP’s annual profit declines 34% to Rs761 billion

KARACHI: The State Bank of Pakistan (SBP) has announced a sharp decline in net profit by 34 per cent to Rs761 billion in fiscal year 2020/2021 as compared with Rs1,164 billion in the preceding fiscal year.

The Board of Directors of the State Bank of Pakistan on October 26, 2021 approved the Annual Performance Review on the working of the Bank and its subsidiaries and the financial statements for the year ended June 30, 2021, the SBP said on Friday.

FY21 remained a particularly challenging year as the global economy adjusted to the economic and financial challenges posed by the COVID pandemic, including multiple waves of virus outbreak and ensuing containment measures.

Amid such testing times, however; Pakistan’s economy rebounded strongly compared to the previous fiscal year as well as in comparison with the targets set for FY21 at the beginning of the fiscal year.

SBP’s supportive monetary policy stance including quantitative measures to inject liquidity in a timely manner, supplemented by fiscal policy measures, provided a targeted, dynamic and well-coordinated policy response to COVID.

These measures helped address the imminent liquidity and solvency concerns of businesses and households that had been emerging since the virus outbreak in March 2020 and supported the better than anticipated economic performance during the FY21.

The economic growth rebounded to 3.94 percent during the year, well above the target set for the FY21 of 2.1 percent and COVID induced contraction of 0.47 percent in FY20. The inflation also moderated to 8.9 percent in FY21 – well within the target range of 7-9 percent announced by SBP. Similarly other key macro-economic balances including current account, fiscal balance and the country’s foreign reserves improved during the FY21.

SBP’s quantitative measures were well targeted, well diversified across beneficiaries and temporary in nature; and in aggregate provided liquidity support of around 5.0 percent of GDP. To ease off the challenging business environment, SBP swiftly introduced concessional refinance schemes to prevent layoffs (Rozgar Scheme); facilitate healthcare institutions to upscale their facilities (Refinance Scheme to Combat COVID); and encourage firms to undertake long-term investments (under the Temporary Economic Refinance Facility).

Export related procedural requirements were relaxed to counter the limited mobility amidst unfolding national lockdowns and scope for concessionary Export Finance Scheme (EFS) was expanded. In addition, SBP allowed bank’s loan restructuring and loan deferment for firms including SMEs and households.

Furthermore, the anchoring of inflation expectations, despite some upward pressures from supply management issues and surge in international commodity prices, allowed the Monetary Policy Committee (MPC) to keep the policy rate unchanged throughout the year.

The adoption of forward guidance on Monetary Policy by SBP since January 2021 played a major role in reducing short-term policy uncertainty for stakeholders.

Pakistan’s external indicators also improved significantly in FY21 as SBP’s foreign exchange grew more than 40 percent and the country’s current account deficit plummeted to a 10-year low – mainly because of record high worker’s remittances and export receipts.

While market determined exchange rate improved export competitiveness, the financial incentives announced by SBP and the government for remittance processors under the Pakistan Remittance Initiative (PRI) encouraged the use of formal banking channels for remitting funds by emigrants, which paved the way for increasing inward remittance to USD 29.4 billion during the year.

With regards to Payments Infrastructure of the country, SBP undertook major initiatives aimed at financial inclusion, digital on-boarding of customers, enabling remote banking, providing digital modes of investments to customers through banking channels and improving payment systems efficiency.

First, SBP in collaboration with Government and Commercial Banks launched Rohan Digital Account (RDA), allowing non-resident Pakistanis to open and operate bank accounts remotely with banks in Pakistan, invest in Naya Pakistan Certificates (NPCs), stock market, mutual funds, real estate and to purchase cars for their family members.

The initiative was well received by Pakistani diaspora as by end June 2021, USD 1.56 billion have been received via 181,556 RDAs. This influx of foreign exchange has positively supported the country’s balance of payment position. SBP’s second major undertaking in the payments sphere, is the launch of first use case of Raast-a state-of-the-art, interoperable and secure payment platform that enables consumers, merchants and government entities to exchange funds in a seamless, instant and cost-effective manner. Both the developments in the payment systems domain will have a lasting impact on Pakistan’s banking landscape as well as external account.

Financial inclusion remained top strategic priority at SBP, in line with the vision of National Financial Inclusion Strategy. During FY21, SBP’s special focus remained on rural, underserved and unbanked areas, while issuing licenses for opening of new branches of commercial and microfinance banks.

With regards to credit disbursement, SBP had a renewed focus on underserved economic segments, especially housing and construction finance, agriculture finance, and finance for micro, small and medium enterprises.

Moreover, the third five-year strategic plan for the Islamic banking industry was issued by SBP in April 2021 to set a strategic direction and strengthen the existing growth momentum of industry.

With respect to its regulated entities, SBP during FY21 implemented Risk Based Supervision Framework- a forward-looking framework that would allow the SBP to pursue a coherent risk-based approach through proactive identification of risks, and take timely mitigation measures to ensure financial stability in the country.

To achieve its broad strategic goals and strengthen the organizational efficiency, SBP took major initiatives during FY21 aimed at workforce rationalization, attaining gender diversity, automation of process workflows, strengthening cyber security and risk management framework and improving transparency through enhanced communication with external stakeholders.

SBP slaps Rs280 million penalty on National Bank

October 29, 2021
Dollar plunges to Rs171.65 in interbank forex market

KARACHI: The dollar continued losing its value against the Pak Rupee (PKR) on Friday since Saudi Arabia announced to place $3 billion with the State Bank of Pakistan.

The rupee recovered 61 paisas to Rs171.65 to the dollar from the previous day’s closing of Rs172.26 in the interbank foreign exchange market.

The rupee hit the historic low at Rs175.27 on October 27, 2021.

Saudi Arabia announced additional support of $3 billion to Pakistan for building its foreign exchange reserves. The additional financial support is besides a $1.2 billion dollars deferred oil facility to Pakistan to help its balance of payment issues, an official statement said.

Currency dealers said that Pakistan needs more inflows to stabilize the local currency. They said that the exchange rates are facing immense external payment pressure.

Dollar slides to Rs172.26 in interbank

October 29, 2021
SBP slaps Rs280 million penalty on National Bank

KARACHI: The State Bank of Pakistan (SBP) has slapped a heavy monetary penalty of over Rs280 million on the National Bank of Pakistan (NBP) for violating instructions pertaining to Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT).

The central bank imposed a monetary penalty on four banks during the quarter ended September 30, 2021. The SBP imposed Rs465 million as monetary penalties on the four banks for similar deviation.

The SBP imposed a penalty of Rs132.44 million on Silk Bank Limited, Rs38.55 million on United Bank Limited and Rs13.54 million on Industrial and Commercial Bank of China-Pakistan Branches.

In addition to penal action, the banks have been advised to strengthen its processes with respect to identified areas.

The SBP from July 2019 started public disclosure of penal action against banks. “Enforcement actions are an integral part of a regulatory regime which involves the imposition of monetary penalties and other actions against institutions and individuals for violations of laws, rules, regulations, guidelines or directives issued by SBP from time to time,” according to a circular issued by the central bank.

In order to bring more transparency and strengthen market discipline, SBP has decided to publicly disclose significant enforcement actions.

SBP imposes monetary penalty on eight banks

October 29, 2021
OGDCL declares Rs33.63 billion net profit in first quarter

KARACHI: Oil and Gas Development Company Limited (OGDCL) on Friday announced its financial result, posting a profit after tax (PAT) of Rs33.629 billion during the first quarter ended September 30, 2021.

The profit of the company has surged by 44 per cent when compared with the net profit of Rs23.344 billion in the first quarter of the last fiscal year.

The company declared earnings per share at Rs7.82 for the quarter under review as compared with Rs5.43 in the same quarter of the last year.

Alongside the result, the company announced an interim cash dividend of Rs 1.75/share for the first quarter of fiscal year 2021/2022 (Rs 2.00 in 1QFY21).

According to Arif Habib Research, topline clocked-in at Rs71,531 million in 1QFY22 against Rs56,347 million in same period last year (SPLY), up by 27 per cent YoY, on the back of i) a massive 70 per cent YoY jump in oil prices, and ii) 4 per cent YoY growth in oil production. Whereas, gas production plummeted by 10 per cent YoY during the quarter. On a sequential basis, net sales ascended by 14 per cent given 9 per cent QoQ growth in oil prices along 2 per cent QoQ higher oil production.

The exploration costs declined by 23 per cent YoY arriving at Rs 2,283 million in 1QFY22 given dry well (Bago Phulphoto) reported during the quarter compared to three dry wells (Jun-01, Umair North West and Jatoi-01) incurred in SPLY. Whereas on QoQ basis, exploration costs plunged by 65 per cent given two drys (Washuk-01 and Kambir) and higher seismic activity incurred in 4QFY21.

Other income in 1QFY22 settled at Rs 10,878 million versus Rs 5,958 million in SPLY, significantly up 83 per cent YoY, amid exchange gain on foreign currency tagged with higher income from cash and cash balances. Similarly, other income on QoQ basis climbed up by 89 per cent due to USD appreciation against Rs.

The company booked effective taxation at 36 per cent in 1QFY22 vis-à-vis 31 per cent in 1QFY21.

OGDCL discovers huge gas deposits in Balochistan

October 29, 2021
Gul Ahmed announces 67% growth in quarterly profit

KARACHI: Gul Ahmed Textile Mills Ltd. (GATM) on Friday declared over 67 per cent growth in after tax profit for the quarter ended September 30, 2021.

According to the financial results shared with the Pakistan Stock Exchange, the textile unit declared Rs1.167 billion as profit after tax for the first quarter (July – September) 2021 as compared with profit after tax of Rs697 million in the same quarter of the last fiscal year.

The company declared earnings per share at Rs2.73 for the period under review as compared with Rs1.63 in the same period of the last fiscal year.

The sales of the company increased to Rs24.64 billion during the quarter ended September 30, 2021 as compared with Rs20.32 billion in the same quarter of the last year.

The textile unit declared gross profit at Rs5.04 billion for July-September 2021 as compared with Rs3.69 billion in the corresponding period of the last fiscal year.

The board of directors of Gul Ahmed Textile Mills Limited in its meeting held on October 28, 2021 approved the financial results. The board has not recommended any cash dividend, bonus shares or right shares.

Gul Ahmed Textile declares 4-time increase in net profit during nine months

October 29, 2021
PMIC initiates action against 50 individuals, entities

ISLAMABAD: Inspection Commission constituted by Prime Minister Imran Khan, in its first phase initiated proceedings against 50 individuals and entities nominated in the Pandora Papers.

The proceeding is likely to expand in due course, said a press release on Thursday.

The process will be concluded strictly in accordance with law and whenever necessary, enforcement powers would be invoked directly or through concerned law enforcement agencies.

The Prime Minister Inspection Commission (PMIC) has commenced its proceedings regarding the Pandora Papers, the process for collection of information and data is underway.

Since initial disclosure regarding offshore companies and trusts were made by ICIJ and its partner journalists, information and assistance is being sought from the said sources.

The purpose of ongoing proceedings is to identify cases which may potentially involve any breach of law especially by present or past holders of public office.

The task also includes referral of cases to the relevant authorities for necessary action from tax evasion or money laundering aspects.

In order to maintain objectivity and fairness, the opportunity of representation in person or through written communication would be provided to the individuals who on the basis of available data are required to clarify their offshore ventures.

PMIC would welcome information from the public and encourage whistle-blowers to come forward for disclosure in the interest of transparency.

PM task force initiates proceedings in Pandora papers

October 29, 2021
Facebook changes name to Meta

Facebook at its annual developer conference announced to change the name to Meta. The company said it would better “encompass” what it does, as it broadens its reach beyond social media into areas like virtual reality.

According to BBC, the company, which announced the change at its annual developer conference, said it would better “encompass” what the firm now does. It also revealed plans for a metaverse – an online world where people can game, work and communicate in a virtual environment, often using VR headsets.

The name change follows a series of negative stories about Facebook, based on documents leaked by an ex-employee.

“The metaverse is the next frontier,” Chief Executive Officer Mark Zuckerberg said in a presentation at Facebook’s Connect conference, held virtually on Thursday. “From now on, we’re going to be metaverse-first, not Facebook-first.”

Facebook’s name change is the most definitive signal so far of the company’s intention to stake its future on a new computing platform — the metaverse, an idea born in the imaginations of sci-fi novelists, according to Bloomberg.

In Facebook’s vision, people will congregate and communicate by entering virtual environments, whether they’re talking with colleagues in a boardroom or hanging out with friends in far-flung corners of the world.

October 28, 2021
SCBL posts 17% decline in net profit during nine months

KARACHI: Standard Chartered Bank (Pakistan) Limited (SCBL) on Thursday announced a 17 per cent decline in profit after tax for the nine months period ended September 30, 2021.

The bank declared Rs9.91 billion as profit after tax during January – September 2021 as compared with Rs11.91 billion in the corresponding period of the last year.

The earnings per share of the bank also declined to Rs2.56 for the period under review as compared with Rs3.08 in the same period of the last year.

SCBL in its financial statement said that despite uncertainties surrounding COVID-19, the bank delivered a resilient financial performance with a profit before tax of Rs18.4 billion compared to Rs19.9 billion in the corresponding period last year.

The revenue of the bank fell to Rs26.56 billion during first nine months of the calendar year as compared with Rs32.07 billion in the corresponding months of the last year. The bank said that the revenue was lower by Rs5.5billion primarily due to sharp reduction in interest rates in second quarter of 2020, subdued economic activity and market volatility which impacted foreign exchange income, revaluation income on derivatives and gain on sale of securities.

Administrative costs continue to be well managed through operational efficiencies and disciplined spending with an increase of one per cent compared to same period last year.

Moreover, strong recoveries of bad debts, coupled with lower impairments as a result o a prudent risk approach led to a net release of Rs0.8 billion in year to date September 2021 compared to charge of Rs3.2 billion in the comparative period.

The bank said that all businesses have positive momentum with strong growth in underlying drivers. “This is evident from pickup in net advances, which have grown by 26 per cent since the start of this year. This was a result of targeted strategy to build profitable, high quality and sustainable portfolios,” it added.

On the liabilities side, the bank’s total deposits grew by Rs40 billion, whereas current and saving accounts grew by Rs41 billion since the start of this year and comprise 93 per cent of deposit base.

Standard Chartered Bank declares 18pc fall in annual profit

October 28, 2021
Pakistan’s forex reserves fall to $23.934 billion

KARACHI: The liquid foreign exchange reserves of Pakistan have declined by $393 million on weekly basis, according to statistics released by the State Bank of Pakistan (SBP) on Thursday.

The foreign exchange reserves of the country declined to $23.934 billion by the week ended October 22, 2021, as compared with $24.327 billion a week ago.

The foreign exchange reserves of the State Bank fell by $345 million to $17.147 billion by the week ended October 22, 2021 as compared with $17.492 billion by the week ended October 15, 2021.

The foreign exchange reserves held by commercial banks have also come down by $48 million to $6.787 billion by the week ended October 22, 2021, as compared with $6.835 billion a week ago.

SBP’s foreign exchange reserves fall by $1.64 billion

October 28, 2021