Category: Trade & Industry

This section covers news on trade and industry. Pakistan Revenue is committed to providing the latest updates on business trends.

Hafeez Shaikh discusses budget proposals with chambers of commerce and industries

ISLAMABAD: Dr. Abdul Hafeez Shaikh, Adviser to Prime Minister on Finance and Revenue on Thursday met presidents of various chamber of commerce and industries to discuss proposals for budget 2019/2020.

The Presidents and representatives of Lahore, Faisalabad, Sialkot, Karachi and Federation of Chambers of Commerce and Industry were at the meeting.

The representatives of various chambers briefed the adviser about problems and challenges being confronted by the economy of the country.

They gave various suggestions aimed at improving the economy and industrial sector of Pakistan.

The delegation proposed ways and means to enhance the export of the country.

The delegation also gave proposals for the budget 2019/2020.

In order to facilitate the business community and attract foreign investment, the adviser informed that the government was focusing on improving the ease of doing business.

He stated that the role of private sector was highly important in improving the economy of the country and urged the members of business community to play their role to increase the volume of exports.

He assured that the proposals of the chambers would be considered and a business-friendly budget would be presented.

Apart from the representatives of the chambers, the meeting was attended by Adviser to PM on Commerce, Textile, Industry and Production and Investment, Abdul Razak Dawood, Minister of State for Revenue, Muhammad Hammad Azhar, Secretary Finance, Naveed Kamran Baloch, Chairman, FBR, Shabbar Zaidi and Adviser, Ministry of Finance, Dr. Khaqan Najeeb.

May 31, 2019
FPCCI expresses concerns over abolishing zero-rate regime

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has expressed serious concerns over rumors regarding abolishing zero-rated for export sector.

Engr. Daroo Khan Achakzai, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), S. M. Muneer Former President FPCCI and Iftikhar Ali Malik, Former President FPCCI & Sr. Vice President SAARC-CCI show their serious concern over the speculation of withdrawal of Zero Rated Facility for the five Key exports sector in the forth coming budget.

They said that the withdrawal of zero rating facility of key five sector i.e. value added textile, leather, carpet, surgical instruments and sports goods will decline further exports of Pakistan which is confronted with many challenges.

These five sectors contribute 70 percent in exports of Pakistan and contribute significantly in earning foreign exchange and providing employment to skilled and unskilled labor force.

They further stated that the refunds claims of exporters amounting to Rs300 billion is already pending with FBR creating liquidity crunch and hurdles to new investment.

Due to uncertainty in economic environment, the investors are reluctant to make investment in Pakistan. Moreover, the devaluation of Pak. Rupees more than 30 percent in last one year does not impact positively on the enhancement of exports.

They added that the withdrawal of this facility will increase cost of doing business due to 17 percent sales tax and high utility cost, as Pakistan’s exports is already facing a tough competition in international market due to enormous facilities given by the regional countries to their exporters.

They further stated that government should find new avenues for enhancement of its revenue instead of damaging the exports sector which is already on a decline. They further suggested that the government should facilitate the industrialization in Pakistan particularly the agro-based and value added industries for the enhancement of exports.

May 29, 2019
Textile exporters oppose proposed plan for abolishing zero-rating, FTR

KARACHI: The textile exporters have strongly opposed to the proposed withdrawal of zero-rating of sales tax and abolishing Final Tax Regime (FTR).

Chairmen of Value Added Export Sector Associations in a joint Press Conference held at PHMA House Karachi while expressing deep concern stated that discontinuation of zero rated status will result in ruin and disaster of export oriented industries, flight of capital, mass unemployment and huge foreign exchange losses.

It will also lead to corruption in connivance with dubious FBR officials under the mode of flying invoices, over invoicing, frauds in refunds etc. Further, due to significant volumes of liquidity being stuck in the form of sales tax refunds, export growth will be severely affected and we may even witness a decline in exports.

More than 200 billion rupees of exporters in Refunds of Sales Tax, Customs Rebate, Withholding Tax, DLTL & DDT are already held up with Government.

They also conveyed serious apprehension on proposed abolition of Final Tax Regime (FTR) for exporters.

The Chairmen and Representatives of Council of All Pakistan Textile Mills Associations, Pakistan Apparel Forum, Pakistan Hosiery Manufacturers & Exporters Association, Pakistan Textile Exporters Association, Pakistan Bedwear Exporters Association, Towel Manufacturers Association of Pakistan, Pakistan Cloth Merchant Association, Pakistan Knitwear and Sweater Exporters Association, Pakistan Denim Manufacturers & Exporters Association, All Pakistan Textile Processing Mills Association, Pakistan Readymade Garment Manufacturers & Exporter Association, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association, The Surgical Instrument Manufacturers Association of Pakistan, Pakistan Leather Garments Manufacturers & Exporters Association, Pakistan Tanners Association, Pakistan Sports Goods Manufacturers & Exporters Association, Pakistan Carpet Manufacturers & Exporters Association, All Pakistan Bedsheets & Upholstery Manufacturers Association have fervently appealed to continue the Zero-Rating Scheme in the national interest to uplift exports. The five zero rated sectors are already documented and contribute 70% of total Nation’s exports and generate 50% of total Nation’s employment.

They added that collecting sales tax and then refunding – is a futile exercise which creates hassles for exporters and also opens flood gates of corruption. No collection and no refund of sales tax from five zero rated export sectors is a tried and tested formula for increasing revenue and exports. We must not forget that during last two decades the Government had tried to undo zero rating twice but miserably failed, hence, zero rating was reintroduced.

The zero rated scheme, in consultation with stakeholders, can further be improved for much better outcome.

They added that the Government rather than involving in futile exercise of collecting sales tax and then refunding should focus its energy on increasing the number of taxpayers. According to FBR, in year 2017 number of active taxpayers was only 1.13 million only (0.51% of total population).

They warned that Government’s attempt to collect interest free money in shape of sales tax will put the country’s export at stake. Today, in this period of worst economic crisis, can we afford to do away with zero rated status for the five export oriented industries? they questioned. They cautioned that if the Zero-Rating Scheme is discontinued, 30 percent of the export will decline in first year. They urged the Government to broaden the tax-base rather than burdening the existing tax-payers and documented sectors of the economy.

Pakistan rupee has been devalued approx. 20.16% against dollar from 123.6 to 149.07 in just 9 months. Such state of affairs when the dollar is appreciating and banks are also reluctant to fix dollar rates, the Textile Exporters will be aggrieved in case of BMR because some machineries are delivered in 6 to 8 months and cost of machinery is increased to 20% during the period.

Previously, on assurances of the Government to continue zero rating, exporters made huge investment in shape of BMR.

They articulated that the Government focused on enhancing exports and identified the Five Zero-Rated Export Sectors as the main engines of growth for this purpose whereby Power Division vide Notification SRO12(I)/2019 dated 1st January, 2019 has revised the power tariff for zero rated industrial consumers to net 7.5 cents / kwh and OGRA vide Notification dated 18th October 2018 has been fixed Gas tariff for Registered Manufacturers or Exporters of five Zero-Rated sectors and their Captive Power to Rs600/- per MMBTU but discontinuation of zero rating status from the five export sector will put all the hard efforts of the government in vain.

The Federation of Pakistan Chambers of Commerce & Industry, Karachi Chamber of Commerce & Industry, Lahore Chamber of Commerce & Industry, Faisalabad Chamber of Commerce & Industry & Sialkot Chamber of Commerce & Industry have also supported the stance and demand of Value Added Export Sector Associations to continue zero-rating scheme for the betterment of economy and export enhancement.

May 28, 2019
Ban foreign cigarettes without health warnings: OICCI

KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended to the government to impose a ban on the import of cigarettes lacking health warnings, as part of a strategy to deter the rampant smuggling of tobacco products.
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May 26, 2019
Reduction in corporate tax for E&P companies recommended to attract foreign investment

KARACHI: Federal Board of Revenue (FBR) has been recommended to reduce corporate tax rate for exploration and production companies in order attract foreign investment in this sector and generate more revenue for the country.

The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020 said that the applicable tax rate for the Oil and Gas Exploration and Production sector is 40 percent.

Before the promulgation of Income Tax Ordinance, 2001, the tax rate was 50 percent to 55 percent, however, the royalty payment to government was adjusted against the tax liability, resulting in effective tax rate of approximately 35 percent or less.

Applicability of effective 40 percent tax rate has in fact increased the tax expense of the Oil and Gas Exploration and Production Companies, as against the incentives given to other sectors of the economy, whereby the tax rate will be gradually reduced to 30 percent.

The OICCI recommended that in order to incentivize oil and gas exploration in the country especially after the massive reduction in the international oil prices, the corporate tax rate on E&P sector should be reduced from the current 40 percent to the rate applicable to other corporate sector by making necessary amendments in the Income Tax Ordinance 2001 and Regulation of Mines and Oilfield and Mineral Development (Government Control) Act, 1948.

Giving rationale, the OICCI said that foreign investment will be encouraged in the country, which will eventually increase the tax collection of the government and will also greatly help to overcome the energy crises in the country.

The OICCI highlighted another issue of limitation on payment to federal government and taxes, and said that the rate of tax applicable on E&P companies on their Oil & Gas profits are given in their respective PCAs signed with government.

Under Rule 4AA of Part I of the Fifth Schedule to the Income Tax Ordinance, Super tax has been imposed at 3 percent for E&P companies earning Rs 500million (equivalent to US$ 5million).

It recommended that it is critical for E&P sector and recommended that the tax applicable should be calculated strictly in accordance with the provisions of the respective PCAs signed between Government and each E&P company and are legally binding, without changes throughout the full Lease period.

The chamber said that this will remove the negative investment scenario, and potential for litigation – due to the varying interpretations by the FBR from time to time (despite the signed PCAs with Government)

The OICCI said that tax credits under section 65A and 65B are not currently being allowed to E&P companies by the tax authorities despite the fact that appellate Tribunal decided the matter in favour of E&P companies.

Therefore, it is suggested that necessary clarification needs to be provided by tax authorities to assessing authorities.

In view the current energy deficit in the country and recent decision of appellate Tribunal, these credits should be allowed to the E&P companies to promote further investments in this sector.

Regarding depletion allowance, the OICCI said that clarity over definition of well head value for computation of depletion allowance is required.

As per clause 3 of Fifth Schedule, depletion is calculated at 15 percent of the gross receipts representing well-head value of production, but not exceeding 50 percent of taxable income.

E&P industry interprets above by calculating depletion at 15 percent of gross revenue before royalty deduction.

Tax authorities calculate depletion at 15 percent of Gross Revenue after deduction of royalty.

Therefore, it is proposed that amendment be introduced in the relevant clause in favor of E&P companies i.e. depletion to be calculated at 15 percent of revenues before royalty deduction.

The matter is under litigation at High Court level for various E&P companies. Clarification in the definition of Well head value will ease unnecessary burden of these litigations for E&P Companies, the OICCI added.

May 26, 2019
Amnesty schemes culture should be eliminated: OICCI

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended the government to eliminate culture of amnesty schemes as such measures encourage tax evaders.
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May 23, 2019
FPCCI expresses concerns over policy rate hike

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has expressed concerns over recent significant rise in key policy rate by State Bank of Pakistan (SBP).
In a statement on Wednesday Engr. Daroo Khan Achakzai, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) showed his serious concern over the hiking of policy rate by another 150 basis points in view of prevailing inflation, devaluation of currency and twin deficit in Pakistan.
He added that SBP continues to operate a tight monetary policy despite the clear evidences that this policy strangulates investment and hampered the economic activities in Pakistan in Pakistan.
He underlined that the IMF bailout package will further create burden on poor segment of society in terms of rising utility prices which will ultimately increase inflation in the economy.
At present, every Pakistani possess a debt of one lac fifty nine thousands rupees.
The President FPCCI termed the contractionary monetary policy as an anti-investment policy which has declined the economic activities in the first ten month of the current fiscal year due to declining of large scale manufacturing and service sector.
He indicated that 12.25 percent policy rate is very high compared to regional economies like India 6.0 percent, China 4.35 percent, Sri Lanka 9.0 percent, Thailand 1.75 percent, Indonesia 6.5 percent, Malaysia 3.00 percent etc.
While commenting on the devaluation of currency, he stated that the rising of exchange rate will increases the prices of imports particularly petroleum products which comprises 30 to 35 percent import bill of Pakistan.
He suggested the government to intervene in the economy for currency stabilization and control of inflation. He said that the present inflation rate is 7.0 percent which is high compared to last year same period 3.8 percent; but this inflation is cost push inflation which can’t be controlled through demand management policies.
The major cause of rising inflation in the country is high cost of doing business particularly utility prices, increase in the prices of industrial inputs and shortage of essential items of daily necessity.
The Government should focus to increase the demand for credit by declining interest rates and make easy access to finance. Globally, the aim of monetary policy is to protect the value of the currency in co-ordination with the fiscal policy in order to achieve the objectives of macro-economic stability with constraining inflation and expansion of private sector investment, he added.
The President FPCCI further stated that the government should create its own fiscal space for financing its expenditures instead of borrowing from SBP and other institutions. During the first ten month of year, there was an expansion in private sector credit, but is largely attributed to working capital due to rising of input prices.
This private sector credit should be expanded to agriculture and industrial sector which are showing declining growth trend, he suggested.

May 22, 2019
FBR restructuring proposed to make autonomous body

KARACHI: The government has been proposed to make Federal Board of Revenue (FBR) as an autonomous body on similar line as State Bank of Pakistan.

The Overseas Chamber of Commerce and Industry (OICCI) in its budget proposals for 2019/2020 suggested restructuring of FBR as an independent governing body.

It suggested that FBR should be made an autonomous body on similar lines as State Bank of Pakistan, SECP, and Internal Revenue Services (IRS) of United States.

FBR should operate and work in a corporate governance structure with a Board of Directors, vested with powers like that of the Boards of Public listed companies.

The Chairman of FBR and fifty percent of the Board members may be nominated by the government (Ministries of Finance, Law, and Commerce) and, the remaining fifty percent Board members should be nominated by bodies like OICCI, PBC and ICAP.

A transparent accountability system in tax administration should be introduced, and reasonable independence and empowerment given to various operational positions.

The external audit of FBR should be done annually, by an independent international audit firm whose report should be presented and fully discussed in the Tax Policy Board meeting.

There should also an Internal Audit function within the FBR for an effective ongoing internal audit reporting directly to the independent members of the Board nominated by the Trade bodies.

Apart from revenue collection a key function of the FBR should be to address coordination issues between federal and provincial revenue authorities, with monthly meetings to ensure ease of doing business for taxpayers.

May 22, 2019
Tax amnesty scheme step in right direction: FPCCI

KARACHI: The members of Federation of Pakistan Chambers and Commerce of Industry (FPCCI) have unanimously declared the recently announced tax amnesty by the present government is step in right direction.

The FPCCI held an emergent meeting of its members at its head office Karachi on Saturday under the chairmanship of Abdul Rauf Mukhtar, Acting President of FPCCI and reviewed/discussed the new tax amnesty scheme namely “Asset Declaration Scheme 2019” as announced by the PTI government which has come in to effect through a Presidential Ordinance.

The meeting was attended by S.M. Muneer, leader of the Business Community and Former President of FPCCI; Dr. Mirza Ikhtiar Baig, Sr. Vice Presidents; Vice Presidents FPCCI Arshad Jamal, Muslim Muhammadi, Waqar Mehmood Khan and Noor Ahmed Khan, Zubair Tufail, Former President FPCCI, Former Sr. Vice Presidents FPCCI Khalid Tawab, Syed Mazhar Ali Nasir and Aamer Ata Bajwa, Former Vice Presidents Hanif Gohar, Shakil Dhingra, Akbar Abdullah and other representatives of trade and industry.

FPCCI acting president Abdul Rauf Mukhtar termed the scheme as a right step in the right direction with the objective to bring the tax evaders under the tax net, enhancing the country’s revenue base, documentation of economy, curtailing the size of ever increasing black economy and to bring dead assets in the mainstream of economy and make them functional.

He also urged the government to ensure complete secrecy and confidentiality of the declarants’ data to enhance the confidence of tax payers in the scheme- a pre-requisite for success for any scheme.

Highlighting salient features of the scheme, the FPCCI Acting President informed, “The rates of tax imposed on undisclosed assets, sales and expenditures would be 4 percent on all assets; rate of tax would be 1.5 percent on domestic immovable properties; rates of tax would be 6 percent on foreign liquid assets not repatriated; rate of tax would be 4 percent on unexplained expenditure and rate of tax would be 2 percent on undisclosed sales.”

The participants termed the 4 percent tax rate as attractive for legalisation of black money held in the form of expenditures, sales and assets including foreign assets; however, they said that duration of the scheme is relatively less as the scheme would offer a period of 45 days to people for declaration of their undeclared assets along with payment of taxes until June 30, 2019.

They added that the PTI government announced its first tax amnesty scheme for whitening of undisclosed expenditures, sales and assets including foreign assets at nominal tax rates and were of the unanimous opinion that the time period of the scheme should be extended beyond June 30, 2019 up to December 31, 2019.

They appreciated the FBR’s move to issue the scheme in Urdu language as well as in simplified declaration form.

They were of the opinion that legalization of undeclared assets at 4 percent is very attractive although the rates are comparatively higher as compared to last amnesty scheme.

They added for the first time lucrative rate of 1.5 percent has been offered for real estate sector.

They, referring to the size of the parallel economy were of the opinion that resolution of real state and bearer instruments issues were necessary to clip the wings of grey economy otherwise these would be surfacing periodically in future and the government would have to offer amnesty scheme again and again.

They also lauded government efforts to broadening the tax base and enhance tax to GDP ratio as it was one of the lowest in the world.

The participants were of the opinion that this time the scope of the scheme would be for those avenues which were not covered in earlier ones like sales tax and benami assets especially benami bank accounts.

The members urged the government to publicize the scheme rigorously because that one may who may not be aware the penalties associated with it for not availing the scheme, including confiscation and imprisonment, and that this is the very last chance to avail it.

They also proposed that the limit of Rs5 million for gold jewelry be withdrawn and the condition of depositing cash in hand in bank to avail the scheme be also removed.

May 18, 2019
FBR chairman agrees on abolishing withholding tax on raw materials

KARACHI: Shabbar Zaidi, Chairman, Federal Board of Revenue (FBR) on Saturday asked business community to provide list of raw material for reducing tax rates on import stage.

Addressing the business community at Karachi Chamber of Commerce and Industry (KCCI), Shabbar Zaidi agreed with the business community that there should not be withholding tax on import of raw material.

The KCCI members raised the issue that withholding tax rates ranging 3 percent to 6 percent were imposed on import of raw materials.

“Yes. There should not be withholding tax on raw material,” Zaidi said and asked the KCCI to provide list for taking action before the next budget.

Talking on Amnesty Scheme – 2019, the chairman said that the asset declaration scheme was clear and there was no ambiguity.

He said that the scheme would be part of the Finance Bill for formal approval from the parliament and it would be the same as promulgated through the presidential ordinance.

The chairman said that the rules were being formulated for intending declarants.

Shabbar Zaidi also talked about smuggling and misuse of tax concessions.

He said that tax relief may be given to small number of raw materials but it cannot be extended to all imported goods.

He said that Afghan Transit Trade was used for smuggling into Pakistan. “But there are other ways to import illegal goods into the country,” he added.

The chairman asked the business community that once they declare the smuggled goods were illegal for selling in the local market. “If the business community support and promise there will be no protest then the raids against illicit goods will be launched from tomorrow,” the chairman added.

May 18, 2019