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  • Higher inflation jacks FBR’s revenue collection up: SBP

    Higher inflation jacks FBR’s revenue collection up: SBP

    KARACHI: Higher inflation has jacked up the revenue collection for Federal Board of Revenue (FBR) besides other factors including increase in tax rates and reinstatement of tax on telecom services, State Bank of Pakistan (SBP) said on Monday.

    The SBP in its quarterly report on state of economy for July – September 2019/2020 said that the overall FBR taxes grew 15.2 percent in first quarter of 2019/2020, compared to the 8.8 percent rise noted in the same quarter of the last fiscal year.

    This higher growth can be attributed to: (i) an increase in sales tax rates; (ii) reinstatement of taxes on telecom services; (iii) an upward revision of tax rates on various salary slabs; (iv) increase in interest rates and higher tax on profit on debt;3 (v) upward revision in the federal excise duty (FED) rates; and (vi) the abolishment of the zero rating regime on five export-oriented sectors.

    “In addition to these measures, the impact of higher inflation also boosted revenue mobilization.”

    For 2019/2020, the SBP’s projections at the start of the year (July 2019) clocked in at an elevated range of 11-12 percent. Not only was this range higher than previously projected, but it was also in excess of the medium-term target of 5-7 percent.

    Despite this improvement, the FBR managed to achieve only 17.3 percent of the annual target of Rs 5,555.0 billion for 2019/2020. “This means that tax revenues would require a substantially higher growth in the remaining 9 months of the year to achieve the full year target.”

    Moreover, import-related taxes, representing nearly half of FBR taxes, would remain under stress due to the ongoing declining trend in imports. Dutiable imports, in particular, declined sharply in the first quarter of 2019/2020.

    Encouragingly, the fiscal authorities have introduced some initiatives to facilitate business and individual tax payers and to broaden the tax base.

    For instance, in order to provide hassle-free refunds to exporters, the FBR has introduced the Fully Automated Sales Tax e-Refund (FASTER) system for tackling refund claims within 72 hours.

    The FBR has also launched a mobile application, “FBR Tax Asaan,” to facilitate taxpayers in paying sales tax and claiming refunds.

    In addition, video tutorials are prepared and uploaded online to guide taxpayers in filing their income tax returns.

    These efforts to simplify and streamline the taxation mechanism have also contributed to the improvement in Pakistan’s ranking in the World Bank’s Ease of Doing Business: the digitization of tax collecting procedures was cited as one of the drivers of the improvement in the country’s ranking. In addition, the government has continued its drive to increase documentation in the economy.

    However, businesses are resisting some of these documentation measures, such as the CNIC condition on business-to-business (B2B) and business-to-consumer (B2C) transactions.

  • Birds hit two PIA aircraft

    Birds hit two PIA aircraft

    KARACHI: At least two aircraft of Pakistan International Airlines (PIA) were damaged in bird-strike incidents which were took place at Karachi Airport, a spokesman said on Monday.

    “Today two aircraft were hit by birds once again. Both incidents took place at the Karachi airport,” PIA spokesman Abdullah Khan said.

    The spokesman said that flight number PK301 was damaged on the nose and other flight number PK311 on its wing flap by the bird strike.

    “These strikes not only pose life threatening danger for passengers but also cause financial losses,” the spokesman added.

    The national flag carrier appealed several times for appropriate actions to be taken to remove presence of birds around the airport.

    The spokesperson said that the PIA had contacted Civil Aviation Authority (CAA) in this regard, along with running a special social media campaign to raise awareness on the issue.

    “Unfortunately, no substantial action has so far been taken,” the spokesperson said and urged everyone to join the airline in addressing the issue as it concerns everyone.

  • Import bill plunges by 17.06% in first half

    Import bill plunges by 17.06% in first half

    KARACHI: Pakistan’s import bill fell by 17.06 percent during first six months (July – December) 2019/2010 owing to deceleration in international commodity prices and lower domestic demand.

    According to data released by the ministry of commerce, the import bill reduced to $23.18 billion during first half of current fiscal year as compared with $27.94 billion in the corresponding half of the last fiscal year.

    The exports exhibited 3.21 percent growth during the period under review owing to better earning of local manufacturers in the international markets.

    The total exports were at $11.54 billion during July – December 2019/2020 as compared with $11.18 billion in the corresponding period of the last fiscal year.

    The lower import bill brought down the trade deficit by 30.58 percent for the period under review.

    The trade deficit declined to $11.64 billion during July-December 2019/2020 as compared with the deficit of $16.77 billion in the corresponding period of the last fiscal year.

    According to trade data for the period July – December 2019/2020 revealed that the import of motor cars in completely build unit (CBU) fell by 80 percent to $31 million as compared with $156 million.

    While import of CKD (Completely Knocked Down) motor cars fell by 46 percent to $229 million in first six months of current fiscal year as compared with $426 million in the same period of the last fiscal year.

    The import of petroleum crude declined by 30 percent to $1.7 billion during first six months of current fiscal year as compared with $2.42 billion in the corresponding months of the last fiscal year.

    While import of petroleum products fell by 24 percent to $2.59 billion during July – December 2019/2020 when compared with $3.41 billion in the same period of the last fiscal year.

    According to top performing export items, basmati rice posted 56 percent increased to $380.2 million during first six months of current fiscal year when compared with $244 million in the corresponding period of the last fiscal year.

    Export of meat posted 52 percent growth to $155.9 million during July – December 2019/2020 when compared with $103 million in the corresponding period of the last fiscal year.

    The exports of readymade garments registered increase of 12 percent to $1.41 billion during first half of current fiscal year as compared with $1.26 billion in the same half of the last fiscal year.

  • KTBA seeks FBR clarification on tax ordinance

    KTBA seeks FBR clarification on tax ordinance

    KARACHI: Karachi Tax Bar Association (KTBA) on Monday urged Federal Board of Revenue (FBR) to issue necessary clarification related to issues in recently promulgated tax ordinance.

    The KTBA sent a letter to Syed Shabbar Zaidi, Chairman, FBR and pointed out anomalies in the Tax Laws (Second Amendment) Ordinance, 2019 for clarification.

    The KTBA highlighted that Sub-section 4 has been added to section 73 of Sales Tax Act, 1990, under which sales to an unregistered person by a registered manufacture cannot be made for more than Rs10 million in a month and Rs100 million in a year, failing which input tax will be disallowed proportionately.

    Considering the implication of the phrase of unregistered person [i.e. singular term] used in drafting of the law, instead of the phrase unregistered persons [plural term], it implies that the restriction is applicable on sales to a single unregistered person instead of cumulative sales to all unregistered person(s).

    In order to ensure that intent of law is not suffered by any legal infirmity due to any unintended or inadvertent drafting, the clarification must be issued in this respect on urgent note, it added.

    It further pointed out that in addition to the above, it should also be clarified as to whether the all unregistered person will be effected or only those unregistered person who actually were required to be registered in Sale Tax but didn’t ?

    In the event, the law is intended to cover all unregistered persons, without any discrimination, certain serious ramification would follow because of the fact that Manufacturers won’t be able to make sale to various Government/other authorities, armed forces hospitals, Universities, Charities & EPZ entities, which by law, are not required to be registered at all, in the first place.

    The KTBA said that it is important to define the category of unregistered person who should not suffer due to any adverse implication of the law. Hence, a clarification is necessitated in this context.

    The tax bar further highlighted the amendments introduced related to business license.
    Through the Tax Laws (Second Amendment) Ordinance, 2019, various penalties have been prescribed for person who has not obtained business license, while the procedure to obtain business license has not been prescribed as yet.

    It is not possible to get a Business License either for any person or for any tax commissioner to issue one.

    An unnumbered and undated draft SRO was issued by the FBR in July 2019, whereby Draft rules 83A to 83E were proposed in the Income Tax Rules, 2002 for the purpose, which were not finalized yet.

  • Equity market ends down by 2.4% on political situation

    Equity market ends down by 2.4% on political situation

    KARACHI: The equity market fell by 1,027 points or 2.4 percent on Monday due to geo-political and regional security concerns.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 41,296 points as against 42,323 points showing a decline of 1027 points.

    Analysts at Arif Habib Limited said geo-political and regional security concerns took toll on market sentiment and investors resorted to selling.

    Although crude price jumped significantly, with Arab Light trading near $73/bbl, Oil & Gas chain didn’t take any positive impact.

    Power sector led the volumes with 52.6 million shares, followed by Banks (291 million) and Cement (22.8 million). Among scrips, KEL topped the chart with 46 million shares, followed by UNITY (17.6 million) and BOP (16.9 million).

    Sectors contributing to the performance include Banks (-186 points), Fertilizer (-155 points), Cement (-111 points), E&P (-92 points) and Power (-85 points).

    Volumes declined further from 322.9 million shares to 266.6 million shares (-17 percent DoD). Average traded value also declined by 29 percent to reach US$ 67.5 million as against US$ 94.8 million.

    Stocks that contributed significantly to the volumes include KEL, UNITY, BOP, TRG and FFL, which formed 38 percent of total volumes.

    Stocks that contributed positively include JLICL (+4 points), DCR (+1 points), SCBPL (+0 points), COLG (+0 points). Stocks that contributed negatively include ENGRO (-97 points), HUBC (-65 points), LUCK (-53 points), PPL (-48 points), and FFC (-36 points).

  • Rupee falls by five paisas on import demand

    Rupee falls by five paisas on import demand

    KARACHI: The Pak Rupee ended down by five paisas against dollar on Monday owing to higher demand for import and corporate payments, dealers said.

    The rupee ended Rs154.95 to the dollar from last Friday’s closing of Rs154.90 in interbank foreign exchange market.

    Currency dealers said that the market witnessed higher demand for dollar owing to first trading day of the week.

    The dealers however said that the exchange rate might witness an adverse effect due to rising tension in Middle East after killing of Iranian leader in the US attack.

    The foreign currency market was initiated in the range of Rs154.93 and Rs154.98. The market recorded day high of Rs154.98 and low of Rs154.93 and closed at Rs154.95.

    The exchange rate in open market witnessed depreciation in rupee value. The buying and selling of dollar was recorded at Rs155.00/Rs155.30 as compared with last Friday’s closing of Rs154.80/Rs155.10 in cash ready market.

  • Achieving 4% GDP growth target unlikely: SBP

    Achieving 4% GDP growth target unlikely: SBP

    The State Bank of Pakistan (SBP) issued a cautionary statement on Monday, stating that achieving the targeted 4 percent GDP growth for the current fiscal year is unlikely.

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  • Procedure for conducting audit of transfer pricing cases unveiled

    Procedure for conducting audit of transfer pricing cases unveiled

    KARACHI: The Director General of International Tax Operations has been empowered to select and conduct transfer pricing audit of cases under section 230E of Income Tax Ordinance 2001.

    Federal Board of Revenue (FBR) in explanation to Tax Laws (Second Amendment) Ordinance, 2019 said that previously, there was no provision which specified the procedure to be adopted for conducting transfer pricing audit of taxpayers.

    It has now been specified that transfer pricing audit of cases selected by the Director General of International Tax Operations shall be conducted as per procedure laid down in 177 of the Ordinance.

    Moreover, the right to conduct transfer pricing audit under section 230E of the Ordinance shall not prejudice the right of the Commissioner to determine transfer price at arms length in transactions between associates while conducting audit under section 177 or 214C of the Ordinance or whilst making amendment under section 122 of the Ordinance.

    Tax experts at PwC A F Ferguson Chartered Accountants said that Section 230E was introduced in the Income Tax Ordinance, 2001 through the Finance Act, 2017 for establishing a separate Directorate for conducting transfer pricing audit of taxpayers.

    Through the Finance Supplementary (Second Amendment) Act, 2019, Section 230E was substituted so as to establish Directorate General of International Tax.

    However, no specific procedure or mechanism for transfer pricing audit was prescribed in the said section which was causing ambiguity amongst the field officers and taxpayers.

    Through the Second Amendment Ordinance, necessary amendment has been made in Section 230E to prescribe that transfer pricing audit is to be conducted as per the procedure laid down in section 177 and other provisions of the Ordinance.

    This way, the ambiguity relating to the transfer pricing audit procedure has now been removed, the experts said.

  • Rupee falls nine paisas in early day trading

    Rupee falls nine paisas in early day trading

    The Pakistani rupee weakened by nine paisas against the US dollar in early trading on Monday, driven by increased demand for import and corporate payments. The greenback was being traded at Rs154.99 during morning hours in the interbank foreign exchange market, compared to the previous closing rate of Rs154.90.

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