Karachi, Pakistan – June 16, 2024 – Leading tax experts at KPMG Taseer Hadi & Co. have raised concerns about the impact of tax changes for exporters proposed in the Finance Bill 2024 on Pakistan’s foreign exchange reserves.
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Pakistan’s IT Exports Surge 62% YoY in April 2024
Pakistan’s information technology (IT) sector marked a milestone in April 2024, with exports surging 62% year-on-year (YoY) to an impressive $310 million.
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Bangladesh Export Hits $47.47 Billion in Ten Months of FY24
Dhaka, May 5, 2024 –Bangladesh has reported a growth in its export revenues, achieving a substantial $47.47 billion in the first ten months of the fiscal year 2024.
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SBP imposes mark lien on delayed export inflows
The State Bank of Pakistan (SBP) has imposed a mark on lien for exporters who fail to realize export money within the prescribed time frame.
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Pakistan exports plunge 18.34pc in November 2021
ISLAMABAD: Pakistan exports have registered 18.34 per cent decline Year on Year (YoY) in November 2022 owing to import restrictions and slowdown in global demand.
Data released by Pakistan Bureau of Statistics (PBS) on Thursday revealed that exports fell to $2.37 billion in November 2022 when compared with $2.9 billion in the corresponding month last year.
READ MORE: Pakistan’s import restrictions help narrowing trade deficit by 27%
Imports of the country recorded 33.60 per cent decline to $5.245 billion in November 2022 when compared with $7.9 billion in the same month of the last year.
This resulted contraction in trade deficit of 42.46 per cent to the deficit of $2.876 billion in November 2022 as against $5 billion in the same month of the last year.
READ MORE: Pakistan import bill falls by 12.72% in 1QFY23
The decline in exports can be attributed to the restrictions imposed on imports which hampered industrial and export activities. Furthermore, global slowdown also added to export fall.
Meanwhile, exports recorded a nominal decline of 0.63 per cent to $2.37 billion in November 2022 when compared with previous month of September 2022 at $2.38 billion.
However, imports recorded an increase of 11.34 per cent to $5.24 billion on Month on Month (MoM) in November 2022 when compared with $4.71 billion in the previous month.
READ MORE: Pakistan trade deficit narrows by 17% in 2MFY23
This brings the widening of trade deficit by 23.59 per cent to $2.876 billion in November 2022 when compared with the deficit of $2.33 billion in September 2022.
Overall trade deficit during first five months (July – November) 2022/2023 contracted by 30.14 per cent to $14.41 billion when compared with the deficit of $20.62 billion in the corresponding months of the last fiscal year.
READ MORE: Pakistan’s trade deficit narrows by 18% in July 2022
Exports of the country recorded 3.48 per cent decline to $11.93 billion during first five months of the current fiscal year as against $12.36 billion in the same months of the last year.
Whereas, import bill fell by 20.15 per cent to $26.34 billion during the period of July – October of fiscal year 2022-2023 as against $32.98 billion in the same period of the last fiscal year.
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Pakistan approves LNG at $9 per MMBTU for export sector
ISLAMABAD: Pakistan on Monday approved a rate of $9 per MMBTU for supply of LNG to export sector across the country.
The country’s apex economic coordination body approved the rates to provide competitive environment to the export sector at par with regional economies.
READ MORE: NEPRA to conduct public hearing on KE’s petition on July 28
Federal Minister for Finance and Revenue Miftah Ismail presided over the meeting of the Economic Coordination Committee (ECC) of the Cabinet at Finance Division, on Monday.
Federal Minister for Defence Khawaja Muhammad Asif, Federal Minister for Commerce Syed Naveed Qamar, Federal Minister for Industries and Production Makhdoom Syed Murtaza Mehmood, Federal Minister for Power Khurram Dastgir Khan, Shahid Khaqan Abbasi – MNA, Minister of State for Finance and Revenue Dr. Aisha Ghous Pasha, Minister of State for Petroleum Mr. Musadik Masood Malik, Rana Ihsan Afzal, Coordinator to PM on Commerce & Industry, Federal Secretaries and senior officers attended the meeting.
READ MORE: Revised power tariff, taxes on electricity bills in Pakistan
Ministry of Commerce presented a summary on regional competitive energy rates for export oriented sectors during financial year 2022-23.
It was submitted that in pursuance of the decisions of ECC dated August 16, 2021 and the Federal Cabinet dated August 24, 2021, the government provided energy to the export oriented sectors namely Textile including Jute, Leather, Carpet, Surgical and Sports goods at regional competitive rates to reduce cost of manufacturing and enhance exports.
The ECC after detailed discussion approved RLNG rate at US $9 per MMBTU, all inclusive to five export oriented sectors across Pakistan for existing gas connections.
READ MORE: K-Electric, Siemens sign deal for KKI Grid construction
A subsidy cover of Rs. 40 billion for RLNG has been allocated under Federal budget 2022-23 which will be reviewed on quarterly basis.
Further, ECC recommended to the Federal Cabinet to raise the tariff of indigenous gas for export oriented sectors at Rs. 1350 per MMBTU and for general industry at Rs. 1550 per MMBTU.
The ECC also approved the electricity rate at US cents 9 per kWh to five export oriented sectors from 1st August 2022 subject to (i) subsidy of Rs. 20 billion provided by Finance Division (ii) quarterly review of the subsidy (iii) Petroleum Division will provide a list of industrial units getting subsidized gas and electricity, within one month to the ECC for review.
READ MORE: Rupee devaluation severely affects KE’s profitability
The committee approved supplementary grant of Rs750 million for Ministry of Information and Broadcasting for 75 years’ Independence Day celebrations.
The ECC also approved proposal of Ministry of Interior for payment of compensation/goodwill package from its own budget.
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SBP raises mark-up rate for export financing scheme
KARACHI: The State Bank of Pakistan (SBP) on Thursday increased mark-up rate for refinancing under Export Financing Scheme (EFS).
The SBP increased the rate of mark-up for export financing scheme following sharp jump in key policy rate by 250 basis points to 12.25 per cent.
READ MORE: SBP issues list to impose 100% cash margin on import
“It has been decided to increase the markup rate for financing under Export Finance Scheme (EFS) by 2.5 per cent in line with the increase in policy rate announced in the MPC meeting today (April 07, 2022),” the SBP said.
Accordingly, the markup for Export Finance Scheme (both Part I and Part II) will be 5.5 per cent per annum with effect from April 08, 2022 till further instructions.
Banks’ spread for corporate borrowers and SME borrowers will remain unchanged i.e. 1 per cent & 2 per cent, respectively.
READ MORE: SBP allows commission payment to foreign brokers
This revision in rates will not be applicable on financing under Rupee-based discounting facility of EFS, the SBP added.
Earlier in the day, the Monetary Policy Committee (MPC) of the SBP in its emergent meeting decided to raise the key policy rate to 12.25 per cent from 9.75 per cent.
The MPC noted that the latest developments necessitated a strong and proactive policy response. “Accordingly, the MPC decided at its emergency meeting today, to raise the policy rate by 250 basis points to 12.25 percent.”
READ MORE: SBP increases policy rate sharply by 250bps to 12.25%
This increases forward-looking real interest rates (defined as the policy rate less expected inflation) to mildly positive territory.
The MPC was of the view that this action would help to safeguard external and price stability.
The MPC also noted that SBP is in the process of taking further actions to reduce pressures on inflation and the current account, namely an increase in the interest rate on the export refinance scheme (EFS) and widening the set of import items subject to cash margin requirements.
These items are mostly finished goods including luxury items and exclude raw materials.
READ MORE: SBP receives 20 applications for digital bank licenses
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Final tax regime allowed for export of services
KARACHI: The Finance Bill 2021 has proposed a final tax regime for export of IT and IT enabled services.
According to commentary on budget 2021/2022 released by KPMG Taseer Hadi & Co. currently, tax deduction on foreign proceeds from export of goods are taxed at 1 percent which is considered as final tax.
The Finance Bill proposes similar taxation regime for following specified services:
—Export of IT and IT enabled services where tax credit under section 65F is not available;
—Services or technical services rendered outside Pakistan or exported from Pakistan;
—royalty, commission or fees derived by a resident company from a foreign enterprise in consideration for the use outside Pakistan of any patent, invention, model, design, secret process or formula or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided to such enterprise;
—construction contracts executed outside Pakistan; and
—other services rendered outside Pakistan as notified by the Board from time to time.
The tax deductible will be final tax subject to following conditions:
(i) Income tax return has been filed;
(ii) withholding tax statements for the relevant tax year have been filed;
(iii) sales tax returns under Federal or Provincial laws have been filed, if required under the law; and
(iv) no credit for foreign taxes paid shall be allowed.
The Bill also proposes an option for taxation under Normal Tax Regime which is to be exercised every year at the time of filing of income tax return.
The Bill proposes while explaining the nature and source of any amount, investment, money, valuable article, expenditure, referred to in section 111, a taxpayer takes into account any source of income under this section, he shall not be entitled to take credit of a sum that can be reasonably attributed to the business activity under this section.
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Import bill falls by over 10 percent in October; export witnesses 2.1 percent growth
ISLAMABAD: The country’s import bill has witnessed decline by 10.3 percent to $4.07 billion in October 2020 as compared with $3.65 billion in the same month of the last year.
Meanwhile, the exports have witnessed an increase of 2.1 percent to $2.06 billion in October 2020 as compared with $2.02 billion in October 2019.
To review the current export trends, a meeting was held on Tuesday, in the Ministry of Commerce, under the Chairmanship of the Advisor to the Prime Minister on Commerce and Investment, Abdul Razak Dawood.
The trade deficit shrank by 22.6 percent in October 2020 to $1.587 billion, showing an improvement of $463 million over October 2019.
The advisor was also briefed that during July-October 2020 the exports decreased only marginally by 0.1 percent. The exports during this period stood at $7.54 billion as compared to $7.547 billion during the same period last year.
He was informed that, during July-October 2020, the balance of trade has witnessed a decline of 4.5 percent to $7.424 billion as compared to $7.776 billion last year.
The Advisor expressed his satisfaction at the export trends and praised Pakistan’s exporters who made it possible for bringing the exports to pre-COVID-19 levels despite uncertainty and contraction in Pakistan’s major markets.
He was also briefed on the major export product trends and was informed that during July-October 2020, the export increases were mostly in the value added sectors.
The increases were witnessed in Home Textiles (10.0 percent), Women’s Garments (20.8 percent), Jerseys & pullovers (35.3 percent), Made-up articles of textile (10.4 percent), Stockings & socks (19.2 percent), Cement (10.8 percent), Pharmaceutical products (26.8 percent), Tarpaulins (66.8 percent), and Made-up clothing accessories (245.2 percent) as compared to the same period last year.
He was informed that, as compared to the same period last year, the export decreases during July-October 2020 were seen in mostly the non-value added sectors such as Cotton Fabric (-8.0 percent), Cotton yarn (-40.1 percent), Worn clothing (-63.6 percent), Raw Leather (-38.4 percent), Crude Petroleum (-53.7 percent), and Cotton (-95.7 percent). The Advisor was also briefed on the geographical spread and growth of exports.
He was informed that, as compared to the same period last year, Pakistan’s top five growing markets during July-October 2020 are Indonesia (39.3 percent), Qatar (34.5 percent), Denmark (24.9 percent), S. Korea (22.5 percent) and Afghanistan (15.6 percent).
The Advisor expressed his hope that Pakistan economy will continue on its upward recovery trend and he directed that the officials of Ministry continue to proactively facilitate exporters and businessmen.
He further directed that no efforts should be spared to counter the effect of the second wave of COVID-19 in Pakistan’s major markets.
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Cabinet allows export of all PPE items
ISLAMABAD: The federal cabinet in its meeting held on Tuesday allowed export of all Personal Protective Equipment (PPE) items. The cabinet approved to lift the ban on export of Tyvek Suits and the anti-malarial drugs, including Chloroquine and Hydroxychloroquine.
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