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  • Foreign investors express satisfaction on security environment

    Foreign investors express satisfaction on security environment

    KARACHI: The foreign investors operating in Pakistan have showed satisfaction over security environment especially after quick response of law enforcement agency against failed terror attack on Pakistan Stock Exchange (PSX).

    “The smooth and professional handling of the brazen attack on Pakistan Stock Exchange on June 29, and restoring order within a very short time, is a testimony of the OICCI members’ confidence in the ability of the LEAs to professionally combat any threat to life and property in the country, said Haroon Rashid, President Overseas Investors Chamber of Commerce and Industry (OICCI) while commenting on latest findings of security survey,

    OICCI is the largest chamber in terms of economic contribution and representing top 200 foreign investors in Pakistan, has released the results of its latest Annual Security survey 2020, covering feedback on the security environment from July 2019 to June 2020.

    Overall, the foreign investors have shown high level of satisfaction on the fast improving security environment and have also appreciated the performance of law enforcement agencies (LEAs) in the main business centers of Pakistan, Karachi and Lahore, raising the security satisfaction profile of the two cities and bringing them at par with other megacities in the region.

    The OICCI President said: “Foreign investors are not deterred by isolated incidences and continue to take a holistic view of the operating environment, which, OICCI members perceive to be highly positive showing continuous improvement.”

    The survey respondents included CEOs and senior management of member organizations, and was participated by 70 per cent of the OICCI’s 200 members, who belong to 35 countries and operate in 14 key sectors of the economy in Pakistan.

    It may be noted that over two third of the OICCI members have their head offices in Karachi with operations all over country. The survey was conducted from May 15th till June 22nd.

    OICCI 2020 Security Survey indicates that the foreign investors, overall, are impressed with further improvement in the security environment over the past twelve months, since July 2019, especially in Karachi and Lahore, with noticeable improvement in other business centers as well.

    While giving assessment of the overall security situation, 60 percent of the respondents have reported improved security environment for own and Customer’s Business, as well as for their respective suppliers and employees.

    Irfan Siddiqui, OICCI Vice President pointed out: “this improvement is over and above the already improved security environment last year, and the continuous improvement recorded in the OICCI members annual security surveys since 2015.”

    He further added that It is highly encouraging that despite many disruptions during the past twelve months, due to Azadi March in December 2019, border tension with India during Q3 2019, and subsequent travel restriction since end March 2020 due to COVID 19, the visit of foreign nationals visiting Pakistan for OICCI members business, pre COVID 19, showed a healthy increase, as over 40 percent respondents reported more visitors than last year, with 26 percent hosting more than 50 visitors and most respondents getting between 20 and 50 visitors.

    The foreign business visitors were mainly from China, UK, USA, UAE, as well as other European and Asian countries.

    Due to the sustained improvement of the security environment, OICCI members reported that over 90 percent of the Board and management meetings of their Pakistan business operations, involving HQ and/or Regional Management, were held within the country.

    In terms of serious crimes, 87 percent respondents indicated a decrease over last year in Karachi and Lahore. However, the survey respondents have expressed concern on the increasing trend of street crimes.

    All in all, 37 percent respondents in Karachi and 27 percent in Lahore reported concern on increasing street crimes.

    According to the results Islamabad experienced the lowest increase in street crimes among the key business centers.

    There was also a thumbs up for the LEAs as, by and large, the foreign investors were satisfied with the performance of Law Enforcement Agencies, with over 90 percent expressing satisfaction in their interactions with Karachi and Lahore Police, Sindh Rangers, Punjab Police and CPLC and 84% for Sindh Police.

    OICCI Security survey is very comprehensive and gives a detailed feedback of a large number of foreign investors operating in Pakistan on various aspect of doing business connected with security and its impact on their operation which is regularly sought by diplomats and security professionals.

    Established in 1860, Overseas Investors Chamber of Commerce and Industry (OICCI), is the largest Chamber of Commerce in Pakistan based on economic contribution in the form of taxes and investment by its members and is the collective voice of over top 200 foreign investors in Pakistan, including over 50 Fortune 500 companies, who contribute about one third of the total tax collection in the country and a significant portion of the GDP.

    Coming from 35 countries and working in 14 key sectors of the economy, OICCI members are leaders not only in economic activities and investment but are also thought leaders in transfer of technology and in CSR activities.

  • Haroon Rashid elected as President OICCI

    Haroon Rashid elected as President OICCI

    KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has elected Haroon Rashid as president of the chamber with effect from July 01, 2020.

    Haroon Rashid is Chief Executive Officer of Shell Pakistan Limited.

    His appointment came following a successful tenure of Shazad Dada, who resigned as the President of OICCI after resigning from Standard Chartered Bank and taking over as President of United Bank Limited.

    Irfan Siddiqui has been elected as the Vice President of the OICCI from July 1, 2020. Irfan is the founding President/CEO of Meezan Bank Limited.

    He initiated the formation of Al-Meezan Investment Bank in 1997, which was converted into a full-fledged scheduled Islamic Commercial Bank in May 2002 – the first ever Islamic Commercial banking license given in Pakistan.

    Commenting on his appointment as the President of OICCI, Haroon Rashid was very upbeat and said, “It is really an honor to have been elected as the President of a prestigious organization like the OICCI, which is the largest chamber in the country in terms of economic contribution, contributing over one third of all government levies and is also the largest foreign investor in the country”.

  • Exemption from withholding tax on foreign remittances may not practical for banks

    Exemption from withholding tax on foreign remittances may not practical for banks

    The Pakistani government has announced a significant tax relief measure, granting withholding tax exemption on the transfer of foreign remittances to Pak Rupee (PKR) accounts. However, tax experts have raised concerns about the practical implementation of this exemption, particularly regarding the bifurcation of transactions for banks.

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  • Restoration of multiple years audit to burden taxpayers

    Restoration of multiple years audit to burden taxpayers

    KARACHI: Business community has criticized the government for eliminating condition of conducting audit once in three-year period.

    Overseas Investors Chamber of Commerce and Industry (OICCI) highlighted anomalies in the Finance Bill 2020, sent to the Federal Board of Revenue (FBR) and said that omission of the condition would burden the taxpayers and would give sweeping powers to tax officials.

    The Finance Act 2018 restricted the frequency of conducting audits to once in a three-year period.

    This amendment of 2018 demonstrated the confidence of the Government on the records maintained by registered persons.

    The Bill now seeks to omit the condition of conducting the audit once in a three-year period. If passed, this will unnecessarily burden taxpayers, while handing over sweeping powers to the assessing officers of Inland Revenue to conduct audits covering one or multiple tax years with no reprieve for the taxpayer available under the law, in absence of any prescribed limitation.

    The consequence of this change will likely erode the taxpayer’s confidence in the revenue machinery and the probable unnecessary wastage of time and effort by the revenue authorities.

    The OICCI said that during the FBR/OICCI Web link meeting on May 5th the FBR Member (IR-Operations) informed that new Audit Policy will be announced soon, where there will be only one audit in three years u/s 122, which was welcomed by OICCI members.

    Therefore the removal of condition of one audit in three years in the Finance Bill 2020, is a shock for OICCI members.

    “Hence, we strongly advocate maximum of one for audit within three years, for promoting Ease of Doing Business,” the OICCI said.

  • Foreign investors express concerns on proposed rates for imported raw materials

    Foreign investors express concerns on proposed rates for imported raw materials

    KARACHI: Foreign investors have raised concerns over the proposed tax rates on import of raw materials.

    Overseas Chamber of Commerce and Industry (OICCI), which is represented of foreign investors and multinational companies in Pakistan, highlighted anomalies in the Finance Bill 2020 and proposed rectifications.

    The OICCI said that the reduction in rate of income tax u/s 148 to 2 percent on import of raw materials/items mentioned in Part II of the Twelfth Schedule is a significant relief that will improve the cash flow position of companies.

    However, two concerns have been voiced on the changes proposed:

    a) The Bill seeks to introduce a new Schedule as the Twelfth Schedule to the Ordinance wherein all the goods imported into Pakistan may be classified under either of the three categories viz Part I, Part II and Part III based on PCT code wise listing of goods.

    However, certain core raw materials used by manufacturers are still falling under the category of 5.5 percent income tax by virtue of non-inclusion in Part II of Twelfth Schedule.

    It is suggested that a general rate of 2 percent may be prescribed for all imports by manufacturing companies for own consumption.

    b) The Bill now seeks to omit Clause 72B, therefore, exemption would no longer be available in respect of tax collected under Section 148 of the Ordinance to an industrial undertaking.

    Though there is substantial reduction in rate of collection of tax, as a result of withdrawal of such exemption, nevertheless, the taxpayer operating on margins lower than the rate of advance tax collected on imports or having adjustable losses/tax credits or enjoying tax exemption may still face liquidity hitches.

    In order to avoid cash flow issues and tax refundable situation, it is suggested that instead of omitting clause 72 B, industrial undertakings importing raw materials for in house consumption should be provided an option.

  • OICCI suggests eliminating Sindh infrastructure cess

    OICCI suggests eliminating Sindh infrastructure cess

    The Overseas Investors Chamber of Commerce and Industry (OICCI) has made a fervent appeal to the Sindh government, imploring for the withdrawal of the Infrastructure Cess to alleviate the burden on the cost of doing business.

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  • SRB urged to allow normal tax for car dealers

    SRB urged to allow normal tax for car dealers

    KARACHI: Sindh Revenue Board (SRB) has been urged to bring authorized dealers of car manufacturers into normal tax regime.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 submitted to SRB, recommended that normal sales tax rate should be applied for services provided by authorized car dealers under tariff heading 9806.4000.

    It said that sales tax on services by authorized car dealers under tariff heading 9806.4000, is at reduced rates and input sales tax is barred, while no such position is available under any of the other provincial sales tax laws.

    Further, no option is available to the service provider to pay sales tax at the normal rate at the rate of 13 percent, instead of reduced rate, as provided for other services under notification No.SRB 3-4/5/2015 dated Jul 01, 2015, e.g. Construction services, Transportation services, Concrete services etc.

    The OICCI recommended that normal sales tax rate should be applied for services provided by authorized car dealers under tariff heading 9806.4000.

    Alternatively, option should be provided to “authorized car dealers of vehicle manufacturers” to pay sales tax at normal rate under tariff heading 9806.4000, as provided to other services.

    Application of standard rate will eliminate the discrimination arising on services provided by dealers in Sindh against other provinces and cost of doing business will reduce for service providers and recipients, it added.

  • Insurance should be excluded from taxable services

    Insurance should be excluded from taxable services

    KARACHI: The provincial tax authorities have been urged to exclude insurance from taxable services in order to provide incentives to insurance industry.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 submitted to Sindh Revenue Board (SRB), said that each year, the life/health insurance companies have been approaching the SRB for an exemption, which is granted annually.

    The last exemption for life insurance was valid only till June 30, 2019, whereas exemption for Corporate Health Insurance is valid till June 30, 2020 and has not yet been renewed.

    The life and health insurance industry is based largely in the province of Sindh, where, the medical sector itself is exempt from SST.

    Accordingly, subjecting the corporate health insurance to SST is making it uncompetitive, in Sindh, by adding on to the cost of health insurance.

    Discussions are still ongoing with the Chairman SRB, and the Chairperson, Sindh Board of Investment, for exemption on the same.

    The OICCI recommended that both, life insurance and health insurance, which do not fall within the scope of definition of service, should be permanently included in the list of exempted services by incorporating the same under table of exempted services specified in SRB’s notification no. SRB 3-4/7/2013 dated June 18, 2013, as per the following:

    01. 9813.15: Life Insurance

    02. 9813.16: Health insurance, rendered to both, individuals and corporates.

    It may be mentioned that in Sindh these are taxable services.

    A life insurance/ health policy is not a service. It is an underwriter’s promise to pay to the policy holder ‘in the future’, a specified sum of money, ‘either on occurrence of an identified event or on maturity of the policy’.

    Such tax is highly discriminatory as entire health sector itself remains exempt and is not taxed.

    This creates a deterrence for insurance business, as a person obtaining insurance would be paying additional 13 percent as well as cost of insurance, compared to directly obtaining health services, where he does not have to pay this tax.

    This is clearly discriminatory and in violation of Article 25 of the Constitution of Pakistan.

    The assertion that insurance is not a service, has also been legally upheld in USA and the Court there has ruled that life insurance policies are not “services”.

    The KP Revenue Authority has exempted life insurance from the purview of taxable services. Uniformity across the country is essential for ease of doing business.

  • Sindh proposed to exempt sales tax on export of services

    Sindh proposed to exempt sales tax on export of services

    KARACHI: Sindh Revenue Board (SRB) has been proposed to exempt sales tax on export of services.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 presented to SRB, said that as per the Fifth Schedule to the Sales Tax Act 1990, exports made by a registered person are zero-rated.

    “Presently, there is no concept of zero-rating in Provincial Sales Tax Acts,” it said.

    Resultantly, the companies providing services to foreign companies and bringing foreign exchange in Pakistan need to pay sales tax from their own account.

    The OICCI recommended that a separate schedule should be inserted in Provincial Sales Taxes Act for zero rating. “All services provided to foreign companies outside Pakistan which result in inflow of foreign exchange and export of all taxable services should be exempt from Sind Sales Tax.”

    Giving rationale to the proposals, the OICCI said that this will result in harmonization of tax laws in Pakistan and would ensure convenient compliance with tax laws through uniform systems across the country and would also contribute towards the economic development of the Country.

    The OICCI highlighted another issue that all pharmaceutical products are exempt from Sales Tax.

    Consequently any sales tax paid by pharmaceutical industry on goods or services purchased, can neither be passed on to the consumer nor can be claimed as input, and has to be absorbed by the manufacturers in their costs.

    It is resulting in increasing the cost of doing business and is also against the philosophy of sales tax which is supposed to be borne by the consumer.
    Therefore, it is recommended that services received by pharmaceutical industry should be zero rated.

    Since pharmaceuticals prices are controlled, sales tax paid on inputs can neither be added to the selling price nor separately charged.

  • Withholding sales tax should be exempted on services rendered to registered persons

    Withholding sales tax should be exempted on services rendered to registered persons

    KARACHI: Sindh Revenue Board (SRB) has been proposed to exempt sales tax withholding in case a registered person renders services to another registered person.

    Withholding of sales tax from registered sales tax persons with Sindh Revenue Board (SRB), does not provide any benefit and only creates hardships for genuine taxpayers of reconciliations and delay in adjustments, said Overseas Investors Chamber of Commerce and Industry (OICCI) in its budget proposals for 2020/2021 submitted to the SRB.

    It further said that similar to federal sales tax law, exemption should be given if payment being made to sales tax registered person against withholding sales tax.

    Withholding tax rules are applicable on active taxpayers also.

    The OICCI recommended:

    i. Withholding should be exempted from deduction of Sales Tax at applicable rate against the payments to the Sales tax registered persons with SRB, in line with Federal Laws.

    ii. The rate of withholding sales tax against the invoices of unregistered persons should be reduced to 5% in line with the FBR’s Withholding Sales Tax regime as applicable under SRO.660 (I)/2007.

    iii. Withholding tax rules should not applicable on active taxpayers.

    Giving rationale to the proposals, the OICCI said that the withholding agents are unnecessarily burdened with deduction of sales tax which is not claimable as input tax and is thus resulting in increasing their cost of doing business.

    Similar matters have already been decided by the courts in case of sales tax withholding rules of FBR and PRA. The ultimate objective of the taxpayer is that indirect tax should not increase its cost of doing business. Moreover these enforcement measures have negative bearing on the regulated sector only.

    The purpose of withholding tax deduction is to ensure that non-active & nonregistered taxpayers can be detected. Compliance burden of businesses can be reduced for businesses by exemption deduction at source for active taxpayers.

    PRA allows similar provision [Sindh Sale Tax Special Procedures (Withholding Tax) Rules, 2014 read with notification SRB-3-4/14/2014].