Thursday, September 03, 2009

KARACHI - The fiscal and budget deficit target set by Ministry of Finance for the year 2009-10 could face some slippages and fail to materialize if the government is proved unsuccessful to tackle the issues of tax administration and electricity subsidies, an analyst showed this concern on Wednesday. Muzzammil Aslam, Head of Research at JS Global, said that IMF would strictly follow the deadlines of performance criteria set in its latest review especially related to taxation and electricity tariffs with an aim to re-balance budgetary deficit. He further said the government has also committed to fulfil the new structural conditionalities within a certain time framework given by IMF however, any difference in real and estimated cost of budget deficit is unlikely to strain IMF program, as Finance Ministry has already taken the performance waiver from IMF in the second review. He also mentioned that the related program commitments have been converted into structural benchmarks for the third review. IMF has further asked Pakistani authorities to introduce a broad-based VAT to correct the structural shortcomings in Pakistan s tax system, which relies on a very narrow tax base. The introduction of a broad-based VAT in mid-2010 is a key pillar of their fiscal strategy.
The fiscal deficit target was missed by 90bps for FY09 if compared to IMF projection, the analyst added.
It is important to mention that the government has estimated budget and fiscal deficits to be stayed at 4.6 per cent and 7.6 per cent of GDP respectively for the current financial year.

It must be recalled that the government has amended by a Presidential Ordinance of the NEPRA Act to ensure monthly determination by NEPRA of the fuel adjustment surcharge in line with international fuel prices, quarterly determination of overall electricity tariffs by NEPRA and notification of the adjusted tariffs within 15 days. Later, by September 15 government s has to take approval for making regulations to form new occupational groups within the FBR and revision of the structure of Regional Tax payer offices and submission of the VAT law to Parliament by end of 2009.Both conditionalities have macroeconomic relevance as in the absence of a de-politicized mechanism for regular electricity tariff adjustments, sizable financial imbalances in the electricity sector are likely to resurface. The adoption of a broad-based VAT is the cornerstone of the revenue effort over the medium term, and a crucial component of the authorities strategy to finance the needed increase in public investment without recourse to external borrowing or crowding out domestic private investment. imilarly, the government has reached a revised agreement with World Bank and ADB staff on a schedule for tariff increases that postpones the elimination of tariff differential subsidies to 2010/11. The budget deficit for the fiscal year 2008/09 (July-June) was 5.2 per cent of gross domestic product (GDP), higher than the government target. The deficit for fiscal year 2008/09 was targeted at 4.3 percent of GDP and was 3.0 percent for the first nine months ending March 31. According to the FY09 fiscal accounts that were released by the Ministry of Finance (MoF), MoF reported a deficit of 2.2 per cent of GDP in the 4QFY09 alone. The extra-ordinary deficit for the last quarter was led by aggressive development spending of Rs 210 billion, as a result of which, the total expenditure came in at Rs455bn in FY09.

Overall, the financing mix of the deficit was tilted in the favour of domestic (internal) financing, led by Rs 251 billion investment in NSS scheme and Rs 260 billion investments by banks. In revenue, last year will be remembered as the most volatile year in the recent past, as oil prices remained volatile; making an all time high of $147/bbl in July 2008 and a low of $32 in February 2009. While the former has impacted the expenditure side led by huge subsidies and the latter affected the overall FBR tax collection ability. Overall, tax revenue target was missed by fair margin and came in at Rs1.2 trillion (up 14.6 per cent) or 9.2 per cent of GDP. Direct tax collection growth remained dismal and came in at 13 per cent compared to sales tax and excise duty. Both were up 17.3 per cent and 38 per cent respectively. The performance of non-tax revenue sector remained robust and depicted a growth of 44 per cent led by SBP profits and defence income. While the current expenditure rose by 9 per cent and development expenditure remained at Rs 455 billion, lower than the target of 550 billion. The fundamental reason for the containment of current expenditure was the pass down of fuel price subsidy and partly electricity subsidy. However, interest payment has slightly inched up to 637 billion or 4.9 per cent of GDP. The budget deficit for the full-year came in at Rs 680 billion or 5.2 per cent of GDP. Similar to FY08, the bulk of the financing was done through domestic sources. Though the external gross receipts remained higher but the higher re-payment of external debt kept the share of external sources subdued. The majority of the domestic funding came through investments in saving schemes and bank investment in Treasury bill.

Visit Finance.KalPoint.Com for latest financial stories...

• 0 comments »

Tuesday, August 25, 2009

KARACHI - Agricultural credit disbursement by commercial and specialised banks rose 19 per cent year-on-year to Rs 17.847b in the first month of the current 2009-10 fiscal year (FY10). In absolute terms, disbursement of credit to the agriculture sector increased by over Rs 2.849 billion in July, 2009, when compared with total disbursement of Rs 14.998 billion in the same month last year. Overall credit disbursement by five major commercial banks including Allied Bank Limited, Habib Bank Limited, MCB Bank Limited, National Bank of Pakistan and United Bank Limited stood at Rs 10.337 billion in July, 2009 compared with Rs 6.690 billion in July, 2008, depicting an increase of Rs 3.647 billion or 54.51 per cent. Zarai Taraqiati Bank Limited, the largest specialized bank, disbursed a total of Rs 3.509 billion in July, 2009, up 12 percent when compared with Rs 3.132b in July 2008, while disbursement by Punjab Provincial Co-operative Bank Limited stood at Rs 548.127m in July, 2009 compared with Rs 699.062m in the same month last year. Besides, 14 domestic private banks also loaned a combined Rs 3.453b in July, 2009, compared with Rs 4.477b disbursed in July, 2008. It may be recalled that the State Bank of Pakistan has set an indicative agricultural credit disbursement target of Rs 260 billion for FY10. Banks disbursed a total of Rs 233.01 billion to the agricultural sector in FY09.

• 0 comments »

Tuesday, August 25, 2009

ISLAMABAD - Federal Board of Revenue (FBR) Monday transferred two of its officials with immediate effect. According to the notifications issued here, Qamaruz Zaman Cheema (Custom Department/BS-16) Superintended, Model Customs Collectorate Lahore, has been transferred to Directorate General of Internal Audit (Custom) Lahore, while Shahid Hameed Butt (Sales Tax Department/BS-16), Superintended Regional Tax Office, Gujranwala, has been transferred to Model Customs Collectorate Lahore. In another notification, FBR has been selected Aftab Alam (income tax/BS-18) and M Arshad Khan (Custom and Excise/BS-18) for posting on special pay positions (allowance equivalent to 100 per cent of basic pay in the reform units). These two officers are selected thorough the process of internal job posting (IJP).

Don't Forget to visit Finance.KalPoint.Com for latest financial stories...

• 0 comments »

Thursday, August 20, 2009

KARACHI - Pakistan s current account deficit has contracted by Rs576 million to Rs606 million during the first month of current fiscal year 2009-10. However, current account deficit amounted to $1.1 billion in the same month of last financial year. In percentage the YoY growth in current account deficit has sharply declined by 48.7 per cent during the single month of July, 2009 on the backdrop of considerable fall in trade deficit and a meager improvement in external inflows (current transfers), particularly remittances during the period under review. In the month of July, current account balance without off transfers stood at $609 million as against $1.22 billion recorded in the same month of last financial year. Consequently, entire stock of foreign exchange reserve showed a sign of stability as only SBP gross reserves amounted to $9.5 billion (excluding reserves of commercial banks) during July F10. The statistics on balance of payments position compiled by SBP for the month ended on July 31, 2009 revealed that total goods exports slashed to $1.5 billion during July from $1.9 billion of the corresponding month of previous year while imports declined to $2.7 billion from $3.4 billion registered in the FY09. Trade balance decreased to $1.2 billion in July 2009 as against $1.3 billion of last fiscal.

Balance of goods and services reached the level of $1.5 billion during the reviewed month as compared to $1.8 billion of FY09. Trade deficit significantly dropped to 1.150 billion dollars during the first month of current financial year. The YoY growth in a trade deficit had squeezed by 31.9 per cent during the single month of July 2009. Pakistan s total exports amounted to $1.488 billion in the month of July of ongoing fiscal year from $1.879 during the corresponding month of last year whereas imports stood at $ 2.639 billion as against $1.879 of previous year. Income account deficit decelerated to $46 million in July FY10 from $65 million of the same month of previous year. Unlike the previous year, current transfers up to $1.17 billion during analytical month of ongoing financial year. Capital account had down to $1 million during July as against $3m witnessed in the equivalent period of FY10. Financial account slashed to $50.10 billion during reviewed period as against $81.35b of preceding year. This decline was a result of confluence of factors such as weakening economic fundamentals, deteriorating law and order situation, slack functioning of stock market, lack of privatisation proceeds and in the presence of global financial crisis, the foreign investors shied away from investing as expectations of the lower degree of profitability and host of risks and uncertainties. Worsening law and order situation, below-than-anticipated performance of stock market and risk averse behavior of foreign investors hampered capital and financial flows to Pakistan whereby the net inflow of foreign investment declined to $2 million.

In line with the trend in emerging economies stock markets, investors are taking their investment out from Pakistan s equity market which contributed portfolio investment to decline to $3 million during July-FY09. State Bank predicts the external current account deficit may come under 5.0 percent of GDP in FY10. Provided projected foreign inflows are realised SBP s foreign exchange reserves could improve further to over $12 billion in this fiscal year. The central bank further believes exports may improve slightly if global recovery sets in by the beginning of 2010, as many anticipate. Similarly, imports could pick up also assuming domestic economic recovery. Nevertheless, both are still expected to see a fall from fiscal year 09. SBP also said there has been considerable improvement here in the course of the year. Meanwhile, foreign trade experts have indicated a further reduction in the current account deficit in the months to come. Vulnerabilities remain, however, given that our exports and markets are highly concentrated, and slow recovery in those markets will restrain exports. Imports remain vulnerable to price pressures from any rises in oil, commodity and basic raw material prices. Deterioration in the current account will directly affect the foreign exchange reserves position.

• 0 comments »

Friday July 10, 2009

ISLAMABAD: The Petroleum Development Levy Ordinance 2009 has been challenged in Supreme Court (SC), Aaj News reported on Friday. Chaudhry Ikram, the lawyer of Shoaib Shahid has filed a petition challenging the presidential ordinance and stated that president has no right to impose tax under constitution article number 77. The president had signed the ordinance on the advice of prime minister to raise petroleum prices and restored them to July 7 position. (Aaj Tv)

• 0 comments »

Wednesday July 08, 2009

ISLAMABAD: The Supreme Court on Tuesday suspended the operation of notification issued by the Oil and Gas Regulatory Authority (Ogra) on June 30/July 1 pertaining to imposition of 'carbon surcharge' on petroleum products. The court directed the Ogra to issue a fresh notification in compliance with the orders of the court. "This arrangement is being made temporarily; the final decision would be taken on later, after going through the detailed report submitted by the Commission (headed by Justice Rana Bhagwandas looking into the oil pricing mechanism) and other components," said Chief Justice Iftikhar Muhammad Chaudhry in the order. A carbon tax is an environmental tax on emissions of carbon dioxide and other greenhouse gases. In other words it is an example of a pollution tax. In this regard, the court summoned Secretary, Ministry of Environment, on July 9 (next date of hearing) along with the summary (if any) for the purpose of imposing carbon tax. According to budget documents, a development surcharge on petroleum products was levied under the petroleum products (Development Surcharge) Ordinance 1961 and rules were framed accordingly. The word 'development surcharge' was substituted with the words 'Petroleum Development Levy' (PDL) on June 29, 2001. In budget 2009-10, PDL has been converted into 'carbon surcharge' on POL products. Attorney-General Latif Khosa asked the court that it could not withdraw carbon surcharge as it was approved by the parliament through the Finance Bill 2009. Chief Justice Iftikhar Muhammad Chaudhry made it clear that the court had merely suspended the operation of notification issued by the Ogra regarding imposition of the tax. Khosa then pleaded with the court to replace 'carbon tax' with the 'PDL', saying that otherwise the budget, already in deficit, would be disturbed. The court declined to take its words back and asked him to argue the point on next date of hearing, saying, Chief Justice Iftikhar Muhammad Chaudhry observed that 'carbon surcharge' was not the only means to bridge the deficit. Justice Chaudhry Ijaz Ahmed, after being disturbed by the helplessness of the citizen of the country, observed that the spirit of the constitution is welfare of the state and all the organs help in this respect. The document of constitution is made for the people of Pakistan but in last 60 years nothing has been done for them, he added. Advocate Ikram Chaudhry, counsel for Zafar Iqbal Jhagra, censuring the carbon tax, said that saving a poor was much more important than the environment. A three-member bench of the apex court, comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Chaudhry Ijaz Ahmed and Justice Mahmood Akhtar Shahid Siddiqui, heard the petition of Zafar Iqbal Jhagra, of PML-N, against hike in petroleum prices and overcharging worth billions of rupees by the government on petroleum products. According to the Finance Bill 2009-10 and the notification issued by Ogra the government is charging Rs 8 per litre carbon surcharge on high speed diesel oil (HSDO), Rs 10 per litre on motor spirit (MS), Rs 6 per litre on kerosene oil, Rs 3 per litre on light diesel oil (LDO) and Rs 14 per litre on HOBC. The calculation reveals that the impact of this surcharge is equivalent to 17 percent hike in prices of petroleum products. The court asked Khawaja Saeed Zafar to inform it who had proposed for imposition of carbon surcharge and what was the purpose. In order to ascertain the price difference with imposition of carbon surcharge the court asked Khawaja Saeed to give break-up of prices of petrol, diesel and kerosene oil as it stood on June 30, prior to the issuance of notification, and July 1, after the notification. On June 30, per litre price of petrol was Rs 56.21 and it included Rs 31.91 ex-refinery price, Rs 10.54 PDL, Rs 1.39 oil marketing companies' margin, Rs 2.88 inland freight charges, Rs 1.74 dealers' margin and Rs 7.75 sales tax. On July 1, after the withdrawal of PDL and imposition of carbon surcharge, the price of petrol per litre was Rs 62.13 and it included Rs 36.59 ex-refinery price, Rs 10 for carbon surcharge, Rs 1.60 oil marketing companies' margin, Rs 3.37 inland freight charges, Rs 2 dealers' margin and Rs 8.57 sales tax. The price of diesel on June 30 was Rs 55.71 per litrer and it included Rs 34.78 ex-refinery price, Rs 8.53 PDL, Rs 1.35 oil marketing companies' margin, Rs 2.22 inland freight charges, Rs 1.50 dealers' margin and Rs 7.68 sales tax. On July 1, after the withdrawal of PDL and imposition of carbon surcharge, the price of diesel per litre was Rs 62.65 and it included Rs 40.94 ex-refinery price, Rs 8 for carbon surcharge, Rs 1.35 oil marketing companies margin, Rs 2.22 inland freight charges, Rs 1.50 dealers' margin and Rs 8.64 sales tax. Similarly, the price of kerosene oil on June 30 was 51.87 per liter and it included Rs 32.77 ex-refinery price, Rs 6.88 PDL, Rs 1.46 oil marketing companies' margin, Rs 3.61 inland freight charges and Rs 7.15 sales tax. On July 1, after the withdrawal of PDL and imposition of carbon surcharge the price of kerosene oil per litre was Rs 59.35 and it included Rs 39.26 ex-refinery price, Rs 6 for carbon surcharge, Rs 1.74 oil marketing companies' margin, Rs 4.16 inland freight charges and Rs 8.19 sales tax. The court expressed displeasure over change in inland freight charges and dealers' margin, saying that these have to be constant. It was also revealed that sales tax was charged over the cumulative price including other taxes, meaning thereby it was a kind of double taxation. The court termed it illegal, saying that tax on other taxes cannot be levied. At court's query, Mehmood Saleem, Secretary, Petroleum, informed the court that 80 percent of petrol and 30 percent of diesel was produced within the country, and the rest was imported. The court adjourned the hearing till July 9. (BRecorder)

• 0 comments »

Saturday July 04, 2009

KARACHI: Pre-Ramazan rise in prices of essential commodities is expected to take place much earlier than usual because of the gigantic surge in prices of petroleum products. Prices of fruits and vegetables have already surged in the range of Rs 10 to 15 per kg in the wholesale market, according to fruit and vegetable dealers in new Sabzi Mandi.

Apprehensive traders said that major items will be pulses and wheat flour whose soaring rates would in turn increase the cost of living, particularly for the poor, much before the advent of Ramazan because of the government's 'stiff' petroleum policy. "Demand of essential items goes on increasing before Ramazan, particularly of pulses, wheat flour, and related by-products," traders said.

Inland transportation cost has immediately skyrocketed with petroleum price increase due to which sugar rate has so far mounted to Rs 4320 per 100 kg sack, from Rs 4260 in the mass market, they added. They said that 50 paisa per kg of sugar has increased immediately which is likely to reach Re 1 in the next few days in the wholesale market. Retail price of sugar is Rs 45 per kg.

Similarly, wheat flour price has posted Rs 30 increase per 100 kg bag until now, which is available at Rs 2250, according to traders, while millers say that increase of Re 1 per kg in wheat flour price has so far taken place in some parts of the city.

The Chairman of Pakistan Flour Mills Association (PFMA), Johar Ali Qandhari, said that increase of Rs 30 to Rs 40 per 100 kg sack of wheat grain has occurred immediately because of petroleum prices surge. To mills now wheat grain is available at Rs 2425 per 100 kg.

Wheat shortage has also occurred because of disagreement between millers and transporters over new cartage rates. However, largely they have now been agreed upon, he said. He pointed out that electricity crisis is another prominent issue which is likely to give rise to the cost of wheat flour production when the government removes subsidy. There is also a fear of a dangerous surge in flour prices.

Qandhari urged the government to set up a permanent price fixation system to protect the consumers' rights in such chaotic situation, and said that everyone would try to multiply profit on the pretext of oil price hike. Wheat flour in retail market is being sold as [fine quality] at Rs 32 per kg, [2.5 no flour] at Rs 30 per kg, [flour chaki] at Rs 32 per kg.

Impact of petroleum prices will come in a week's period, said General Secretary of Karachi Retail Grocers Group, Fareed Qureshi. Sugar price in the wholesale market has immediately mounted by 50 paisa per kg, said chairman of Karachi Wholesalers Grocers Association, Anis Majeed, adding that increase in transportation cost would soon pass on to end-consumers.

Increase of Re 1 per kg in prices of all varieties of pulses is also going to occur shortly, which he termed "the direct and immediate impact" of the recent rise in petroleum prices. He said that the supply of pulses to Karachi would be smooth for the Ramazan to meet the demand.

He condemned the price rise of petroleum products, saying that it would cripple the consumers' purchasing power. Rs 57/litre of petrol is also high for common people, Anis Majeed said. Pulses prices have already surged in July as compared to June this year. Prices of mash washed [I and II] went up to Rs 95 per kg from Rs 77 and Rs 87 per kg from Rs 72 respectively.

Prices of mash peel black mounted to Rs 66 per kg from Rs 57, Kabuli chana white [I and II] to Rs 92 per kg from Rs 84 and Rs 66 from Rs 60 respectively. Price of Mong washed [I and II] to Rs 60 from Rs 53 and Rs 50 from Rs 47 per kg respectively. Prices of moong whole-I increased to Rs 97 per kg from Rs 96 and Mash whole Rs 75 from 73 correspondingly.


(BRecorder)

• 0 comments »

Thursday July 02, 2009

ISLAMABAD: The Federal Board of Revenue (FBR) has failed to achieve the policy objective of sales tax zero-rating for the textile sector, as the amount of refund claimed by this sector is still very high. The FBR has admitted this fact in the Third Quarterly Review issued here on Wednesday, reflecting non-compliance and low tax contribution by the textile sector due to non-existent audit.

The level of compliance is evident from the fact that 65 percent textile units, who declared nil income during 'Tax Year 2008', have claimed refund to the extent of Rs 430 million. The FBR further admitted that the zero-rating of textile sector has broken the VAT chain and eroded the tax base. Unfortunately, the decision of zero-rating seems to be ineffective. The FBR paper strongly recommended creation of 'Textiles Industry Group', including stakeholders like taxpayers and representatives of government to prevent tax evasion and improve compliance.

The report highlighted serious tax gaps in the biggest sector with huge contribution in exports. It is hard to believe that the industry with huge investment contributes negatively. It said that the sector is paying nothing, instead getting back billion of rupees every year in the shape of refund/rebate.

(BRecorder)

• 0 comments »

Wednesday July 01, 2009

ISLAMABAD: President Asif Ali Zardari on Tuesday assented to the Finance Bill 2009 passed by the National Assembly on June 25, 2009. Spokesperson to the President former Senator Farhatullah Babar said that the President signed the bill after receiving the advice of the Prime Minister. The President's assent gives effect to the financial proposals of the federal government for the new fiscal year.

(BRecorder)

• 0 comments »

Wednesday July 01, 2009

ISLAMABAD: The government has increased the price of petrol by Rs 5.92 per litre, light diesel Rs 6.94, kerosene oil Rs 7.48 and HOBC Rs 8.50 per litre. With this increase, the price of per litre petrol has surged to Rs 62.13, HOBC Rs 78.78, light diesel oil Rs 54.94 and kerosene oil to Rs 59.35 per litre.

Prime Minister Syed Yousuf Raza Gilani is reported to have approved the summary of the petroleum ministry in line with the decision taken in the budget as well as due to rise in world oil prices. However, the Minister for Information denied that approval for increase in POL prices was given by the Prime Minister saying that he has no role in this increase as the oil pricing mechanism was tied with the international market.

The increase in POL products prices from July 1 was because of rise in the oil prices in the international market. Advisor to the Prime Minister on Petroleum, Dr Asim Hussain earlier during the day told media the prices of petroleum products have been increased whereas gas prices were reduced for household and industrial use.

The new gas rates, he said would be applicable from July with the 2 percent reduction in the gas price for all the five slabs of domestic consumers and 4.46 percent for Independent Power Producers, captive power and the industries. The advisor said that gas price was slightly increased for fertiliser sector and there would be no reduction in the price of CNG for the next six months.

Dr Asim said that PDL was replaced with the carbon surcharge to introduce transparency in the oil pricing mechanism. The revenue target was projected at Rs 122 billion in 2009-10 from the levy of carbon surcharge that is applicable on petroleum products from today (Wednesday) at the rate of Rs 10 per litre on petrol, Rs 6 on kerosene oil, Rs 3 on Light Diesel Oil (LDO), Rs 14 on HOBC and for high speed diesel (HSD) it is Rs 8 per litre.

(BRecorder)

APP adds: Minister for Information and Broadcasting, Qamar Zaman Kaira has clarified a news item being aired on different private TV channels regarding approval of increase in petroleum prices by the Prime Minister. The minister said according to new policy, which has been formally approved in budget 2009-10, the Prime Minister need not to increase the prices on his own.

According to new formula, he said, the prices will be adjusted automatically according to international market price trends. "The current increase in prices is according to this formula," he further clarified the reports that the Prime Minister had approved the summary for increase in petroleum prices.

• 0 comments »

Saturday June 27, 2009

ISLAMABAD: The government, without wasting any time to generate revenue, has started collecting 'carbon surcharge', levied on petroleum products from oil marketing companies (OMCs), from June 14, replacing petroleum development levy (PDL). The budget was announced in Parliament on June 13 and soon after the announcement of tax, customs authorities started collecting 'carbon surcharge' on petroleum products.

The OMCs have approached Petroleum Ministry saying that customs authorities have started collecting carbon surcharge from June 14 whereas previous experience shows that all budget measures pertaining to relief and taxes were implemented from July 1, start of new fiscal year. Petroleum Ministry has sought explanation from Finance Ministry about effective date of carbon surcharge on petroleum products as this seems an unusual move by the tax machinery.

Sources said that during a meeting held in the Finance Ministry on June 23, Finance Ministry officials had clarified that carbon surcharge would replace PDL on petroleum products from July 1, 2009. However, customs officials are of the view that implementation of carbon surcharge on petroleum products is applicable from June 13, the day of budget announcement.

The government has made amendment in the Petroleum Products (Petroleum Development Levy) Ordinance 1961, in the Finance Bill 2009 to replace PDL with carbon surcharge. According to the amendment, every refinery and every company shall pay to federal government carbon surcharge according to the rates prescribed in the budget on petroleum products produced by a refinery or purchased by a company for sale as specified in Fifth Schedule.

According to sources, customs authorities are collecting carbon surcharge on petroleum products following the fixed rate announced in Finance Bill 2009. According to Finance Bill, the government is to charge Rs 8 per litre carbon surcharge on high speed diesel oil (HSDO), Rs 10 per litre on motor spirit (MS), Rs 6 per litre on kerosene oil, Rs 3 per litre on Light Diesel Oil (LDO) and Rs 14 per litre on HOBC.

The government has targeted collection of carbon surcharge on petroleum products at Rs 122 billion in next financial year budget 2009-10 and Rs 12 billion collection through carbon surcharge on compressed natural gas (CNG). However, the government exempted CNG from carbon surcharge after facing severe criticism from the parliamentarians as well as public.

In Pakistan, earnings through PDL collection on petroleum products was supposed to be invested in projects aimed at development of petroleum sector, but it has never been used on such projects. It is utilised to bridge budget deficit and the government has replaced PDL with carbon surcharge aimed at meeting revenue target set for the next financial year 2009-10.


(BRecorder)

• 0 comments »

Saturday June 27, 2009

KARACHI: City Nazim Syed Mustafa Kamal Friday presented Rs 52.5312 billion budget of City District Government for the fiscal 2009-10 before the City Council.

The Rs 170.36 million surplus budget show expenditure estimates at Rs 52.3608 billion with Rs 26.6183 billion earmarked for development and Rs 25.5425 billion for non-development expenditure.

The Water Board's budget has been kept at Rs 11.3464 billion with Rs 5.7957 billion set aside for development and Rs 5.60 billion for non-development expenditure.

According to the budget, Rs 19.40 billion will be received from the Federal Government as grant while a target of Rs 8.7380 billion has been fixed for the City Government's Revenue department.

The budget reveals receipts at Rs 2.5212 billion from Municipal Services, Rs 2.4098 billion from Master Plan, dues of defunct KDA/KMC from KESC Rs 1.9830 billion, Transfer of Income from KBCA Rs 1 billion, Works and Services Rs 940.19 million, Finance and Planning Rs 909.47 million, , Enterprise and Investment Promotion Rs 651.53 million, Mass Transit Cell Rs 532.16 million, Transport and Communication Rs 245 million.

Sindh Government will pay rs 11.500 million for salaries of employees of devolved departments while KWSB's income has been estimated at Rs 11.40 billion.

Highest allocation of Rs 11.361 billion has been made for Works and Services department followed by Education Rs 10.123 billion, Health Rs 3.983 billion, Municipal Services Rs 2.941 billion, ADP Rs 2.835 billion, Share of Towns/UCs Rs 2.461 billion, Transport and Communication Rs 1.524 billion, Coordination Rs 1.299 billion, Revenue Rs 1.016 billion, Finance and Planning Rs 700 million.

Budget allocation has been made for more than 60 major projects including Rs 2 billion for infrastructure development, Rs 1.5 billion for privatization of Solid Waste Management, Rs 940 million for Taameer Karachi program, Rs 550 million for Citizen Community Board, Rs 500 million for purchase of CNG Buses, Rs 500 million for Karachi Mass Transit system, Rs 500 million for construction of parking plaza, Rs 400 million for development works of Corridor-IV, Rs 450 million for development works of UCs, Rs 370 million for wirless, video and surveillance system Phase-II, Rs 350 million for Elevated Expressway, Rs 250 million for Corridor-III, Rs 250 million for Padestrian bridges, Rs 250 million for construction and repair of roads, footpaths, culverts, chowrangis and round-abouts, Rs 250 million for Karachi Medical and Dental College, Rs 220 million for Corridor-II, Rs 200 million for road and round abouts in UCs, Rs 160 million for Karachi Institute of Heart Diseases, Rs 130 million for construction of Aiwan-e-Riffat, Rs 130 million for constructions in Landhi and Korangi Industrial areas.

The budget shows an allocation of Rs 100 million for purchase of mechanical sweeping machines, Rs 100 million for development works in industrial areas, Rs 100 million for Clifton Fish Acquarium, Rs 100 million for electric system on important roads under City Government, Rs 100 million for development of various parks of city government, Rs 100 million for road marking and traffic signs, Rs 80 million for garbage transport and development works, Rs 80 million for construction of Gattar Baghicha, Rs 80 million for Citizen Complaint and Information System.

City Government has set aside Rs 60 million for cleaning of various drains and Rs 60 million for construction and development of drains, Rs 60 million for Urban Search and Rescue system, Rs 50 million for construction of Inter-Town roads, Rs 50 million for purchase of fire tenders for Korangi Industrial area and as amount for SITE Industrial area, Rs 50 million for purchase of generators for hospitals, Rs 40 million for conversion of women library in Gulshan- e-Iqbal into hospital, Rs 40 million for kite park, Rs 40 million for nursing school and installation of lifts in Abbasi Shaheed Hospital, rs 40 million for construction of sub-way at Rafa-e-Aam Society.


(BRecorder)

• 0 comments »

Thursday June 25, 2009

KARACHI: A big income tax evasion of around Rs 335.87 million by some 117 textile units in raw cotton import during last eleven months has been detected. Sources told Business Recorder on Wednesday that 117 members of All Pakistan Textile Mills Association (Aptma) imported raw cotton without paying income tax of around Rs 335.87 million at the time of import.

They said that raw cotton was earlier exempted from payment of income tax through SRO 567(I)/2008 dated June 11, 2008, which was uploaded by the Income Tax Wing (ITW) of the Federal Board of Revenue (FBR) on the PaCCS system. However, this exemption was not approved by the Parliament. Hence, income tax @ 1 percent became leviable on raw cotton from July 1, 2008, under finance bill 2008.

But, ITW did not remove the SRO against the relevant entry in the PaCCS system. Consequently, the system kept on allowing exemption on import of raw cotton, providing huge losses to the national kitty, sources said. They said that raw cotton containing PCI code 52.01 is not exempted from IT and textile manufacturers have to pay 1 percent IT at the time of its import.

They said that the error was detected by the Directorate-General of Post Clearance Audit, Customs, while analysing data of imports of various items. They, however, said the concerned authority issued the letters to all such importers and requested them to make payment, but they shunned the issue.

They said that Aptma was of the view that SRO 567(I)/2008 was still not annulled. Hence, withholding tax under section 148 of Income Tax Ordinance could not be recovered on cotton import.

They said that Aptma has also tabled the issue in a meeting summoned by FBR chairman with the hope to get amnesty in this connection. But, they added that FBR chairman has decided to adjust the leviable amount with IT refunds and the remaining amount, if any, would be paid by the textile millers in the next fiscal year.

They said the Regional Tax Office (RTO), Karachi has expressed reservations on the said decision, saying that whole amount should be paid in current fiscal year. They added that RTO has sent a letter to the FBR chairman in this regard, asking him to revisit the decision.


(BRecorder)

• 0 comments »

Thursday June 25, 2009

ISLAMABAD: State Minister for Finance and Economic Affairs Hina Rabani Khar has said that the government has decided to bring all the sectors into tax net within next three years. Talking to private news channel, she said the government has brought two sectors Real Estate and Services-into tax net during current budget.

However, she said still there are some sectors which are out of tax net.

She said the government accepted suggestions proposed by the parliamentarians in the budget debate in the National Assembly.

To a question she said the Carbon Tax will replace existing PDL adding it is not a new tax on petroleum product.

Minister further said carbon tax will make the petroleum prices transparent. “Every body will now know the exact amount of percentage tax on per litre of petrol. It will not hike price of petrol.”

According to estimate the government will gain about 120 billion rupees from carbon tax, she added.



(APP)

• 0 comments »

Wednesday June 24, 2009 ISLAMABAD: The consumers are likely to face 17 percent hike in oil prices after imposition of 'carbon surcharge' on petroleum products in place of petroleum development levy (PDL) effective from July 1, 2009. However, the government has decided not to levy 'carbon surcharge' in place of PDL on JP-4 and JP-8 and the Finance Ministry has formally conveyed the decision to Petroleum Ministry. The Petroleum Ministry had sought explanation from the Finance Ministry regarding the replacement of PDL with carbon surcharge on two petroleum products, ie JP-4 and JP-8. The government is currently charging rupees three per litre PDL on JP-4 and JP-8. Sources in the Finance Ministry revealed to the Business Recorder on Tuesday that the Finance Ministry had conveyed to the Petroleum Ministry that the government would end the PDL from July 1 and levy "surcharge" on petroleum products, including kerosene oil, high speed diesel, motor spirit (MS), light diesel oil (LDO) and HOBC. The Finance Ministry has further revealed that fixed rate of carbon surcharge, announced in Finance Bill 2009-10, would be applicable from July 1. According to the Finance Bill 2009-10, the government will charge rupees eight per litre carbon surcharge on high speed diesel oil (HSDO), Rs 10 per litre on motor spirit (MS), rupees six per litre on kerosene oil, rupees three per litre on light diesel oil (LDO) and Rs 14 per litre on HOBC. The sources said that the total impact of this surcharge would be equivalent to a 17 percent hike in price of petroleum products. The government had targeted collection from carbon surcharge on petroleum products at Rs 122 billion in the 2009-10 financial year budget and Rs 12 billion collections from carbon surcharge on compressed natural gas (CNG). However, the government has exempted CNG from carbon surcharge after facing severe criticism from the parliamentarians and the public. According to the sources, the Finance Ministry had said that there would be no notification of surcharge and it would be implemented in place of PDL on the petroleum products from July 1. After imposition of carbon surcharge, the government may deregulate price of all petroleum products and authorise oil marketing companies (OMCs) to make automatic adjustment in oil prices in line with the global oil prices. However, the OMCs will follow formula of oil pricing set by Federal government. At present, high speed diesel (HSD) price is deregulated based on the Federal government formula, whereas the prices of other products, including light diesel oil (LDO), kerosene oil, and motor spirit, JP-1, JP-4 and JP-8, are regulated and notified by the government at the end of every month. (BRecorder)

• 0 comments »

Tuesday June 23, 2009

ISLAMABAD: The print media advertising excluding classified advertisements would be liable to federal excise duty in VAT mode. Through amendments in the Finance Bill (2009-10), the government has withdrawn FED on classified advertisements and shop boards to provide relief to common man and small shopkeepers.

The newsprint media is being provided relief to help them in their difficult situation, by exempting import of newsprint from the levy of 16 percent general sales tax. Now, it will be subjected to customs duty of 5 percent only.

Similarly, for classified advertisements, no withholding income tax shall apply for which a separate notification will be issued. These measures will provide relief of about Rs 1 billion to the newsprint sector, enabling it to play its due role in the nation-building process.

In budget 2009-10, the levy of Federal Excise Duty @ 16 percent in VAT mode was proposed on advertisement in newspapers, periodicals, hoarding boards, pole signs, sign boards and shop boards through amendment in Table II of First Schedule to the Federal Excise Act, 2005.



(BRecorder)

• 0 comments »

Tuesday June 23, 2009

ISLAMABAD: The government on Monday announced a major relief to exporters by declaring income tax collected on export proceeds as final discharge of liability, reduced withholding tax from four to three percent for industrial importers, abolished 'Carbon Surcharge' on CNG, replaced 16 percent sales tax on import of newsprint with five percent customs duty and abolished 20 paisa Federal Excise Duty (FED) on SMS with increase in FED from 19 to 19.5 percent on services provided by cellular companies.

Winding up the debate on the federal budget in the House, Minister of State for Finance Hina Rabbani Khar said the government has decided to revise the ad-hoc relief allowance for civil employees in BPS 1-16 from 15 percent to 20 percent. This revision would also be applicable to personnel of the Armed Forces in BPS 1-16 and equivalent who were earlier allowed only a 15 percent increase. Moreover, the ad-hoc relief allowance announced for old pensioners who retired ten years ago or earlier is being revised and they would now enjoy the benefit of 20 percent increase in net pensions.

Announcing other relief measures for business community through amended Finance Bill (2009-2010), she said that requirement of NTN or CNIC for sales to unregistered purchasers is being withdrawn; similarly, presenting of NTN for opening of bank account is being made voluntary or as per requirement of the bank concerned. Through another amendment in Finance Bill, the difference in the charge of additional tax on delayed payments and compensation on refund is being reduced to three percent from present about 12 percent.

The concept of third party audit by established and certified Chartered Accountant companies is being introduced. However, it is being ensured in the concept that it does not result in unnecessary harassment of business concerns.

The procedures relating to resolution of tax disputes is being further streamlined and simplified and all such proposals that were considered to be unnecessarily harsh and punitive like conducting raids on business premises without approval of FBR, are being withdrawn.

Sharing details of the tax-related amendments in the Finance Bill, she said that it was being proposed to lower the withholding tax from four percent to three percent for industrial imports to provide relief to manufacturers.

This involves a relief of over RS five billion to the manufacturing sector and would reduce their cost of production. Income tax collected on export proceeds is being made final discharge of liability of the exporters to facilitate export oriented activities and to enable exporters to compete more effectively in the international market.

On the demand of youth and children, additional Federal Excise Duty at the rate of paisa 20 per SMS is being withdrawn. The revenue loss would be compensated by increasing the additional FED on cellular services form 19 percent to 19.5 percent.

She also announced that since the government expects to wind up the National Accountability Bureau within the next three months, the budget for NAB is proposed to be reduced to Rs 183 million to cover 3 month's expenditure. The excess amount would be surrendered.

The government also announced reconstitution of Seventh National Finance Commission (NFC). The first meeting of the NFC would be convened in July 2009. The NFC deliberations would be completed at the earliest and hopefully within three months of the convening of the first meeting, she added.

She said the government has risen the PSDP eighty-five percent to the previous year's development programme, which is a record and would help improve the physical infrastructure and basic amenities of life. She said the government has been able to return back Rs 200 billion to the State Bank.

She said the inflation rate in October 2008 stood at 25 percent has now been reduced to 14.4 percent in May this year while food inflation stood at over 32 percent in October 2008 has also been reduced significantly.

She said the government has initiated Benazir Income Support Programme to check the poverty and allocations of this programme has been doubled and stood at Rs 70 billion. Referring to Minorities, the Minister said five percent quota for minorities in federal services has been fixed.


(BRecorder)

• 0 comments »

Monday June 22, 2009

According to a report of App, out of the over 80 million mobile users, about 50 million are young people between the age of 10 and 25 years; 40 million of them use SMS and most of them consist of youth. Many of those who could not afford to expand their businesses relied on SMS to access a wider clientele. Zaheer, a plumber who runs a mobile plumbing business, says he saved up for months to purchase a cellphone so that he could text message with his clients. ‘It worked very well for me. I would be at my client’s place as soon as I got a text message.’ Now Zaheer is skeptical whether his business will have such a smooth flow.’ I was saving a lot of money but I don’t know how it is going to be anymore,’ he said looking slightly frustrated.

Text messaging has played the role of personal integration as well as public mobilisation. During mass protests such as the long march that led to the restoration of judiciary, we saw that galvanizing of the youth was made possible through networking platforms such as the internet and cellphones. It has been a recent global phenomenon that has changed the face of political games as seen during Obama’s election campaign, and most recently during Iran’s elections. It is probably why these avenues are the first to be blocked by the state during an event of possible ‘rebellion.’ Abeer Hamid, 22, in Lahore is the main information dispenser of Student Action Committee and sends a long list of subscribers’ latest updates on the youth initiatives during protests, rallies and gatherings. Abeer terms the imposition of the 20 paisa tax on SMS a hindrance to communication.

‘This will definitely affect us — I mean it is going to affect me.’ But Shaukat Tarin, the adviser on finance, callously said at a press conference that ‘if they have so much money to spend on texting then they can spend a little more on this.’ An illogical and baseless justification for the tax imposition. In Pakistan where there are layers within layers of socio-economic classes, the largest bulge of our population, namely the youth, has had to suffer the consequences of poor governance. As the competition in the global market becomes cut throat, the marginalised youth can hardly keep up in the local arena. Independent of other obvious reasons such as the lack of investment in the education sector, the digital divide is a worrying aspect as well. Texting although a stem of digital technology, is nonetheless a very important way of accessing information and communicating with around 500 million SMS traffic on a daily basis across the country. It seems the government has identified a couple of industries as preys for extracting money from, namely the telecom industry and the petroleum sector which is the usual scapegoat.

The state should realise the massive investment of the telecom industry and should protect such industries instead of exploiting them. The telecom industry is concerned about this tax and worries that their youth targeted phone packages will be ‘killed.’ But despite the possible imposition of a tax which is an increase of 300 per cent on each SMS, some feel it will not make a difference to their lives at all, and that although a nuisance they will nonetheless continue to text message at the same rate. ‘I think the only thing is that the Zardari jokes will finish,’ chuckles Samad Khurram. However, a more concerning aspect is the accountability of the tax. ‘I just want to know where our tax money is going to go,’ says Maham Ali, a student in Islamabad.

(Dawn)

• 0 comments »

Monday June 22, 2009

ISLAMABAD: Pakistan will face a serious balance of payment problem next year, partly because the United States has not reimbursed over $1.2 billion the country spent on the war on terror.

A source in the finance ministry told Dawn on Sunday that the government had received $447 million since September 2008, leaving a balance of over $1 billion (Rs80 billion).

Under the Coalition Support Fund, the US reimburses Pakistan for terrorism-related operations, particularly those undertaken by the army and air force.

Analysts estimate the operational cost of war-related expenditures, including sustainability of logistics and garrison in Fata, was over $1 billion per year.

This cost related only to combats in South and North Waziristan and adjoining areas.

The cost of war increased manifold when a major military offensive was launched in lower and upper Dir and Buner.

The government launched an operation in Swat in November 2007, followed by major operations in Bajaur and Kurrum agencies.

Pakistan has deployed more than 100,000 troops in troubled areas.

The government has projected a budget deficit of 4.9 per cent for 2009-10 as against the IMF target of 4.6 per cent owing to rising expenditures on account of debt servicing, huge allocations for defence and law and order.

To overcome the deficit, the government expects to receive more than $4 billion assistance from friendly countries and multilateral donors during 2009-10.

The government has also sought an additional $4 billion as insurance from the IMF in case assistance from friendly countries was delayed.

The source said that the phasing out of subsidies on electricity and other revenue measures, including the levy of carbon surcharge, were attempts to reduce fiscal deficit.

The source said that the amount of reimbursement had been calculated on the basis of six-monthly reports.

He said all the bills related to expenditure were first audited by a team of Pakistan military officers in cooperation with the US embassy in Islamabad.

He said the bills were then sent to the US government’s Accountability Office and Pentagon for further scrutiny.

After clearance from the departments it finally goes to the State Department for release of funds.

‘There was no delay in payment till March 2008. However, the process has been made cumbersome seeking minute details about expenditures.’


(Dawn)

• 0 comments »

Monday June 22, 2009

Lahore: The former central chairman of Pakistan Hardware Merchants Association (PHMA) Haji Muhammad Asif has welcomed withdrawal of sales tax on diesel engines and spare parts as it would benefit the textile and sugar industries.

Addressing a meeting of PHMA Asif said that only 7 out of 200 spare parts of diesel engine were manufactured in Pakistan and the remaining spare parts were being imported from China.

He said if the diesel engines and their spare parts were available on cheaper rates, then it would benefit the small farmers. "It will reduce the cost on crops and farmer will be more well to do and by which country shall progress further", he added.

He said the government should pay more attention to the needs of agriculture sector as it was backbone of country's economic and social stability. Asif said that industries were being shut down due to shortage of electricity as there was hardly any work for the industries to carry out. He said the elimination of electricity load shedding and progress of industries should be ensured.


(BRecorder)

• 0 comments »