(042) 35300721
Mon - Fri 09:00-17:00
Free consultant
                November 14, 2012  (Wednesday)News & Views

Newsletter from Ashraf Reza & Company, Bahawalpur, www.ashrafrezaandcompany.com,email: reza888itp@gmail.com

Assalam o Alaikum W’Rahmatullah W’Barakatuhu   !!!

Cabinet likely to approve two new tax schemes today

 The Federal Cabinet which, is scheduled to meet on Wednesday (today), is expected to give its approval to two tax incentive schemes – Tax Registration Enforcement Initiative, 2012 and Investment Tax Scheme, 2012 – of the Federal Board of Revenue (FBR) for documentation of economy and legalisation of un-disclosed assets along with income/expenditure. 

Sources told Business Recorder here on Tuesday that the Federal Cabinet is also expected to accord immunity to persons availing these schemes from the National Accountability Ordinance, 1999, Federal Investigation Agency Act, 1974, Companies Ordinance 1984 and Foreign Exchange Ordinance, 2002. In this connection, the FBR has finalised the proposal for placing it before the Federal Cabinet. 

According to sources, a significant segment of country”s economy is undocumented. The growing size of the underground economy is not only depriving the national exchequer of its due share but is also profoundly hindering economic planning and development. A large number of businesses and individuals who are regularly filing their income tax returns are avoiding their legal obligations by either under-declaring or not correctly declaring their assets and income. On the other hand, a large number of businesses and individuals who are required to be registered with the FBR and to regularly file their income tax returns are avoiding their legal obligations. 

According to sources, the FBR and Nadra have data of multiple bank accounts, travels, assets and other details of these non-filers. Based on this data, two tax incentive schemes are being proposed by the FBR. Previous attempts made aimed at registering them failed as FBR”s field units unfortunately compromised data. 

Sources said the Tax Registration Enforcement Initiative, 2012 had been devised to make an attempt through a simple scheme which would be administered through banks along with Nadra under proposed section 120B of Income Tax Ordinance 2001 to register and bring into tax net non-filers of tax returns. A fixed tax is proposed and provides cover to undeclared income/assets upto Rs 5 million.

Sources also said the Investment Tax Scheme, 2012, was being proposed to be enacted under an authority stipulated by the section 120A of Income Tax Ordinance 2001, which would spell out a simple scheme to provide a mechanism and cover to regular filers in addition to non-filers of income tax returns to declare undeclared income assets/expenditure up to the value of Rs 5 million by payment of a token tax and additional assets/income by payment of investment tax as per proposed slab. The scheme would be administered through establishing special counters with the help of banks along with Nadra, sources added. 

Both the schemes must not be taken as a safety net for those who have not complied with tax laws but will provide buoyancy to the national economy and deepen and broaden the tax base. Persons availing the schemes shall also have immunity under the National Accountability Ordinance, 1999, Federal Investigation Agency Act, 1974, Companies Ordinance 1984 and Foreign Exchange Ordinance, 2002, according to sources. Based on discussions and feedbacks from tax bar associations and trade bodies and the field units, these schemes had been fine-tuned, the sources said and added that the success of the schemes was heavily dependent upon its successful publicity. “Accordingly, it is planned to launch an organised campaign to bring it to the notice of the potential declarants and field units will also be assigned defined targets to publicise the scheme and enroll the declarants,” sources said. 

According to sources, up to five percent of the tax revenue through these schemes is proposed for expenditure on the publicity and advertisement for the launch of schemes, in accordance with prescribed procedure of Press Information Department (PID) and the Federal Government and 1.5% of the revenue receipts from the Tax Registration Scheme is proposed as share of the National Database Registration Authority (NADRA). 

Sources said it was also proposed to provide an effective alternative dispute resolution mechanism in all tax laws to settle protracted legal disputes, sources said. The proposed amendments in the Customs Act, 1969, Sales Tax Act, 1990, Income Tax Ordinance 2001 and Federal Excise Act, 2005 to take effect immediately can be made by the National Assembly through a Money Bill to be called Finance (Amendment) Bill 2012. Approval of the Cabinet is solicited for the proposal for submission of the Finance (Amendment) Bill 2012 before the National Assembly, according to sources. 

Published in The Business Recorder, November 14th, 2012.

Parametric computer balloting: FBR selects 1,217 corporate taxpayers for audit

 The Federal Board of Revenue (FBR) has selected 1,217 corporate taxpayers and 8,523 non-corporate taxpayers for income tax, sales tax and federal excise audit for the Tax year 2011 through transparent parametric computer balloting. The FBR here on Tuesday conducted computer ballot for selection of audit cases at the FBR House. The selection was made on the basis of various risk parameters developed after consultation with all stakeholders. 

President of Pakistan Tax Bar Association Zulfiqar Khan pressed the button for selection of cases. Representatives of All Pakistan Tax Bar Association, Islamabad/Rawalpindi Tax Bar Association, Federation of Pakistan Chambers of Commerce and Industry, Islamabad Chamber of Commerce and Industry, Rawalpindi chamber of Commerce and Industry, media and senior officials of FBR attened the balloting ceremony. 

Representatives of chambers and federations congratulated FBR’s Member of Taxpayer Audit for transparent balloting. Mustafa Ashraf, the FBR’s Member Taxpayers Audit, stated that the selection of approximately 15% of returns were from those filed in Large Taxpayer Units (LTUs), 5% filed by the corporate sector and 2% of returns filed by non-corporate taxpayers in RTOs as an incentive to promote voluntary compliance. This is for the first time in the history of FBR that such a reasonable percentage of cases have been selected for audit. 

Of 22,204 returns received from the corporate sector for Tax Year 2011, a total of 1,217 cases have been selected for audit. Of 519,974 returns filed by the non-corporate persons, a total of 8,523 cases were selected. The list of cases selected for audit through computer balloting was prepared under Section 214C of the Income Tax Ordinance 2001, Section 72B of the Sales Tax Act and Section 42B of the Federal Excise Act of 2005. Lessons learnt from the last three years’ litigations were considered before conducting the balloting. 

Mustafa Ashraf highlighted that cases of Presumptive Tax Regime (PTR) and salaried individuals had not been made part of the ballot. PTR cases having other sources of income are made part of the balloting. The FBR also placed the list of taxpayers ie their National Tax Numbers (NTNs) on its website duly signed by the FBR Member, Audit; Member, Inland Revenue and Chief Executive of Pakistan Revenue Automation Limited (PRAL). Lists of NTNs have been placed in ascending order so that taxpayers could easily check whether their cases have been selected for audit or not. 

He said that the balloting was done following the judgement of Lahore High Court. The FBR had asked its field formations to prioritise cases as per revenue and focus on cases selected at the Board level for audit. Cases selected by the Board for audit would be given top priority over audit cases already selected by commissioners in the field formations for the Tax Year 2011. 

About parameters applied for selection of cases, the FBR’s Member, Taxpayer Audit, said that they were shared with stakeholders, including Pakistan Tax Bar Association, field formations and FBR’s audit teams. The FBR has devised the parameters at Board level. The parameters are not new but generalised and already published in Daily Business Recorder in September this year, Mustafa Ashraf stated. 

These parameters would be changed every year in view of risk factors. Parameters of the non-corporate sector were slightly different from parameters set for the corporate sector. Mustafa Ashraf stated that the FBR had conducted computer balloting earlier this year for providing sufficient time to field formations for the timely completion of tax assessments. 

Taking into account issues of capacity of workforce in field formations, the FBR selected low percentage of taxpayers for audit. This would also not overburden tax officials while conducting the audit, but would ensure its quality. The FBR has also placed a monitoring mechanism for checking status of the cases for audit in the field formations. 

Published in The Business Recorder, November 14th, 2012.


Audit guidelines issued to LTUs and RTOs

 The Federal Board of Revenue on Tuesday issued instructions to the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to finalise tax assessment under normal law in all cases selected for audit and no agreement with the taxpayer should be made during audit process. 

The FBR has further directed the field formations to only conduct income tax audit of registered persons, who were selected through parametric computer ballot, but not registered with the sales tax department. In this connection, the FBR has issued audit guidelines to the LTUs and RTOs on the parametric computer ballot for selection of cases for audit/tax year 2011 for income tax and corresponding periods of sales tax/federal excise. 

According to the FBR’s instructions, the FBR, in exercise of its powers conferred under Section 214C of the Income Tax Ordinance 2001, section 72B of the Sales Tax Act 1990 and section 42B of the Federal Excise Act 2005 has selected taxpayers through parametric computer ballot, held on November 13, 2012 at the FBR (HQ) Islamabad. Lists of selected cases pertaining to field formation’s jurisdiction have been issued for conducting audit under the relevant statutes as per given procedures. However, if a taxpayer is not registered for sales tax / FED, audit will be conducted only for affairs of income tax. It must be ensured that the audit is conducted in transparent manner. 

The FBR further said that National Tax Number (NTNs) of taxpayers are selected for audit. The lists are prepared (corporate/non-corporate) on the basis of jurisdiction currently displayed in the NTN Master Index. However, if certain case pertains to jurisdiction of different LTU/RTO, audit is to be conducted by the LTU/RTO having lawful jurisdiction over such case. 

List sorted by NTN in ascending order is placed on the FBR’s website. The selected cases have also been entered in Tax Audit Management System (TAMS). All Chief Commissioners must ensure that audit related activities are regularly entered in TAMS by 5th of each following month. The audit proceedings will be closely monitored by the Audit Wing of FBR, the FBR maintained. 

Audits are to be finalised during the current financial year. However, field formations may prioritise audit cases based on risk-assessment and initiate cases simultaneously or stepwise, in view of the availability and capacity of audit officers. The Chief Commissioners Inland Revenue/Commissioner shall assign cases for audit to the relevant audit teams to be headed by an officer of appropriate level, keeping in view their sectoral expertise. 

The FBR has further said that the assessment in all cases selected for audit must is to be framed under normal law and no agreement with the taxpayer is to be made in that respect. The audits are to be conducted professionally and with integrity within the legal framework without creating unnecessary harassment to the taxpayers. The training needs of the audit staff may he taken care of indigenously. 

In order to complete the audits successfully, the role of Chief Commissioners is of paramount importance. They are expected not only to ensure quick disposal of audits but also maintain a respectable level in audit quality. In addition to data entry of cases selected for audit in TAMS, a monthly report on enclosed prescribed format may also be sent to the Board by 5th of following month. Member (Taxpayers Audit) will visit field formations during December 2012 in order to monitored audit performance of LTUs/RTOs for tax year 2011 as well as pending cases of tax year 2008, 2009 and 2010, the FBR audit guidelines added. 

Published in The Business Recorder, November 14th, 2012.




Hafeez upbeat after approval by Prime Minister

 Finance Minister Dr Abdul Hafeez Sheikh on Tuesday sounded optimism about the success of proposed tax amnesty scheme and gave stern warning to the tax dodgers that undocumented individuals, not availing the facility, would not get any relief after expiry of the deadline. 

The minister said the country needed increase in revenue and the government would seriously pursue the initiative. Those who are not going to avail the facility are not going to get any relief after expiry of the deadline, the minister said. Talking to media after the inaugural session of the annual meeting of Pakistan Society of Development Economists, the minister said the summary is being finalised by the Federal Board of Revenue for approval of Tax Registration and Enforcement Initiative 2012 from the Federal Cabinet today (Wednesday). 

The minister said in the past tax notices were served on the people without authentic database but this time the government has collected potential taxpayers data based on their assets, vehicles as well as travel record and other expenditures before launching the scheme. Hafeez said the availability of credible data and targeted approach would be very helpful in making the initiative successful. 

In reply to another question about holding consultation with political parties, he said the government would initiate talks with political parties from the forum of the parliament after the scheme is tabled in the House. He said the Parliament is the right forum for such discussions and the government would talk to all political parties for broadening of tax base. 

He expressed the hope that the country”s GDP rate is likely to be around 4 percent in the current fiscal year. Earlier, addressing the opening session of the conference as chief guest, Hafeez while recounting the government achievements stated that inflation has been brought down to single digit from 25 percent. 

Hafeez said the tax revenue should be increased and RGST should be imposed in the country. He said the demand should be made to people who have not allowed the government to introduce RGST in the country. The minister said increase in the federal government expenditure was half than the provincial governments. 

The minister said serious economic reforms are needed to steer the country out of the prevailing situation. He said the revamping of State Owned Enterprises is required. The minister said the Supreme Court of Pakistan is taking lead in curbing corruption by questioning people within and outside the governments. Additionally, he said National Accountability Bureau (NAB) and Public Accounts Committee (PAC) of the parliament are playing very proactive role and taking serious notice of the issue of corruption in various institutions and departments. 

Published in The Business Recorder, November 14th, 2012.

Tax evader arrested in Karachi

 The Directorate General of Intelligence and Investigation Federal Board of Revenue (FBR) has arrested a tax evader in Karachi involved in manufacturing and supply of processed flavoured tobacco under famous brand name of the “Zahoor Zafrani Patti Tambakoo”. 

Sources told Business Recorder here on Tuesday that the said brand of flavoured tobacco is very popular in Karachi. However, the directorate was shocked that the manufacture was a major tax evader in Karachi and paying nothing in the form of taxes. The agency has conducted an operation in a sensitive area of Karachi and arrested the tax evader. During current law and order situation I t, was a big initiative of the agency to arrest tax evader from the sensitive areas of Karachi. 

Details revealed that credible information was received by Directorate General that Zaheer Ahmad S/o Zahoor Ahmad is engaged in manufacturing and supply of processed flavoured tobacco used in “Paan” under the brand name of the “Zahoor Zafrani Patti Tambakoo”. The tobacco is packed in cans and is available at almost all Paan shops in Karachi. 

Further, another brand with the name of “Zaheer” (who is Zahoor’s son) is also being sold. Initial investigation revealed that the accused got registered with the Sales Tax Department on March7, 1998 as a “Commercial Importer” but engaged in the manufacturing and sale of processed tobacco products. The registered person failed to declare sales in the monthly Sales Tax returns and hence paid no sales tax thereon. As per available data the registered person is a non-filer of Sales Tax since August, 2004 and paid only Rs 25,000/- income tax in tax year 2011. 

The investigation has further revealed that besides sales tax, Federal Excise Duty has also been evaded as no FED was paid on the unprocessed tobacco during the same tax period. The business has been in operation since long and the brand is not only the number one product in the local market, but a Google search showed that it is also mentioned on various websites for facilitating export of this product from Pakistan to other countries, directorate said. 

A team of the Directorate General after completing codal formalities raided the factory premises at 25/1, Block-B, North Nazimabad, Karachi and recovered 1475 bags of 100 kg each of raw, semi processed and processed tobacco from the factory premises along with production record and other evidence. Initial stock taking shows FED and Sales Tax liability of millions of rupees is involved, agency said. 

Since, the accused persons failed to provide any evidence payment of Sales Tax or FED; FIR in the case was lodged. Zaheer Ahmad son of the Proprietor was arrested and remand from the Special Judge, Customs Excise and Sales Tax has been obtained, directorate of intelligence IR added. 

Published in The Business Recorder, November 14th, 2012.

Land port at Wagha border: FBR asks LCCI to join hands with Customs department

 Chairman Federal Board of Revenue Ali Arshad Hakeem has offered the Lahore Chamber of Commerce and Industry to join hands with the Customs Department to develop a land port at Wagha border. He was speaking at the Lahore Chamber of Commerce and Industry here on Tuesday. The FBR Chairman said that it would be a very lucrative business, therefore, could be done by forming a company listed at stock markets. 

This would benefit the entire business community to the maximum as a big business is expected through Wagha in coming days. Over the issue of Section 153-A of Income Tax Ordinance 2001, he said that it would be kept in abeyance till 2013 and new notices would be issued to businessmen. The FBR Chairman said that 3 million new potential tax payers have been identified through foreign trips, luxury vehicles and high valued properties. 

Published in The Business Recorder, November 14th, 2012.

Audit notices issued by LTUs, RTOs without FBR approval: Member IR says…

 Ijaz Hussain, Member Inland Revenue, Federal Board of Revenue (FBR) said here on Tuesday that audit notices already issued by the commissioners in the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) for Tax Year 2011 were without the approval of the Board. 

Responding to various queries of tax bar associations and chambers on the occasion of computer ballot for selection of cases for audit at the FBR House, FBR Member IR said that audit notices already issued for the Tax Year 2011 by the field formations are without approval of the FBR. Only cases selected for audit through computer balloting would be considered for Tax Year 2011. “We have to look into the cases selected directly by the commissioners in the field formations”, Ijaz Hussain added. 

FBR Member IR has informed the representatives of tax bars, chambers and trade bodies that the success of the balloting depends on the transparency and authenticity of data. The FBR has done a lot of work for the cleansing of the data so that no error is committed during selection of cases for audit. 

Ijaz Hussain assured the business community that the audit would be conducted in the most fair and transparent manner. The FBR has to work closely with the trade bodies and associations to make the exercise fruitful. He further explained that the main purpose of the audit is not to raise revenue, but to act as deterrent for checking mis-declarations and tax frauds. 

When tax bars insisted that the FBR should not go into the history of taxpayers selected for audit, FBR Member IR announced that I wanted to assure that we will not go beyond the period of the Tax Year 2011 for audit. FBR Member IR appreciated the role of the team of Pakistan Revenue Automation Limited (PRAL) which actively worked with the audit teams for computer ballot. 

He said the tax bar associations, chambers and trade bodies should share their audit and other issues with the FBR Member IR during his visit to the field formations. I have started regular visits to the field formations in different cities and I will insist the Chief Commissioners of Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to include representatives of chambers and tax bar associations in meetings convened with FBR Member IR. 

In this way, the trade bodies and representatives of tax bar associations would be able to meet the FBR Members at their respective cities for discussing their issues. The trade and business should highlight the issues to the FBR Member IR to avoid unnecessary litigation in the courts. The FBR is ready to issue circulars and notifications in genuine cases to resolve the issues of the registered persons. 

When a tax bar representative asked to suspend section 21L (payment through cross cheques) of the Income Tax Ordinance 2001, FBR Member IR stated that it is not possible to make any announcement for suspension of section 21L on national level. However, the FBR can examine the matter on case to case basis on local level. 

It was a pleasant surprise for the tax mangers and business community when representatives of chambers and trade particularly Islamabad Chamber of Commence and Industry highly appreciated the performance of the Ijaz Hussain Shah being head of the LTU Islamabad. “We are satisfied with the working style of FBR Member IR when he was DG LTU Islamabad and same positive attitude has been witnessed during his current tenure as Member IR. 

Referring to his successful experience of audit in the field formation, FBR Member IR said that he has selected 100 cases for audit when he was working in the field formation. The whole process of audit was smoothly carried out in the field formation and same method can be replicated in the Board for completion of audit cases. 

Appreciating the role of taxpayers, Ijaz Hussain stated that it is not the only country of tax collectors but the taxpayers are valuable part of the system. Tax bar associations and trade bodies are responsible bodies on the behalf of the taxpayers. “I give high value to the suggestions of the tax bars and associations”, he maintained. Ijaz Hussain, Member (Inland Revenue) while addressing the audience informed that FBR has ensured transparency in the process of selection of cases for audit. The list of cases selected for audit has been placed on FBR’s website showing taxpayers’ National Tax Number only without displaying their names. 

Published in The Business Recorder, November 14th, 2012.

Promoting good governance: FTO to be given a month for passing orders: official

 The government has decided to give one month to the Federal Tax Ombudsman (FTO), instead of unlimited time to review the findings or recommendations for passing an order, an official toldBusiness Recorder on Tuesday. For this purpose, amendments in the Establishment of the office of Federal Tax Ombudsman Ordinance, 2000 are expected to be approved by the Federal Cabinet scheduled to meet on Wednesday (today) with Prime Minister Raja Pervez Ashraf in the chair. 

The office of Federal Tax Ombudsman was established in 2000 under the FTO Ordinance of 2000. Over time, a number deficiencies and lacunae have been observed which need amendments or which are otherwise necessary for standardisation of Ombudsman law and to improve its working for promoting good governance and a taxpayer-friendly tax jurisdiction. 

For this purpose, amendments in sections 2, 3, 4, 5,8,9,11,14, 29, 32 and 37, proposed by the office of Tax Ombudsman will be considered by the Federal Cabinet. The proposed amendments to the Establishment of the office of Federal Tax Ombudsman Ordinance 2000 are as follows: 

(a) Section 2 has been amended to make the definition of maladministration more inclusive, to delete entries relating to the repealed laws and to include the laws now in force, namely: (i) the Anti-Dumping Duties Ordinance, 2000 (LXV of 2000); (ii) the Income Tax Ordinance, 2001 (XLIX of 2001); and (iii) Federal Excise Act, 2005. (b) Section 4 has been amended. The tenure of Ombudsman in most countries of the world is kept at least at par with the term of the Parliament. The rationale is that the decision to reappoint the Ombudsman or appoint a new Ombudsman must not rest with the same government.

In Australia, for instance the tenure of the Ombudsman is seven years. The tenure of FTO is therefore proposed to be enhanced from four to five years to bring this aspect in line with the global practice. For the same reason and in order to maintain continuity in office on completion of tenure, the FTO shall continue to function until his successor enters upon the office. It may be pointed out that in most countries there is no bar on reappointment of Ombudsman. Recently, the Provincial Government of Sindh has also amended law to make the Provincial Ombudsman eligible for reappointment. 

(c) Amendment of section 5 has been proposed to bring the law in conformity with clause (2) of the Article 207 of the Constitution where a retired judge of the Supreme Court who although under restriction to hold the office of profit before expiration of two years is not debarred from holding a judicial or quasi-judicial office or office of Chief Election Commissioner or of Chairman or member of the Law Commission or Chairman or member of Islamic Ideology Council. Under the proposed amendment the FTO, notwithstanding two years bar, shall be eligible to hold judicial or quasi-judicial office. 

(d) Section 8 is being amended to allow flexibility in determining salary, allowances, etc of FTO staff, with the approval of the President, when compared with other offices performing similar functions. (e) The expression ‘court of competent jurisdiction’ used in section 9(2)(a) was undefined with the result that the clause was being misused to delay the process of the office of Federal Tax Ombudsman. The definition is aimed to remove the lacuna. 

(f) Section 11 is being amended to prevent frivolous litigation on account of time limitation, and to bring it unambiguously in line with Article 254 of the Constitution. (g) Under section 14 although the Federal Tax Ombudsman is empowered to review his finding or recommendation or order passed by him but there is no time limit prescribed in the law for filing a review application. Thirty days time is being provided to file the review. With that amendment the deficiency in law shall stand removed. 

(h) Section 29 is proposed to be amended to bring it in conformity with Article 212 of the Constitution. (i) Section 32 of the Ordinance deals with the representations to the President by aggrieved persons and in order to reduce the unnecessary representations which were defeating the objective and spirit of the law, the following amendments are proposed in section 32 (I ) no representation or legal proceedings by a Tax Employee shall lie without permission of Secretary, Revenue Division or where a representation in the same recommendation has already been made by the Revenue Division; (ii) no representation shall lie wherein a review filed by an aggrieved person the Federal Tax Ombudsman has maintained his earlier finding; and (iii) to bring the issue of “personal hearing” by the President in line with the latest court decisions wherein it has been held that as President cannot be expected to grant “personal hearings” the filing of written comments by the Parties should suffice. 

(j) Section 37 is being amended to clarify that FTO Ordinance will have overriding effect notwithstanding the date of promulgation of the laws included under “Relevant Legislation”. This will stop much unnecessary litigation on the point whether or not the FTO Ordinance 2000 had overriding effect on Income Tax Ordinance 2001. 

Published in The Business Recorder, November 14th, 2012.

782 returns filed by big companies: LTU Karachi to conduct audit of 117 corporate taxpayers

 Large Taxpayer Unit (LTU) Karachi would conduct income tax, sales tax and federal excise audit of 117 corporate taxpayers out of 782 income tax returns filed by the big companies and corporate entities for the Tax Year 2011. The list of cases selected for audit through parametric computer ballot here on Tuesday revealed that the LTU Islamabad received 300 income tax returns for Tax Year 2011 and selected 45 cases for audit. 

LTU Karachi received 782 corporate returns and 117 cases were selected for audit and LTU Lahore received 316 corporate income tax returns and selected 47 cases for audit. The list further disclosed that the Regional Tax Office (RTO) Abbottabad received 112 corporate returns and selected 5 cases for audit whereas the same RTO received 3,946 non-corporate returns and 78 cases were selected for audit. RTO Bahawalpur received 177 corporate returns and selected 8 cases for audit and whereas 13,735 non- corporate returns were received and 274 cases selected for audit. 

RTO Faisalabad received 916 corporate returns and selected 45 cases for audit. However, the same RTO received 56,884 non-corporate returns and 1,137 cases were selected for audit. RTO Gujranwala received 311 corporate returns and selected 15 cases for audit. At the same time, this RTO received 25,517 non-corporate returns and 510 cases were selected for audit. 

RTO Hyderabad received 206 corporate returns and selected 10 cases for audit whereas RTO received 17,316 non-corporate returns and 346 cases were selected for audit. RTO Islamabad received 2,109 corporate returns and selected 105 cases for audit. This RTO received 7,900 non-corporate returns and 158 cases were selected for audit. RTO Multan received 598 corporate returns and selected 29 cases for audit whereas the same RTO received 43,417 non-corporate returns and 868 cases were selected for audit, list revealed. 

According to the list, RTO Peshawar received 767 corporate returns and selected 38 cases for audit whereas RTO received 20,218 non-corporate returns and 404 cases were selected for audit. RTO Quetta received 242 corporate returns and selected 12 cases for audit whereas the same RTO received 4,874 non-corporate returns and 97 cases were selected for audit. RTO Rawalpindi received 604 corporate returns and selected 30 cases for audit whereas RTO received 33,895 non-corporate returns and 677 cases were selected for audit. RTO Sargodha received 60 corporate returns and selected 3 cases for audit whereas RTO received 7,841 non-corporate returns and 156 cases were selected for audit. RTO Sialkot received 501 corporate returns and selected 25 cases for audit whereas the same RTO received 21,494 non-corporate returns and 429 cases were selected for audit. RTO Sukkur received 52 corporate returns and selected 2 cases for audit whereas RTO received 13,119 non-corporate returns and 262 cases were selected for audit. RTO-I Karachi received 4,361corporate returns and selected 218 cases for audit whereas the same RTO received 4,8370 non-corporate returns and 967cases were selected for audit. RTO-I Lahore received 3,598 corporate returns and selected 179 cases for audit whereas this RTO received 57,906 non-corporate returns and 1,158 cases were selected for audit. RTO-II Karachi received 2,228 corporate returns and selected 111 cases for audit whereas this RTO received 12,837 non-corporate returns and 256 cases were selected for audit. 

RTO-II Lahore received 2,323 corporate returns and selected 116 cases for audit. This RTO received 28,151 non-corporate returns and 563 cases were selected for audit. RTO-III Karachi received 1,147 corporate returns and selected 57 cases for audit. However, this RTO received 9,182 non-corporate returns and 183 cases were selected for audit, FBR’s list of audit selection added. 

Published in The Business Recorder, November 14th, 2012.

Minimum taxation: Controversial clarification withdrawn

 The Federal Board of Revenue has withdrawn a controversial clarification, which has created an anomaly on the issue of ‘minimum taxation’ of taxpayers falling within service sector under section 153(1)(b) of the Income Tax Ordinance, 2001 as amended vide Finance Act, 2009. In this regard, the FBR has issued circular 9 of 2012 to withdraw the clarification letter C.No 1(10)WHT/2006-Pt.III dated November 01, 2010. 

Sources said that the clarification letter C.No 1(10)WHT/2006-Pt.III dated November 01, 2010 issued by the Secretary (Withholding Tax) FBR was not only contrary to the law but also against the verdicts of Federal Tax Ombudsman (FTO) in C.No 719/LHR/IT(594)/1258/2010 and C.No 627/LHR/IT(483)/1310/2011. In this regard, a tax lawyer Waheed Shahzad Butt of Tax Resolution Services Company has written a letter to the FBR, requesting the tax department to withdraw the clarification ab initio. Later on the matter was forwarded to FTO for intervention. The issuance of circular 9 of 2012 is actually outcome of intervention of FTO forum. 

Tax lawyer further elaborate the matter that under the Finance Act 2009, an amendment was made in Section 153 rendering all service sector taxpayers subject to minimum withholding tax @ 6 percent of gross receipts. It meant that neither a refund could be allowed nor it is adjustable against any other source of income and it would be treated as minimum tax if their assessed income tax was less than the amount withheld @ 6 percent of gross receipts. After the amendment, the FBR issued letter C.No 1(6)WHT/2009 dated July 4, 2009 advising the Directors General, LTUs/RTOs, that the tax deducted under Section 153(1)(b) of the Ordinance would be the “Minimum Tax”. The FBR also issued a circular No 3 of 2009 dated 17th July, 2009, advising the field formations that tax deducted under Section 153(1)(b) would be considered “minimum tax” and all taxpayers falling in the ambit of this provision of law shall file returns under the normal tax regime instead of statement under final tax regime. The issue was further elaborated with illustrations covering both corporate as well as non-corporate taxpayers. 

Secretary (WHT), through letter C.No 1(10) WHT/2006-Part-III dated 1st November, 2010 clarified that the law did not allow to club income on account of services rendered by professionals – on which minimum tax @ 6 percent had already been deducted – with other sources of income for further taxation under the normal tax regime. The Income Tax Ordinance 2001 has not given legal backing to this clarification issued by Secretary WHT. Even the Forum of the Federal Tax Ombudsman has also disregarded this controversial clarification. 

In the light of legal position and own motion intervention of the FTO, FBR has decided to withdraw the clarification vide Circular 9 of 2012, tax lawyer added. According to the FBR circular, the section 153(1)(b) of the Income Tax Ordinance 2001 was amended vide Finance Act 2009 whereby tax deducted on services was made minimum tax. References were made to the Board regarding taxability of amount received by the Executive Directors on the board of a company (not being employee of the company). In this regard, a clarification letter was issued by the Board vide C.No 1(10)/WHT/2006/Pt.III, whereby it was stated that “income falling under section 153(1)(b) is to be treated as a separate block of income and therefore cannot be clubbed with any other source of income.” Representations were filed by tax practitioners/queries from field formations were received, pointing out that the Boards’ clarification was contrary to the law. 

The matter was examined in the light of relevant provisions of law and it was found that the said clarification was contrary to the legal provisions Receipts on which the withheld tax constitutes minimum tax are not be treated as a separate block in contradistinction to Income falling under the Fixed Tax Regime, FBR said. 

It is thus clarified that, the amount received under section 153(1) (b) of the income Tax Ordinance 2001, on account of “rendering or providing of services”, shall be clubbed with other receipts of the taxpayer failing under the normal tax regime and taxable income shall be worked out accordingly. Normal tax rates are to be applied to the resultant taxable income. However, if the tax, worked out on the payments, subject to deduction under section 153(1)(b) is less than the withheld tax, the later being the minimum tax shall be the tax liability on the payments for services rendered which have been subjected to deductions of tax under section 153(1)(b). The earlier clarification issued by the Board vide letter C.No 1(10)WHT/2006-Pt.III dated 01.112010 being contrary to the law is hereby withdrawn ab initio, the FBR circular added. 

Published in The Business Recorder, November 14th, 2012.

Major proposed tax initiative approved by Prime Minister

 Prime Minister Raja Pervez Ashraf on Monday gave his approval to proposed ”Tax Registration and Enforce-ment Initiative” aimed at documenting over 3.8 million potential individuals, who belong to rich class but are out of tax net. Sources told Business Recorder here on Monday that the ”Tax Registration and Enforcement Initiative” would be placed before the Cabinet, which is expected to meet on Wednesday (November 14), for its early submission to the Parliament. 

Appreciating the FBR initiative, the PM commented that had the idea of the registration scheme been materialised two years back, country”s economy would have been in a better shape. “We still have enough time for implementation of scheme, which would be instrumental in raising tax-to-GDP ratio, expanding the tax-base and raising revenue for the government,” sources quoted the PM as telling the FBR team. 

The PM has also directed Ministry of Finance and FBR to prepare a formal summary and put the scheme before the Federal Cabinet for approval. Following approval of the ”Tax Registration and Enforcement Initiative” by the Cabinet, the scheme would be presented before the National Assembly for formal approval. According to sources, Finance Amendment Bill-2012 will seek powers to authorise the FBR for making registration scheme and protection to the persons availing the scheme from other laws such as National Accountability Ordinance-1999 and Foreign Exchange Manual 2002 etc. 

The Prime Minister, however, raised two basic questions about the scheme before giving his approval to it. Tax authorities promptly responded to the queries of the PM and explained the legal and technical implications of the scheme. The PM asked how people would be encouraged to declare their assets and pay taxes under new scheme if they believed that there would be a new amnest6y scheme after every five years. The FBR Chairman responded that previously schemes were not backed by authentic database and details of expenditure. 

Schemes were not targeting potential persons on the basis of authentic information whereas now the proper data was available for a targeted action against persons, who would not avail the scheme. Moreover, previously action was taken on the basis of income of a person, which was a time-consuming process and now action would be taken on the basis of expenditures made by individuals. On the basis of expenditures, the Board could easily determine their income for taking targeted action against potential individuals. The scheme would also give targeted punishment to persons who would not avail the scheme. 

The PM also raised another question: How FBR would address the concerns of individuals about their harassment at the hands of taxmen if they declared their entire assets for availing amnesty under the scheme. Tax authorities responded that the FBR would move a Bill in the Parliament for amendment in rules to give legal backing to all features of the proposed scheme. In the past, no amnesty scheme was rolled back. The Parliament would give its approval to the scheme and there was no question of its rolling-back. Thus, no questions would be raised about the declarations made under the scheme due to legal protection available to them. 

According to sources, the scheme had been approved in broader terms by the Prime Minister and now the final details of the scheme would be modified on Tuesday for its presentation before the Cabinet on Wednesday. During the meeting, the FBR told that the blocking of the CNICs should not affect the basic rights of the citizens. An FBR official responded that the citizens” basic rights would not be suspended as only services of un-documented persons not availing the scheme would be suspended. 

Chairman FBR Ali Arshad Hakeem informed the meeting that tax collection had doubled since 2008 from Rs 1 trillion to Rs 2 trillion this year. Moreover, there had been an increase of 22% in the tax revenues this year as compared to the last year. The Prime Minister said that the self respect of the tax payers should be protected and a taxation structure aimed at enhancing revenue base should be streamlined in a manner where culture of voluntary tax payment was promoted. The PM further said that a large segment of Pakistan”s economy had been operating informally, depriving the national exchequer of its due share and acting as a hindrance towards economic planning and development. 

The Prime Minister said that demand for cars, luxury goods and housing reflected the availability of wealth in the country. Unfortunately, however, country”s tax base was not commensurate with this phenomenon, he regretted. The Prime Minister asked the FBR to plug leakage of taxes and bring elite groups of the society into the tax net. 

The meeting was attended by Dr Abdul Hafeez Shaikh Minister for Finance, Syed Naveed Qamar Minister for Defence, Syed Khursheed Ahmed Shah Minister for Religious Affairs, Farooq H. Naek Minister for Law, Dr Nadeem ul Haq Deputy Chairman Planning Commission and senior officials. The FBR officials included FBR Chairman Ali Arshad Hakeem, Senior FBR Member Tax Policy Asrar Raouf and FBR Member Inland Revenue Ijaz Hussain Shah. 

Published in The Business Recorder, November 13th, 2012.

FBR fails to execute key reforms

 The Federal Board of Revenue has failed to implement key taxation reforms agreed with the International Monetary Fund (IMF) in November 2008 as part of the $7.6 billion Stand By Arrangement. The major tax reforms that the government has failed to implement are the introduction of Reformed General Sales Tax (RGST) and reduction of sales tax exemptions and zero-rating. 

The Pakistani authorities repeatedly renewed their commitment to press ahead with the introduction of a broad-based VAT in 2010-11. They recognised that time is of essence and emphasised that the introduction of a broad-based VAT in mid-2010 was a key pillar of their medium-term fiscal strategy. 

Tax authorities had prepared a detailed time-bound action plan for VAT implementation, but the government was unable to introduce this key reform measure due to strong political resistance. There are around 70,000 to 80,000 registered persons and the number of sales taxpayers has yet to be expanded. For this purpose, sources informed this correspondent that its experts are analyzing different proposals for expansion of the sales tax base. 

On the revenue side, the FBR committed to take steps to strengthen tax enforcement. Sources revealed that the FBR has sufficient data of un-documented individuals to take action against them under the enforcement measures but instead FBR has opted to introduce a tax registration scheme for documentation of potential tax payers instead of direct action against tax dodgers. 

However, the FBR has enforced an important measure to ensure display of National Tax Numbers (NTN) outside the shops/retail outlets and business premises as per provisions of the income tax law. In this regard, the FBR has issued instructions to the field formations. 

The government assured the IMF that an integrated tax administration organisation on a functional basis would be established at the FBR (integrating both the income tax and sales tax administration). The Inland Revenue Service comprising income tax and sales tax officials was established following integration of service group and integration of taxes is being done with the help of Integrated Tax Management System (ITMS). 

Published in The Business Recorder, November 13th, 2012.

Incoming international calls: PTA asked to reply on levy of additional tax

 The Lahore High Court on Monday sought a reply from Pakistan Telecommunication Authority (PTA) on a plea filed by a private company, petitioner in a case against the levy of additional tax on incoming international telephone calls, accusing the authority and FIA of extending illegal harassment.

The petitioner Brain Telecommunication had challenged the additional tax levied by PTA being unlawful and the court had temporarily restrained the government from recovering the impugned tax till the final decision of the court. The company through an application alleged that the FIA and PTA had been extending threats to its management since the court granted it relief against the levy of the tax. 

Representing the petitioner – company Barrister Chaudhry Muhammad Umar said the respondents had been pressurising his client to withdraw the petition.However, counsel of FIA, present in the court, rejected the allegation and urged the court to dismiss the plea being baseless. The court adjourned further hearing for next week after a deputy attorney general sought time to file reply. 

Published in The Business Recorder, November 13th, 2012.

Penalising forex firms, banks: SBP to be granted appellate powers

 The federal government has decided to give appellate authority powers to the Governor of State Bank of Pakistan (SBP) in case any foreign exchange company or bank is penalised for violating the Foreign Exchange Regulation Act of 1947, officials said on Tuesday. SBP is the regulator of the foreign exchange regime in Pakistan and is responsible for administration of the Act. 

According to the Finance Ministry, the country needs effective enforcement powers to regulate the foreign exchange business of banks and exchange companies, however, under the existing provisions, SBP has no direct power to impose monetary penalties and has to follow a lengthy procedure of adjudication. It can only suspend or cancel the licence of a bank or an exchange company on violation of any provision of the Act which often becomes more severe than the violations warrant. 

The sources said the Federal Cabinet during its meeting on June 26 this year considered a proposal of the Finance Ministry for insertion of a new section ie 23 k through an amendment in the Foreign Exchange Regulation Act of 1947(Fera), 1947 and decided that “amendments will be resubmitted to the Cabinet after addressing the reservations of Law and Justice Division in accordance with the constitutional provisions”. 

The Law and Justice Division observed that the expression “SBP may oppose penalty” was vague and penalty imposing authority should not be the same. The clause 23 k (1) has, therefore, been modified in the light of Law Ministry’s observations. 

Accordingly, a modified draft bill for insertion of the section 23 K in the Act duly vetted by the Law and Justice Division is as follows: (i) “Without prejudice to the provisions of sections 3AA, 23 or 23B, if any person, contravenes any provision of this Act, or any order, rule, regulation or direction issued there under and it is necessary to take immediate action to deal with such contravention, no officer of the State Bank other than the Additional Director or Director may, after giving him or it show cause notice to be replied within fifteen days and affording such person an opportunity of being heard, impose fine which may extend to one million rupees for each contravention, and where the contravention is a continuous one with a further penalty which may extend to twenty thousand rupees for each day during which such contravention continues; (ii) where the person guilty of such contravention is a company or a body corporate, every director, manager, secretary or other officer or agent thereof shall be deemed guilty of such contravention, if the contravention was committed with his knowledge or consent or if he did not exercise due diligence to prevent the commission of the offence;(iii) if any person fails to pay any penalty imposed, within the time stipulated in the order imposing the penalty, the State Bank may, without any notice to such person, recover the amount of such penalty from any account, or assets, monetary or otherwise, of the defaulter held with State Bank or any bank or a financial institution; (iv) if any bank or financial institution to which notice has been sent under sub-ection (3) fails to debit the amount of penalty under the said sub-section, it shall itself be liable to pay such amount to the State Bank, as if it had itself committed the contravention; and (v) any person aggrieved by an order passed and penalty imposed under this section may, within thirty days of the order, prefer appeal to the Governor, State Bank.” 

Published in The Business Recorder, November 14th, 2012.

All federal government schools: National Assembly passes compulsory education law

 The National Assembly on Tuesday passed ‘The Right to Free and Compulsory Education Bill, 2012′ unanimously to ensure free and compulsory education to all five to sixteen years old children. The Bill was moved by MNA Yasmeen Rehman on private members’ day. 

The Bill provides education for all children of age of five to sixteen years in schools established by the federal government and local government in Islamabad Capital Territory. According to Article 25A in the first chapter of fundamental rights of Constitution, Right to education,” The State shall provide free and compulsory education to all children of the age of five to sixteen years in such manner as may be determined by law.” 

The Bill contains 29 clauses. Clause three of the Bill about right of child to free education says that (1) every child, regardless of sex, nationality or race, shall have a fundamental right to free and compulsory education in a neighbouring school. (2) No child shall be liable to pay any kind of fee, charges, expenses, etc, which may prevent him from pursuing and completing the education. 

Clause 14 of the Bill talks about registration of schools. Schools, “other than a school established, owned or controlled by the appropriate government”, would not be allowed to run “without obtaining a certificate of registration from the prescribed authority”. “Any person who establishes or runs a school without obtaining certificate of registration, or continues to run a school after withdrawal of registration, shall be liable to fine which may extend to Rs 200,000 and in case of continuing contraventions, to a fine of Rs 25,000 for each day during which such contravention continues.” According to clause 10, 10 percent quota should be earmarked for disadvantaged children in private schools. 

According to Clause 16 (5) and (6) of the bill, any parent who would refuse to send their children to schools, “shall on conviction be punishable with fine which may extend to five thousand rupees and with further fine which may extend to Rs 500 every day after the conviction for which the failure continues or with imprisonment which may extend to three month or both. 

Clause 16 (6) addressed the issue of child labour, saying that people employing children for labour would be fined with a penalty of Rs 50,000 extendable and six months imprisonment extendable. The fine, which may be extend to Rs 1,000 for every day after the conviction for which the non-attendance at a school continues. Yasmeen Rehman said that this legislation would ensure better education for children. Federal Minister for Religious Affairs Syed Khurshid Ahmed Shah said that provision of compulsory education to children was enshrined in Article 25A of the Constitution. 

Dr Azra Fazal Pechuho, Shahnaz Wazir Ali, Asia Nasir, Khushbakht Shujaat and other women lawmakers also termed it a positive step. As many as six bills were introduced in the Lower House of parliament on private members’ day. They included ‘The Protection and Welfare of Khawaja Saras Rights Bill, 2012, The Pakistan Psychological Regulatory Authority bill, 2012, The Criminal Law (Amendment) Bill, 2012, The Pakistan Food Security for Poor People Bill, 2012, The Criminal Law (Amendment) Bill, 2012 and The Control of Narcotics Substances (Amendment) Bill, 2012. 

‘The Protection and Welfare of Khawaja Saras Rights Bill, 2012’ proposes different protective and welfare measures in addition to ending social discrimination against eunuchs as a whole. The amended bill on Narcotics Substances calls for a legal mechanism to check the availability of narcotic substances, particularly in the vicinity of schools, colleges or other public places. 

Published in The Business Recorder, November 14th, 2012.

Senate adopts bill on intellectual property rights

 The Senate on Tuesday unanimously passed ‘The Intellectual Property Organisation of Pakistan Bill, 2012’ which had already been passed by the National Assembly. The Bill was moved by Federal Law Minister Farooq H. Naek. It will now go to the President for signature to become an act of parliament. 

Objects and reasons of the Bill reads: “On independence, three separate and distinct offices ie the Trade Marks Registry, Copyright Office and Patent Office, for protection of Intellectual Property Rights existed in Karachi which worked under their respective Acts/Laws/ Rules, under the administrative control of different Ministries of Government of Pakistan. 

“These offices worked under the Law/Rules framed in the British times and there was no effective co-ordination between the three separate offices. A need was, therefore, felt to integrate all the different offices, for protection of Intellectual Property Rights in Pakistan. “Accordingly, the Pakistan Intellectual Property Rights Organisation Ordinance was promulgated on April 8, 2005 under the administrative control of the Cabinet Division. Upon the commencement of the PIPRO Ordinance 2005, the Trade Marks Registry, Copyright Office and Patent Office were integrated and became part of the new Organisation under a unified and integrated management. 

“Subsequently, several Ordinances were promulgated to give continuity to the Organisation and the last Ordinance (No XXXI of 2009) expired on 25th March, 2010. In order to continue establishment of the Intellectual Property Organisation of Pakistan for the protection of Intellectual Property Rights in Pakistan, the President was pleased to promulgate the IPO-Pakistan Ordinance, 2012 on 24th April, 2012. 

By virtue of its membership to the World Trade Organisation (WTO), Pakistan is also signatory to the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The TRIPS agreement obligates the Government of Pakistan to ensure adequate protection of Intellectual Property Rights in the country for domestic and international rights, holders alike. “Failure to provide such protection can attract legal action against Pakistan in WTO Dispute Settlement Mechanism. Therefore, the President was pleased to promulgate IPO Ordinance, 2012 which empowers the authority to bring the Trade Marks Registry, Patent Office and Copyright Office under one umbrella.” 

Published in The Business Recorder, November 14th, 2012.

‘Tight gas’ from Kirthar block: Polish firm, SSGC sign GSPA

 A Polish oil and gas production firm and Sui Southern Gas Company Limited (SSGC) on Tuesday singed Gas Sales Purchase Agreement (GSPA), adding 30 Million Cubic Feet (MMCFD) of ‘tight gas’ from Kirthar block in Sindh in SSGC’s system. After the signing ceremony, Dr Asim Hussain, the Prime Minister’s adviser on Petroleum and Natural Resources, told reporters that this is the first-ever ‘tight gas’ GSPA in Pakistan. 

The agreement was signed by Pakistan Petroleum Limited (PPL), Sui Southern Gas Company Limited (SSGCL) and Polskie Gornictwo Naftowe i Gazownictwo (PGNIG). The agreement signing ceremony was witnessed by Dr Asim Hussain, Dr Waqar Masood, the Secretary Ministry of Petroleum and Natural Resources and other officials. The Kirthar block is jointly owned by the Polish firm and Pakistan Petroleum Limited (PPL) and production from the field would start in May next year. Officials said that the price of ‘tight gas’ would be $6 per mmbtu, which would be much higher than the current gas price. Hussain said that ‘tight gas’ production would start in May 2013 and SSGC would lay a 52-kilometre-long pipeline at an estimated cost of Rs 325 million, carrying gas from the Suleman Range to the Nooriabad industrial estate. 

He said that production from two wells that would produce 15 million cubic feet gas per day (mmcfd) each. He said that the Polish firm and PPL would further provide gas to the Sui Southern Gas Company limited and supply it to industries in the Nooriabad industrial estate in Sindh. 

Hussain said that polish firm had invested $40 million to explore tight gas from Kirthar block in Dadu district while $20 million would be further invested. “The Polish firm has explored ‘tight gas’ from two wells. It will also dig other wells to explore more gas,” Hussain said 

He rejected reports that Pakistan was facing any external pressure against the Iran-Pakistan gas project, adding that the nation would soon hear “good news” about this project. Hussain reiterated that the agreement was a significant step in the implementation of Pakistan’s Tight Gas Policy announced in 2011 for providing economically viable sources of energy. He stressed that the government had introduced incentives and investor-friendly policies for boosting investment in the Oil and Gas sector for substantially bridging the demand and supply gap of natural gas. Waldemar Woiciech Bak, Managing Director of PGNiG Pakistan thanked MD PPL for the support PPL has extended as a joint venture partner throughout this period to bring the project to its current status. 

MD PPL Asim Murtaza Khan hoped that the timely completion of Rehman project will increase the gas supply significantly. He assured POL’s full support in this endeavour. MD SSGCL Zuhair Siddiqui appreciated JV partners for leading the industry in unconventional gas production and hoped that they will be bringing in more gas to the system in near future. An agreement between the Polish firm and SSGCL for laying the 52-kilometre-long pipeline from PGNIG’s Rehman Field to Naing Value Assembly of SSGCL in Dadu, was also signed on the occasion. SSGCL was awarded the contract for laying the pipeline. The project is likely to be completed by April next year. 

Published in The Business Recorder, November 14th, 2012.

Survey of Pakistan to be made national mapping agency: draft

 The government has decided to make the Survey of Pakistan into a national mapping agency, according to the draft of a proposed bill. According to the draft bill, the government will detain for at least three months elements damaging the Survey of Pakistan’s markings, sources said on Tuesday. 

The Survey of Pakistan is a national mapping organisation is responsible for surveying and mapping requirements of the Armed Forces as well as civilian organisations/ departments. Rapid developments in the field of surveying and mapping, especially computer-aided cartography, availability of satellite imagery and satellite-based Global Positioning System (GPS) have greatly facilitated the art of map making. 

As a result, a number of firms were engaged in mapping activities. Most of them, being non-professional, were not only producing sub-standard maps, but were also involved in mapping of sensitive areas without any authorisation. If the mushroom growth of such firms was not checked instantly, it would be a potential source of high security risk on the one hand and a decline in mapping standards on the other. 

The Ministry of Defence argued that in the absence of any law and regulatory authority, it would be technically and legally difficult to keep a check on the unlawful activities of such unauthorised firms. Australia, China, India, Turkey, the US and the UK have already enacted supportive laws and framed necessary laws to regulate the mapping activities. 

The objectives of regulating and implementing surveying and mapping standards was to obviate potential security risk to sensitive information, prevent damage to affixed survey markers, avoid duplication of effort in mapping and to transform the Survey of Pakistan into a National Mapping Agency, a draft of Land Surveying and Mapping Bill-2010 has been prepared by the Survey of Pakistan. 

Salient features of the Bill are as follows: (i) transform the Survey of Pakistan into a National Mapping Agency ie an authority regulating surveying and mapping activities in the country; (ii) to make it compulsory for all firms involved in Surveying and Mapping activities to get themselves registered with the Survey of Pakistan; (iii) to make it obligatory for all firms involved in Surveying and Mapping activities to adopt Surveying and Mapping standards framed by the National Mapping Agency, ie the Survey of Pakistan; (iv) to stop unqualified/unregistered firms from taking part in surveying and mapping activities that could pose a security risk to the state; (v) to protect established and affixed survey markers at various locations across the country from damage by assigning their responsibility to local district management/ governments; (vi) to avoid duplication of efforts in the field of mapping especially in the public sector, thereby economising on public exchequer; and (vii) to assess mapping requirements of public and private sectors on a yearly basis, thereby lending technical support to federal and provincial developmental plans and activities. 

Offences and penalties will be as follows: (a) any organisation, firm, individual or group of individuals engaged in any unauthorised activity within the meanings of this Act shall render itself a accused of illegal practices and will be asked by Survey of Pakistan to immediately suspend all such activities; (b) Survey of Pakistan shall ask concerned police to register a criminal case on such activities; (c) depending upon nature of such violations, the accused shall be asked by the Survey of Pakistan or its designated official to deposit the entire received money with the department and a penalty up to fifty thousand rupees; and (d) in case Survey of Pakistan is convinced of major offence on the part of the accused then his case shall be referred to a court of law and shall be tried for the following, namely (i) any individual or group causing hindrance and obstruction to the work being done by Survey of Pakistan and a registered surveyor shall be liable to be imprisoned for a term which may extend upto one month and a fine upto Rs 50,000; (ii) any individual or group causing damage to survey mark shall be liable to be imprisoned for a term which may extend upto three months and a fine upto Rs 100,000; (iii) an individual who engages in geospatial data production, analysis and surveying and mapping activities in violation of the provisions of this Act shall be liable to be imprisoned for a term which may extend upto one year and a fine upto a million rupees; (iv) every act of damaging, destroying, removing, seizing, occupying or establishing a mark resembling a permanent survey mark of Survey of Pakistan shall be an offence under this Act, punishable with imprisonment for a term which may extend upto one month and a fine upto Rs 50,000; and (v) the owners, directors or managers whosoever of any accused organisation, firm individual or group of individuals which engages in geospatial data production analysis surveying and mapping activities or any related activities in violation of the provisions of this Act, shall be liable to be imprisoned for a term which may extend up to one year and a fine upto Rs 5 million. 

Published in The Business Recorder, November 14th, 2012.

Fertiliser plants on SNGPL network: no deal on resumption of gas supply

 The Ministry of Petroleum and Natural Resources and fertilisers firms on Tuesday failed to reach an agreement on the resumption of gas supply to fertiliser plants from the Sui-Northern Gas Pipelines (SNGPL) network. A meeting, held here with Dr Asim Hussain, the Prime Minister’s Advisor on Petroleum, in the chair, which discussed various options for resuming the gas supply to the fertiliser sector. 

A senior industry official, who attended the meeting, told Business Recorder: “We have discussed different plans with officials of the Petroleum Ministry, including provision of $400 million from receipts of the Gas Infrastructure Development Cess (GIDC) to fertiliser firms for the construction of 1,000-kilometre-long gas pipeline for utilisation of low BTU gas to subsidise the building and laying of gas transmission lines”. 

The GIDC is a tax imposed on gas consumers, to generate funds for gas pipelines and LNG import projects, Iran-Pakistan gas pipeline and Turkmenistan-Afghanistan-Pakistan-India gas pipeline projects. The plan will help save fertiliser plants from the impact of load shedding; they will now receive gas supply directly from various gas fields, without relying on gas utilities. 

A Petroleum Ministry official said that the move to lay the gas pipeline by spending revenue generated via GIDC had created a controversy, as other gas consuming sectors opposed the move, saying that GIDC was imposed on gas consumers to fund gas pipeline projects of national importance, following US opposition to the Iran-Pakistan gas pipeline project. Other stakeholders are of the view that utilisation of funds collected through GIDC are meant to finance LNG import projects, and the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project. 

The Petroleum Ministry official said that the Economic Co-ordination Committee (ECC) of the Cabinet, in its meeting held on August 16 this year, had approved the Petroleum Ministry’s proposal to allocate gas from existing or new discoveries for the fertiliser sector, especially the four fertiliser plants on the Sui Northern Gas Pipelines (SNGPL) system. 

“The fertiliser industry has projected a cost of $300-400 million, for the pipeline to be laid by gas utilities (SNGPL and Sui Southern Gas Company Limited),” a source in the fertiliser industry said, adding that the operating and maintenance cost of the pipeline will be recovered from gas consumers. The Oil and Gas Regulatory Authority (Ogra) will require an amendment in rules to allow the income on account of operating and maintenance costs. 

At present, as progress on these projects remains sluggish. The Ministry of Petroleum has, however, now agreed to a proposal put forth by the fertiliser industry; calling for funds for a transmission and distribution network from dedicated sources of gas. Fertiliser firms have supported the plan, which will divert gas to their plants from dedicated fields controlled by the Oil and Gas Development Company (OGDC), Mari Gas and MOL Pakistan. Under the plan, the Petroleum Ministry has proposed to dedicate supply of 202 Million Cubic Feet Gas per Day (MMCFD) to the fertiliser industry. 

According to the plan, the Oil and Gas Development Company (OGDC) was to dedicate 130mmcfd gas from the Kunnar Pasakhi Deep field; 15mmcfd from OGDC’s new Bahu field; 10mmcfd from OGDC’s new Reti Maru field; 22mmcfd is to be provided by the Mari Gas Company; and 25mmcfd will be diverted from MOL’s Makori East Tal Block. 

“Investment made by the fertiliser plants will be adjusted against recoveries of the Gas Infrastructure Development Cess (GIDC),” he said. Industry sources said that the entire transmission system – including compression and allied facilities – will be set up by the four fertiliser plants on the SNGPL system. These plants include Engro Fertilisers, PakArab Fertiliser, Agritech and Dawood Hercules Fertilisers. 

Published in The Business Recorder, November 14th, 2012.

Dance of death

 The dance of death continues on the streets of Karachi. Not a day passes when criminals would take time off and let its 19 million residents take their eyes off the macabre stage. Reaching back home alive after the day at the workplace is the best news a family would like to hear. And there is no hope of this devilish theatre coming to an end anytime soon; because the criminals have overwhelmed the state and it’s they who are the rulers of Karachi, and for that matter Quetta and many other towns and cities that too are falling to them one after the other. 

Barricaded behind high walls and secured doors the so-called government’s only channel of communication with the people is their statements that reach the people through the media. How long the besieged authority can survive it is anybody’s guess, as with every passing day the criminals’ grip on the city of Karachi is tightening. A large part of the city fondly, and correctly, called Pakistan’s industrial and financial hub is now out-of-bounds and no-go territory for the authorities. No question, the state has abdicated its fundamental responsibility of protecting the life and property of its citizens. Do you find any justification with ministers flying the national flag on their offices, homes and vehicles when their authority has ceased to be operational? And to think that criminals’ rule would remain confined to Karachi, Quetta and some places in Fata and Khyber-Pakhtunkhwa would be too naïve and self-deceptive; the fault-lines are present all over the country. It’s only a matter of time. 

The criminals whose appetite for innocent blood remains unquenched wear various visages. Some of them are ordinary thieves, dacoits, and street vandals but more powerful among them are the hired assassins and contract killers, assigned to strike well-defined targets. One would be failing in his duty by hesitating to say that such nasty assignments are given not only by the mafias but also by master planners of militant wings of political parties or exploiters of revenge-seeking sectarian volunteers.

That some outsiders may be fishing in the troubled waters of Pakistan is a strong possibility that too cannot be ruled out. In fact, as to who is behind all this bloodshed in Karachi, Quetta or elsewhere in Pakistan there is ample evidence on the official record to identify the master planners. The problem is with the follow-up action, as how to catch criminals and bring them to book. And that’s where a complete paralysis tends to cripple viability and effectiveness of law-enforcement in Karachi. In most of the cases criminals are not nabbed, but in case some of them are caught they are let off on one or the other ground. If police lack the will to catch the criminals the prosecution fails to build strong enough case to get the criminal duly punished by the court. No surprise then that the murderers of journalist Wali Babar have not only been identified and arrested, the master planners have seen to it that witnesses in the case are no more available; the last of the witnesses in this case was eliminated on Monday. 

There may be an enemy out there scheming to put the heart of Pakistan’s economic strength and viability that Karachi is, out of action, but perhaps we too are conniving with him. Should we agree to surrender to the hired thugs and professional criminals? Can anyone in their right mind think that sectarian killings would promote their brand of religion? Or, should the political stakeholders believe they can survive having bartered away their mandate to lead to rented murderers and target-killers? Should this macabre theatre sustain there will no more be the ‘City of Lights’. The question is what to do?

The simple answer is that we should do all that should have been done but was not done. Update the relevant laws to ensure that criminals don’t get acquittal because of some lacunae in investigation or prosecution. With political opposition almost non-existent in the provincial assembly of Sindh the coalition government should not take more than a week to tighten the legal grip on criminals and mafias. For what else have the members been elected by the people and heavily paid from the taxpayers’ money? That done, the police should be completely depoliticized – an action that should be easier now with the Supreme Court order that civil servants are not bound to obey illegal orders. At the same time the national parliamentarians should take the next step and move forward from merely making declarations and offering their analyses. What the future holds for the political elite of Pakistan may be on their mind, but as to the people of Pakistan for them their future at this moment is in their present. 

Published in The Business Recorder, November 14th, 2012.

On-budget or not?

 According to a Business Recorder exclusive the Economic Affairs Division’s data indicates that the World Bank and Asian Development Bank have provided on-budget support of 154.8 million dollars since July 2012 to date. 

This data was refuted by the two multilaterals who categorically and unambiguously informed the newspaper that Pakistan has not been a recipient of programme lending or budgetary support for the past two years; and further is unlikely to receive assistance under this head until and unless it begins implementing fiscal and power sector reforms or gets a Letter of Comfort (LoC) from the International Monetary Fund (IMF) that has expressed its unwillingness to extend such a letter premised on the government’s sustained failure to begin implementing the identified reforms. 

That nothing has changed from the IMF’s perspective is evident from a press release dated 4th October 2012 on the Fund’s website which notes that “The government and the IMF team agree on the need to contain the budget deficit to help lower the inflation, reduce crowding out of private sector credit, and ensure debt sustainability. In our view, this requires significant corrective measures; the fiscal deficit is otherwise likely to exceed the budget target by a significant margin. To rein in the fiscal deficit, both revenue and expenditure measures will be required”. That, as is evident from the release of official statements and data, has yet to happen. 

However, project support or lending for specific projects continues. The question is why did EAD feel the need to park 154.8 million dollars as on-budget support in its data banks? The BR report quoted an official who defined on-budget support in a novel way, “on-budget support does not necessarily mean programme lending and project inflows provided by the multilateral institutions are also usually indicated as on-budget support,” though he admitted that the multilaterals have suspended their budgetary support/programme lending since two years dating to the time of the suspension of the IMF Stand-By Arrangement with two tranches remaining undisbursed. The reason could well be that as money is fungible the releases under specific heads are being used by the Ministry of Finance to shore up its falling external balances with imports rising at a faster pace than exports. Numerous reports sourced to senior members of the Ministry of Finance also indicate that the funds released under the Coalition Support Fund (CSF) meant specifically for covering expenditure incurred by the armed forces have been used in a similar fashion. 

On-budget support is critical if the government wishes to spread the perception that its reform-oriented economic policies are being implemented and are endorsed by the international donor community inclusive of multilaterals and bilaterals. The fact that only project support is forthcoming reflects the fact that the international community remains engaged in pro-poor policies notably in the social sectors, education and health particularly with respect to UK’s DFID, and in some deficient sectors for example infrastructure and power sector. The fact that the power sector continues to suffer from low recoveries and high system losses has compelled the better managed distribution companies to resist putting their assets as collateral for fresh loans to other companies for a reduction in recovery and system losses. In short, the fact that the power sector continues to suffer from a huge inter-circular debt that undermines the liquidity necessary for the sector to even pay for fuel imports, remains the major impediment for the inability of the government to generate at capacity.

Be that as it may, the budget for the current fiscal year indicates 41.4 billion rupees as programme loans from external sources – an amount that is unlikely to be realised if one of the conditions namely implement reforms or get a LoC from IMF are not met. The budgeted inflow is also unrealistic given the fact that last year only 4 billion rupees under this head were disbursed, an amount that was no doubt in the pipeline, in relation to the budgeted 117.8 billion rupees. Unrealistic data compromises the government’s ability to formulate realistic budgets or indeed to begin reforms that would turn the economy around and one would urge the government to desist from this useless exercise. 

Published in The Business Recorder, November 14th, 2012.

Violation of FRDL Act

 Fiscal Responsibility and Debt Limitation (FRDL) Act, 2005 was hailed as the victory of reasoning and an extremely positive way to ensure financial stability by forcing the government to follow a proper fiscal discipline and a sustainable debt policy. In particular, it stipulated that revenue deficit will be reduced to nil by 30th June, 2008, and thereafter a revenue surplus would be maintained. Expenditures on social sectors and poverty alleviation will not be reduced below 4.5 percent of estimated GDP and budgetary allocations to education and health will be doubled from the existing level in terms of percentage of GDP during the next ten years. It was also provided that total public debt at the close of June, 2013 would not be allowed to exceed 60 percent of GDP for that year and would subsequently be maintained below 60 percent of estimated GDP for any given year. 

Since the matter of contingent liabilities was also considered a critical issue, the government was also required not to issue new guarantees, including those for rupee lending, bonds, rates of return, output purchase agreements and all other claims and commitments that may be prescribed from time to time, for any amount exceeding two percent of the estimated GDP in any financial year. It was also provided that the renewal of existing guarantees will be considered as issuing a new guarantee. In order to cover the possibility of unforeseen demands on the finances of the government due to national security or natural calamity, the government could depart from these principles temporarily but it had to explain the reasons for such a departure to the parliament and the period of time in which it was expected to return to the principles as laid down in the FRDL Act. 

While the FRDL Act, 2005 was a very sound piece of legislation and expected to be followed meticulously by all the governments, the present government seems to have lost the script and is all set to violate its basic provisions. According to a report in this newspaper on 6th November, total outstanding debt of the country had already swelled to Rs 12,661 billion by June, 2012 or 61.3 percent of GDP, out of which local currency debt was Rs 7,636 billion or 37 percent of GDP and foreign currency debt was Rs 5,025 billion or 24.3 percent of GDP. Total debt during the tenure of the present government had more than doubled from Rs 6,044 billion in 2008 to Rs 12,661 billion in 2012 due to huge fiscal and external sector deficits and sustained heavy borrowings from the domestic and foreign sources to bridge these deficits. Sadly, the country is headed towards another bulge in public debt during 2012-13 on account of the expected huge levels of fiscal and current account deficits, necessitating a massive recourse to internal and external borrowings. In particular, fiscal deficit is anticipated to be as high as 8 to 9 percent of GDP due to a number of factors, meaning clearly that basic provisions of the FRDL Act, 2005, including the requirement of reducing the public debt to 60 percent of GDP by June, 2013 would not be met. It needs to be pointed out, however, that the new government to be formed after the coming elections will be obliged to take the matter of violation of the Act to the National Assembly whereas the present government which is basically responsible for the violation may escape the blame of this transgression if it fails to clinch a majority in the new parliament. 

Which government was accountable for the violation of the FRDL Act was, however, irrelevant for the enormous deterioration of the state of the economy and the plight of common man as a consequence of the failure to meet the basic provisions of the Act. The reality is that very high hopes attached to this piece of legislation for maintaining economic stability have been dashed to the ground. More distressing is the fact that our rulers seem to be incapable of adhering to the laws of land. One wonders how else they could be constrained to live within the available means and restrained from flouting the basic principles of a sound economic management. It is simply unbelievable that the government and its economic team do not know the severe implications of resorting to such a disastrous policy in terms of excessive price pressures, debasing of PKR, loss of investor confidence, burdening the future generations with high levels of debt etc but the damage would not be limited only to economic parameters. At stake is also the credibility of the government and its faith in the sanctity of law. The situation has become all the more complicated by the continuous addition of contingent liabilities which technically are not part of the government debt but are most likely to be invoked by the lending institutions and, as such, would be a huge liability on the budget in future. Another surprising aspect is that the opposition parties and the media also do not seem to be much concerned about the consequences of such an irresponsible attitude of the government. In a situation like this, we could only pray and hope that the government would realise the gravitas of this negative development and revert to strict fiscal discipline as ordained in the FRDL Act, 2005 as soon as possible. Its violation on the pretext of national security and natural calamity cannot possibility be defended because the scale of these adverse factors is not as severe as envisioned by the authors of the Act to justify such an abuse. 

Published in The Business Recorder, November 13th, 2012.

Only three mills begin cane crushing

 After the passage of two weeks, cane crushing in the province could not start in full as only three of the total 32 sugar mills have so far started their operations, sources told Business Recorder. “The non-operational mills are expected to begin their operations after Muharram,” they said, adding that the boilers of all mills have been lighted. 

One of the major reasons behind the failure of mills to start operations is the lack of labour, which delayed the crushing on the scheduled date of November 1, they said. There are 29 other sugar mills in the province mills that have illuminated the boilers (a first stage in sugarcane crushing) of their sugar factories. 

Industry sources said that the remaining twenty nine sugar mills would commence their operations after 10th Muharam-ul-Haram, adding that Sanghar Sugar Mills, Ranipur Sugar Mills and Mityari Sugar Mills have started their operations. 

However, Mehran Sugar Mills, Al-Noor Sugar Mills, Sindh Abadgar Sugar Mills, Habib Sugar Mills, Faran Sugar Mills, Ansari Sugar Mills, New Dadu Sugar Mills, Naudero Sugar Mills, Army Welfare Sugar Mills, Sakrand Sugar Mills, Shahmurad Sugar Mills, Dewan Sugar Mills, Sehri Sugar Mills, Al-Asif Sugar Mills, Tando Muhammad Khan Sugar Mills, Al-Abbas Sugar Mills, Mirpurkhas Sugar Mills, Al-Abbas Sugar Mills, Larr Sugar Mills, Ghotki Sugar Mills, Pangrio Sugar Mills, Mirza Sugar Mills, Bawany Sugar Mills, Najma Sugar Mills, and Dewan Sugar Mills, Badin may start the sugarcane crushing at full capacity after the 10th of Muharam-ul-Haram. 

Sources said that the provincial government had already issued two deadlines of October 15 or November 01 to the millers, but the millers could not start crushing due to late fixing of the official cane support price. The Agriculture Department Government of Sindh had fixed the minimum price of Sugarcane at Rs 172/- (Rupees One Hundred Seventy-Two only) per 40 Kg for the crushing session 2012-13. While the Government of Sindh also directed the sugar factories in the province to pay quality premium to the cane growers at the end of the crushing session 2012-13 at the rate of fifty paisa on 40 Kg. 

Under the Sugar Factories Control Act, Cane Commissioner Sindh could file cases in the civil courts for the delay which is punishable by one-year imprisonment or Rs 100, 000 fine or both. Sources said that so far the Sindh Cane Commissioner had not served notices to sugar mill owners for not starting crushing in their respective mills in compliance with government directives. 

Published in The Business Recorder, November 13th, 2012.

Containing inflation

 Good news for the Pakistani people and businesses – Lowest price rise recorded in the past 4 years. Price increase in food and non-food items is slowing down for the past many months. In October 2012, price increase was at its slowest pace since January 2008. This is a sign of stabilisation of prices in the markets and a much-awaited relief for the people of Pakistan. 

This success is attributed to government’s efforts in monitoring prices, ensuring continued supply of essential items, and tightly controlled economy policy. In the past, reductions in price increase have resulted in decrease in interest on bank loans. Average interest rates have reduced from a high of 15 percent in 2008 to 10 percent in October 2012. This means that for the same amount of loan, businesses are paying 50 percent less interest as compared to 2008. This is an encouragement for businesses to increase their production and reduce their borrowing costs. 

The falling trend in price rise has also proven to be happy news for the investors in the Stock Exchange. People are now diverting their savings to invest more in equities of Pakistani businesses. This is with the view that investments will yield more returns when businesses will declare added profits. As of 2nd November 2012, the stock exchange is trading at an all-time high of 16,000 + points. This is the amount of investment that has never been seen before in the history of Pakistan – demonstrating confidence of Pakistani people on the economy. 

When the present government came to power in 2008, the economy was displaying a dismal picture, due to multiple external and internal shocks of extreme nature. It is important to remember here that average price rise in August 2008 was 25 percent as compared to August 2007. On average items costing Rs 100 in August 2007 were sold for Rs 125 by August 2008. The rapid price increase was a direct result of record high international oil prices and record borrowings by the previous Government. Imprudent economic policies of the previous Government resulted in an economic bubble-burst and where the country had to suffer a trade deficit (more imports less exports) of around $15 billion, which drastically depleted our foreign reserves and forced the incumbent Government to seek IMF assistance. 

In October 2012, the average food prices (combining a number of items in a basket) have increased by 5.8 percent as compared to October 2011. Overall (combining food and non-food items), the price increase was 7.7 percent as compared to October 2011. This price rise is at its lowest since January 2008. 

Average inflation in 2008-09 was around 17 percent as compared to 2007-08 that was reduced to 11 percent in 2011-12 (when compared against 2010-11 which was 13.7 percent). The price thus reduced in 2011-12 despite unprecedented floods of July/August 2011 that resulted in loss of agriculture produce and disrupted supply at a massive scale. 

In the current year, consistent drop in inflation is witnessed. Inflation has reduced to single digits in July, August, September and October at 9.6 percent, 9.1 percent, 8.8 percent, and 7.7 percent. On average in the first four months of this year (July-October) inflation has been recorded at 8.8 percent as compared to 11.3 percent in the same period last year. 

In these four months food inflation was 7.3 percent as compared to 12.9 percent last year, while non-food inflation was 9.7 percent as compared to 10.3 percent in the same period last year. 

Similarly, sensitive price index (of 53 items) has reduced to 7.6 percent in the first four months of this year, as compared to 9.6 percent last year. The prices in the wholesale (measured through whole-price index (WPI)) have reduced from 17.8% last year to 7.6% in the first four months of this year. This demonstrates availability of ample supply of commodities available at the stage of wholesale, and warrants to further reduction in inflation in the coming months. 

The core-inflation (excludes certain items that face volatile price movements, notably food and energy) is also witnessing reduction since July of this year. Core-inflation was 11.3 percent, 10.8 percent, 10.4 percent, and 10.8 percent in July, August, September and October respectively. 

A comparison of 53 essential eating items in the following table suggests that the number of items in which prices have decreased or remained same, have been much more than the items in which price increase has been witnessed. Overall the trend, as explained above, has been reducing.


                            27 Sept   04 Oct  11 Oct  18 Oct   24 Oct  1 Nov

                               2012    2012     2012    2012     2012   2012


Prices of Items increased        9       6       18      15       13       7

Prices of Items decreased       16      20       11      13       11      17

Prices of items unchanged       28      27       24      25       29      29

Total                           53      53       53      53       53      53


Published in The Business Recorder, November 13th, 2012.

Supremacy galore

 On November 6, while hearing a case about the media’s role in reporting the US attack on Abbottabad to kill Osama bin Laden, the Chief Justice said that the Supreme Court (SC) has the ultimate (supreme) authority about which no one should have any doubts. 

The next day the Federal Minister for Information and Broadcasting said that the parliament is supreme because it consists of elected representatives who are answerable to the public (is that so?) and the judges are answerable to the government. Responding to a question, he said that in some cases the president has the power of clemency (softening the severity of a verdict passed by a court, not undoing it) though his intention seemed to imply the president’s ‘ultimate’ supremacy. 

Then, of course, there is a huge powerful clan of religious leaders who claim supremacy for their edicts (fatwas). Then there are the Sardars, Nawabs, landlords, and those whose wealth and ‘connections’ give them power. This huge lot too claims supremacy. 

In reality though, supremacy belongs only to the Creator of the universe because He alone knows the whole truth to decide with perfection. Humans only have ‘power’ that they often don’t use judiciously because “power corrupts, and absolute power corrupts absolutely.” 

Being prone to erring, humans can’t claim supremacy; that claim itself confirms their being prone to erring. But the bigger tragedy that afflicts humans is that they refuse to learn from their mistakes, and our politicians epitomise this tragedy. 

Dust had hardly begun to settle on the SC verdict in the “Asghar Khan” case when stories about rigging of the electoral process in the 2008 elections and the yet-to-be-held” 2013 elections, began unfolding and petitions being prepared for lodgement with the SC. 

All these shameful incidents conclusively establish that elections in Pakistan were never fair, and there is no indication yet that the coming elections would be fair. What makes this a possibility is the fact that the judiciary doesn’t want to be a part of the electoral process. 

Landed aristocracy – majority of our politicians – doesn’t believe in giving the ordinary their rights. In the government’s review petition over the SC verdict in the “missing persons” case, it has admitted this by saying that landlords obstruct development programme in their constituencies. 

The misconception – landlords wanting to give people their rights via parliaments crowded with suspiciously elected landlords – explains why this class (that rules the millions in villages and small towns as the ultimate authority) is so pro-democracy. Landlord politicians want to use democracy to extend their writ beyond their villages and towns to cities, provinces, in fact the whole of Pakistan, because it offers them a ‘legalised’ route to benefiting at the cost of the ordinary Pakistanis. 

No wonder these politicians never tire of claiming supremacy of the parliament because that is their power centre, but their lowest priority is good governance. That this is so is proved by scores of cases of corruption and embezzlement associated with the politicians. 

Pakistan’s politicians may be among the worst in the world, but the fact that corruption and democracy now go hand-in-hand, is a global phenomenon. That democracy in its currently practised form has eroded good values, is undeniable even by its staunchest supporters. 

In this backdrop, what seems odd is SC’s backing for such democracy; its stand that election should not be delayed because electoral rolls are imperfect or suspicious won’t serve the cause of democracy, more so of ridding it of the label of being unrepresentative. Democracy we now have is the product of the 2008 election whose partiality will soon be questioned. So, the regime that these elections installed is challenging the writ of the SC. In the “missing persons” case the review petition blames the SC for “getting involved in political questions.” 

This petition says that the verdict “constitutes misconduct under Article 5 of the Code of Conduct of Superior Court Judges issued after the restoration of the present Chief Justice. As such the aforesaid findings of this Court are without jurisdiction” and need review. 

In the context of administrative flaws pointed out by the SC verdict, the review petition says that “The order is tantamount to harassment, interference and direct suspension of faithful and actual discharge of duties. They [the administrators] remain obsessed about [the] future.” 

Doing so, the government claims unquestionable “supremacy”. No one (including the courts) can question its flawed actions; that task is to be left to the voters who may hold the regime accountable, but only via the next elections ie five years after the regime committed those flawed acts. 

Is this the profile of democracy that permits unhindered accountability, and serves the aim of promoting good governance to set examples that should be followed by future parliamentarians? By completing its term in office, a corrupt regime sets the opposite example. 

This outcome is eating away the very roots of people’s confidence in democracy, governance and accountability. They are opting for their own ways of dispensing justice – the ones rooted in fearless use of the gun to avenge denials of a whole variety that they suffer. 

While the state and all its “pillars” delude themselves with being “supreme” the fact is that supremacy is sliding into the hands of the powerfully backed criminals, reflecting the prolonged collective failure of all the “pillars” of the state. People now wonder whether this collective failure is accidental or a deliberate, well planned, and organised effort because, while the “pillars” keep faulting each other, none of them has acted credibly to contain the country’s slide into total chaos. 

The police simply can’t check pillion riding. So, people sitting in wayside restaurants are targeted every day. Often, these horrible acts are not driven by past enmity or disputes, but are helping the cause of accelerating a total system breakdown. Governor Sindh had sought from the KCCI a 30-day period to fix the lawlessness in Karachi, but it seems that in that 30-day period new chapters would be written in the escalation of lawlessness. The approaching Youm-e-Ashur could only make things more difficult. 

Besides Karachi, Hyderabad too has now become the victim of violence. Rumours are that FPCCI is again pushing the Sindh Governor to seek the intervention of the Army in restoring law and order in Karachi. But it seems that, like Balochistan, Sindh as a whole needs such intervention. The reason there for is that those who reigned “supreme” for the past five years didn’t bother about expanding the law enforcement agencies and equipping them to act effectively. This is the single biggest (deliberate?) failure of the self-proclaimed “supreme” class. 

Published in The Business Recorder, November 13th, 2012.

Remittances on a record spree

 Holidays and festivals adorn the contributions of the Pakistani diaspora, offering an extra treat to all those eyes set on the precious foreign exchange sent home by those living abroad. While all else like FDI and development assistance, appears choppy in recessionary waters, home remittances have remained resilient and significant. 

Overseas Pakistanis represent roughly 3-4 percent of the total population of the country. Almost 45 percent of these reside in Saudi Arabia, UAE, and other GCC countries, and a closer look at the monthly data by SBP reveals that these countries contribute almost 60 percent to the total remittance receipts on average. 

These are not one-time occurrences; the phenomenon of persistence in remittances is directly proportional to migration as well as linked to the fact that these receipts are sent by all the migrants over the years and not just new migrants. 

The distribution of remittances by US and Europe also shows a similar pattern to the respective overseas Pakistani population data. During October 2012 alone, Saudi Arabia and the UAE region sent back 800 million dollars, 59 percent of the total home remittances for October 2012. 

A total of 1.365 billion dollars in October is a valuable contribution, the highest ever number recorder in a month. On a year-on-year basis, this is a surge of a whopping 34 percent, thanks to the additional contributions during the religious festival of Eid. 

On an aggregate basis, the growth has been tremendous during FY13: inflows during the first four months of FY13 grew by a healthy 15 percent YoY, and monthly averages improved from Rs1.078 billion in 4MFY12 to 1.241 billion dollars during 4MFY13. 

The significance of the festivals and holiday season cannot be overlooked. Trends over the years suggest that dwellers abroad bring and send in more foreign exchange during summer holidays and religious celebrations, all falling during the first half of the fiscal year since at least the last two years. 

Going forward, the remarkable pace and agility of home remittances is likely to continue in the coming months especially with the wedding season just around the corner.

Published in The Business Recorder, November 14th, 2012.

3G Auction – three failed attempts

 An event happening for the first time may pass off as an accident. Call it a coincidence the second time. But when it happens thrice there is an incontestable pattern on hand. 

Just when people thought that the government was seemingly done with the ehearsals for auctioning 3G licenses, the pre-auction process appears to be in the doldrums again. 

Latest one heard from PTA went like this: the hiring of the consultant (for designing and overseeing the auction process) would be finalised by October 5, and a Letter of Intent would be issued forthwith. Formal contract would be awarded by October 15. Within a month, the consultant would hammer out details of the auction afresh, and issue the auctions the revised Information Memorandum by November 15. 

The awaited consultant never arrived, because the hiring process couldn move beyond the EoI phase, despite a lapse of several months. 

News reports highlight the disappointment of the FinMin officials whose hopes of containing the fiscal deficit were pinned on the Rs79 billion (expected to be generated from this auction) already accounted for in the FY13 budgetary estimates. 

The Auction Supervisory Committee, headed by the Finance Minister, has decided to change course now, perhaps hoping to finish this business within the confines of the ongoing fiscal year. 

Reportedly, the ASC has recommended the PTA to quit stargazing for a consultant, and rather hire an “Independent Advisory Group” (IAG) to do the job. Fresh public advertisements by PTA indicate that wheels are rolling again. 

Titled “Short Term Advisory Opportunity”, the public ad informs that the telecom watchdog is setting up the IAG to facilitate the auction process. The IAG will function for three months and would comprise experts and consultants of international repute. 

The positions of spectrum valuation advisor, spectrum auction design advisor, auctions software advisor, and spectrum regulatory policy advisor can be applied against by sending in professional resumes to the Chairman PTA. The process will close this week. 

Given the concerned authorities prior, clumsy handling of the pre-auction process and their diverse administrative faux pas, not much room is left for even cautious optimism about the auction actually following through this time. 

Already, news reports reek of bickering and intrigues within PTA, which does not help matters at all. Whatever the outcome, authorities are already four years late into introducing the 3G network technology in Pakistan. 

Consequently, Pakistan lags behind in mobile broadband when much of the developed and developing countries have migrated to 3G (and now looking towards 4G and LTE) networks. A thorough investigation into the circumstances and causes behind the multiple delays should be conducted. 

Meanwhile, Chairman PTA has been quoting a daily loss of Rs38 million due to 3G auction delays. The Chairman should substantiate this figure, because it seems understated. 

Moreover, he should do something about it. After all he is the lead executor for federal government in this transaction. More importantly, he must inform the public as to why another multi-million dollar auction has remained stalled under his watch. 

Earlier this year, PTA had published the IM for auctioning over 600MHz of additional, freed up spectrum in the 1.9GHz and 3.1GHz frequency bands. The target market was the existing operators in the fixed and wireless local loop segments, and class-value-added services (e.g. data & voice VAS, vehicle tracking, payphone, video conferencing, etc.). 

The auction was scheduled to be held on May 3, but it seems there is no intent to restart this auction process. 

Leasing out this valuable spectrum could not only facilitate operators expansion, but also raise significant revenues for the exchequer. Official figures from the PTA IM reveal that the minimum (one-time) license fees from this auction are over 117 million dollars (summation of base prices of all blocks on sale). Annual spectrum fees add up to 0.685 million dollars per year. 

Despite passage of several days, PTAs spokesperson was unable to provide official response to BR Researchs specific email queries regarding the three auctions of 3G spectrum, Instaphone license and the local loop spectrum.

Published in The Business Recorder, November 14th, 2012.

Auto industry: Drastic times call for drastic measures

 Pakistan auto industry kicked off the ongoing quarter on a grim note according to the latest data released by PAMA. Car sales plunged by 32 percent during 4MFY13 on year-on-year basis, clocking in at 34,990 units as against 51,755 units during the same period last year. However, during October, car sales declined to a 16-month low of 8,184 units as compared to 13,690 during October FY12. 

The major smack to the sales of four-wheeler came on the heels of subdued sales in 1000 cc and below category, mainly because of the completion of Punjab Yellow Cab taxi scheme under which the Government distributed 20,000 yellow cabs to the youth of the province. Moreover, the production of Cuore and Alto completely purged off, as both models have been discontinued by the respective manufacturers. 

On the flip side, the farm tractor category illustrated a remarkable boom of 69 percent YoY in 4MFY13, demonstrating a sales volume of 13,983 units, as against 8,269 units in 4MFY12. During October, the tractor sales volume thrived by 41 percent on year-on-year basis, up from 4,054 units during the same period last year. 

The major contribution to the boom in farm tractor cadre came from the sales of FIAT tractors which propped up by 1.65 times YoY in 4MFY13 owing to the Green Tractor Scheme under which FIAT tractors were distributed to farmers via balloting, at a subsidized rate of Rs200,000 compared to the price tag of Rs550,000. Massey Ferguson tractor sales also gushed by 34 percent in 4MFY13, as compared to the same period last year, which further buttressed the tractor category. 

Amongst individual companies, PSMC sales during 4MFY13 declined by 35 percent to 22,753 units as against 34,877 units sold in the similar period last year. The major reason was the completion of Punjab Governments taxi scheme for which Suzuki Mehran and Suzuki Bolan were selected. 

After the conclusion of the scheme, the collective sales of Mehran and Bolan in 4MFY13 plummeted by 24 percent YoY. 

During 4MFY13, Indus Motors sales plunged to 11,003 units, 38 percent down as compared to the same period last year. The decline in sales is largely attributable to the termination of Daihatsu Cuore production. As of 4MFY13, Cuore witnessed a trivial sales volume of 71 units as against 1,532 units in 4MFY12. 

However, on month-on-month basis, Indus Motors sales demonstrated an uptick of 28 percent. This monthly rise in the sales volume is attributable to 22 percent MoM growth in Corolla sales to 2,155 units on the back of the launch of its new model. 

Moreover, the Company also introduced navigation system in its Corolla Altis range, which was well received by the market. Hilux sales also grew 57 percent MoM to 549 units, as a result of the introduction of interior changes which were able to gain buyer interest. 

In contrast to the other two players, Atlas Honda car sales for 4MFY13 clocks in at 6,009 units, having attained a nominal growth of 1.97 percent YoY. 

Currently, imported cars having an age limit of five years and depreciation limit of 48 percent is incentivising customers to opt for the refurbished imported cars instead of locally assembled cars. During FY11-12, around 56,000 used cars were imported which dealt a severe blow to the local industry sales. 

Yet in 4MFY13, the key reason of dismal performance quoted by the industry sources is the humongous arrival of imported cars. However, auto assemblers are engaged in extensive dialogues with the GoP for the forthcoming Auto Industry Development Programme (AIDP). 

The industry is asserting for the reduction in age limit of imported cars to three years and the reduction in depreciation limit to 24 percent. The industrys fortunes are likely to get better provided a restrictive import policy is put in place in line with persistent industry demands. 



                                                                                  4MFY13     4MFY12


CARS                                                                          34,990     51,755

TRACTORS                                                               13,983      8,269

TRUCKS & BUSES                                                       677        691

JEEPS                                                                             166        217

PICK-UPS                                                                  4,782      6,829

MOTOR CYCLE & THREE WHEELERS        278,227    291,256


Published in The Business Recorder, November 14th, 2012.

Zeroing in: FBR isolates 10,000 cases for suspected tax evasion

ISLAMABAD:Amid deep-rooted suspicions of massive tax evasion by even those who regularly file income tax returns, the government has selected roughly ten thousand cases for a tax audit. Almost 13% of the entities and persons in the government’s crosshairs are big firms.

The Federal Board of Revenue isolated these cases on Tuesday through parametric computer balloting, making sure that those who are fully discharging their tax liabilities are not unnecessarily pursued, claimed tax officials.

They explained that only those firms that failed to clear the two dozen risk parameters set for the ballot had been selected for the audit, while individuals and associations of persons who did not clear the 20 risk parameters set for the non-corporate sector had been isolated for audit purposes.

A total of 9,740 cases have been selected for scrutiny, out of which 1,217 are medium and big firms, according to the Federal Board of Revenue (FBR). The rest of the 8,523 cases isolated belong to the non-corporate sector. The salaried class has been excluded from the exercise.

For big firms, one criterion defined for the selection was that the companies’ opening balance sheets in a new year did not match the closing balance sheet of the previous year. Another criterion was firms which claimed more than Rs10 million in refunds, which tax officials have deemed ‘suspicious’ activity.

The FBR has held the computerised ballot after a gap of three years. In 2009, it had picked over 900 firms and individuals for the audit, but many of them obtained stay orders from courts against the decision. The petitioners had claimed that under the self assessment scheme of the FBR, taxpayers were the ultimate authority on determining the taxable amount, and the FBR therefore did not have any role.

After that experience, the FBR has amended its laws and inserted Clause 214-C in the Income Tax Ordinance, which empowers the FBR to conduct an audit of taxpayers. In addition, officials said that the risk parameters defined for the selection were also finalised after consultation with tax bar associations.

The audit will be performed only for tax year 2011. In that year, the FBR had received a total of 1.45 million returns, including those from the salaried class. Out of that figure, returns filed by the corporate sector totalled 22,204, returns filed by the non-corporate sector totalled 519,974. For the audit exercise, the FBR ran the data for 448,866 taxpayers through its parametrised ballot, out of which 9,743 cases were selected.

The taxes paid that year with filed returns were dismally low as compared to previous years, compelling the authorities to go for the audit, said officials. The exercise should otherwise be a regular feature to deter taxpayers from evading taxes, they added.

The FBR is also working on an amnesty scheme to encourage over three million identified persons to file income tax returns and pay due taxes.

FBR Taxpayers Audit Member Mustafa Ashraf said that the FBR had reposed confidence in taxpayers through the self assessment scheme, but certain people did injustice to that responsibility by either not paying taxes, or paying less than their due share.

The selection of approximately 15% of returns filed by large taxpayers units, 5% of returns filed by corporate entities, and 2% of returns filed by non-corporate taxpayers in Regional Tax Offices is only to promote voluntary compliance, he added.

The maximum number of audit cases – 2,063 – have been picked from the jurisdiction of Lahore’s tax offices; followed by Karachi, from where 1,909 firms and individuals have been picked for the probe. From Islamabad, 308 cases have been selected for the audit, according to the FBR. The FBR has also placed the list of the audit cases on its website.

Published in The Express Tribune, November 14th, 2012.

Microsoft demonstrates new Windows 8 operating system

KARACHI:Whether you are a die-hard fan and want to try new touch screen devices or a traditional user who is satisfied with tried and tested desktop computers, Windows 8 operating system (Win8 OS) will not disappoint you in either case, at least this was what was apparent in Microsoft’s (MS) media briefing of this highly anticipated OS on Tuesday.

Win8 is a re-imagination of the PC phase, an OS built in line with the latest consumer trends and on the solid foundation of Win7 – the most successful operating system by MS so far, according to Sherif Morsi, Windows Client Business Group Lead, North Africa, Middle East and Pakistan.

“With Win8, you will need one device for business and pleasure without compromising on speed,” Morsi said while talking to a select group of journalists during the product’s demonstration.

The Redmond-based software giant launched Windows 8 globally on October 26 along with its much-anticipated tablet, Windows Surface.

MS is launching three versions of the software – Win8, Win8 Pro and Win RT, according to Morsi who is visiting Pakistan to attend Win8 Summit and associated events as well as brief the media about the relevance of the operating system to the local market.

The most exciting features of the product are Modern User Interface (MUI) for touch screen lovers and a desktop interface for desktop users as they can switch to the Win7 desktop anytime to run desktop applications. The desktop interface can be accessed through desktop tile on the MUI. The OS runs on both touch and non-touch devices.

One can personalise the lock screen by using picture password, a newly introduced feature, according to Morsi, that becomes the reflection of user’s own personality. The feature enables the user to select a picture and then apply a password by drawing lines, curves, circles and dots, something that allows the user to make the device more personalised.

One can also personalise the start screen, which is a set of tiles (apps), by customising each tile and changing their positions to suit him. This will help both heavy users and light users to use the space more efficiently. Switching between the tiles is smooth and very fast. Some of the tiles such as mail tile and news tile offer real time updates while messaging tile helps connect with social media contacts.

Though Win8 certainly offers exciting features, it may not be perfectly suited to every user.

“The messaging application, for example, can exhibit slight delays in messaging Facebook contacts,” Noman Ansari, who recently purchased Win8, wrote in his blog post on The Express Tribune blogs.

Ansari also experienced a lack of customisation on some of the tiles. Importing pictures to the Modern UI, he wrote, is a bit of a nightmare in terms of navigation with the options in the ‘pictures’ tile frustratingly limited.

While the new product may have some limitations, system requirements to run this OS are not very high.

The basic requirements to run Win8, Morsi said, include 1GB of RAM, 1GHz processor and 16GB of hard drive and basic video graphic hardware.

One can upgrade any previous version of Windows OS to Win8 against a payment of $15, a limited offer valid from June 2 up to January 1. “We didn’t want to penalise our customers who recently bought Windows 7,” Morsi said while talking about their promotional offer. Win8 Pro can be bought for $40, he said.

When it comes to hardware, users have a variety of options. The new product comes in all-in-ones, ultra books, convertibles, slates and other computing devices.

Excited about the product’s launch, Morsi said the feedback from customers is extremely positive and they are getting great reviews.

Published in The Express Tribune, November 14th, 2012.

Trade deficit shrinks 7% in July-October over previous year

ISLAMABAD:Pakistan’s trade deficit shrank significantly from July through October this year due to a fall in imports for four consecutive months and a gradual pick in exports on the back of a seasonal rise in global demand of certain goods.

The trade deficit – a measure of how much imports exceed exports – shrank by almost 7% to $6.5 billion from July to October 2012, as against $6.9 billion in the corresponding period of the preceding fiscal year.

The latest trade statistics, released here on Tuesday by the Pakistan Bureau of Statistics, show that the trade deficit has shrunk for the third consecutive month due to falling imports. The figures further show that after declining for first two consecutive months, exports have registered an increase for the second month in a row. However, the rise in exports is attributed to an increase in the exports of food products, which is a seasonal phenomenon.

Notwithstanding the ‘improvement’ in the balance of trade, the trend also suggests a possible slowdown in the country’s economic activities. Independent experts say that the decline in imports, and the consequent narrowing down in the deficit, poses a challenge to policymakers who are scrambling to address imbalances in the economy. This is the fifth month of the current fiscal year, but the government has as yet failed to announce a trade policy for the current fiscal year.

In the period under review, exports grew almost 5% year-on-year: goods worth $8.2 billion were exported – an increase of $389 million over the previous year. On the other hand, imports plunged 0.54% to $14.7 billion, which was $80 million less than last year’s corresponding import bill.

Asad Sayeed, a senior researcher at the Collective for Social Science Research, said that the narrowing of the trade deficit due to the pick in exports was encouraging. He, however, cautioned that the trend could reverse in the coming months as most of the increase was because of seasonal exports.

Month-on-month trade data also suggests that the accumulative growth in exports of almost 5% may not last long. On a monthly basis, exports plunged 9.2% in October over September 2012, while imports grew by 8.1%. The trade deficit widened 37.8% due to plummeting exports and growing imports.

A yearly comparison of monthly trade figures presents yet another scenario. In October, exports rose 7.2% year-on-year. The country exported $2.1 billion worth of goods, $136 million higher than the exports made last October, according to the PBS. Imports also grew by 5.1% in the previous month to $3.8 billion – $183 million higher than October 2011’s figure. Resultantly, the trade deficit widened marginally by 2.7% to $1.8 billion.

In its latest assessment on Pakistan’s economy, the IMF revised Pakistan’s growth projection downwards to 3-3.5% against the official target of 4.5%. But the finance minister on Tuesday said that the economy will grow by over 4%, as the country was not affected by floods this year.

Published in The Express Tribune, November 14th, 2012.

Needless meddling: Govt fails to restrict its role in economy, says Shaikh

ISLAMABAD:In what appeared to be a candid admission towards the end of the tenure, Finance Minister Dr Abdul Hafeez Shaikh said on Tuesday there was a lack of success in changing the role of the government in state institutions.

Addressing the inaugural session of the 18th Annual General Meeting and Conference of Pakistan Society of Development Economists (PSDE), Shaikh admitted economic challenges have emerged due to weak governance and the obsessive role of the state in key sectors of the economy. He said so far the present government has given over Rs1.4 trillion in subsidies, most of which went to the power sector.

The minister spoke at length about the issues besetting the economy, role of the state and reforms introduced over the last four and a half years including financial autonomy for the provinces.

His comments on governance and state’s intrusion into business vindicate the stance of those who have been advocating restrictive role of the state to the extent of performing regulatory duties.

The minister, however, stressed that reforms always succeed when all the institutions and forces work in order and events are according to the plans, which has not been the case during the past few years.

He said expensive oil imports have blunted some of the reforms introduced in the energy sector. Over the past two decades, the share of thermal-based electricity generation has increased to 82% from less than a third.

Recognising the role of the Supreme Court of Pakistan in eradicating corruption, Shaikh said functioning of the state institutions can only guarantee tackling corruption. In this regard, he said, the Supreme Court, National Accountability Bureau and Public Accounts Committee were playing their roles.

However, he looked displeased with long unchecked growth in the size of the government including both the ministers and federal secretaries, saying the size of the government has a direct bearing on fiscal position of the country.

Commenting on the present economic situation, Shaikh said the economy is likely to grow over 4% this year, which is still reasonable. However, the international financial institutions forecast a growth of 3.5%.

Though inflation is in single digit, it is still painful, he said and added maintaining macroeconomic stability is the priority of the government.

Defending the new tax amnesty scheme, Shaikh said its enforcement will be a key determining factor in the success and failure of the scheme. He believed that this time identification criteria for tax dodgers are better than the past, indicating strong chances of success of the scheme.

PSDE President and Pakistan Institute of Development and Economics Vice Chancellor Dr Rashid Amjad asked all political parties to clearly spell out their economic reforms agenda in the upcoming elections and said these programmes should be subject to a critical debate.

He also called on the economists to play their role in development of the society and “this is the time (for them) to stand up and be counted”.

Amjad underlined the need for tackling the two formidable challenges that the economy is facing. The first is to come out of stagflation in which the economy is mired because of low growth of an average 3% in five years and double-digit inflation. Most worsening is the decline in investment, which has halved in terms of GDP in just five years.

The second is to take the economy decisively towards higher sustained and inclusive growth, which will also help ensure social harmony through development and uplift of less-developed provinces, especially Balochistan.

He described three pillars of development – macro stability, structural changes and strong and well-functioning institutions – as the key for growth and development of the country.

Amjad also highlighted four critical challenges hurting the economy. To confront these, he said, there was a need to increase the tax-to-GDP ratio through better documentation, tackle the energy crisis, stop bleeding of public sector enterprises by putting in place professional apolitical management and accelerating tariff reforms by bringing down protective tariff rates and eliminating the statutory regulatory order (SRO) culture.

Published in The Express Tribune, November 14th, 2012.

‘Govt has turned focus to businessperson’s issues’

LAHORE:Government of Pakistan has reset its priorities by shifter greater focus on improving the law and order situation, ensuring equitable electricity load-shedding and promoting the private sector, Prime Minister Raja Pervez Ashraf said while speaking at the Lahore Chamber of Commerce and Industry (LCCI) on Tuesday.

The premier said that the present government is ready to implement all doable energy projects without any let or hindrance because it believes in the growth of the private sector. The government and the private sector are on the same page on ridding the country of economic ills being faced today, he said.

Ashraf said that the government is working on a number of coal and solar power projects that are not as inexpensive as is being portrayed. However, with the passage of time, they will be in easy access of consumers, he reassured.

He said that the government gave an immediate response to the Thar Coal Gasification Projects, which is currently well underway. However, he also made it clear that the projects entails additional allied projects including power generation stations and transmission lines for their connectivity with the national grid.

Ashraf said that if the federating units develop a consensus on the Kalabagh Dam today, the government would initiate construction of the dam.

The Prime Minister said that the government is also focusing on the hydel component of electricity, and has expedited work on all ongoing hydel projects as well as those on the drawing board.

With regards to trade with India, the Prime Minister said that government was committed to facilitate the business community; adding, “We are watching the entire development on the subject and will not compromise on the interests of the Pakistani business community.”

Speaking on the occasion, LCCI President Farooq Iftikhar said that the biggest problem faced by the business community, and generally the whole of Pakistan, is a severe shortage of energy.

The intensity of this crisis is getting worse by the day, he complained. He said that we must adopt measures to address this issue urgently as it is crippling the national economy.

The LCCI president urged the government to allocate Rs200 billion per year or 10% of the total budget at the very least for hydel energy projects in order to produce cheap energy. He said that the Kalabagh dam is the most viable project to address the energy issue, but has unfortunately fallen prey to politics.

Published in The Express Tribune, November 14th, 2012.

Young cheats: Almost 50% of tax dodgers below 35 years of age

ISLAMABAD:Nearly five out of every 10 identified tax dodgers are between 18 and 35 years of age, while one out of every 10 of the evaders is a woman, according to official statistics.

Karachi hosts the maximum number of tax evaders, while traders make up the biggest group of those who earn millions, own multiple houses and expensive vehicles, maintain many accounts and spend significant time abroad while avoiding paying a rupee to the exchequer.

The statistics also show that almost two-thirds of the identified people use advanced business models.

The Federal Board of Revenue (FBR) and the National Database and Registration Authority (NADRA) have for the first time identified and grouped over 2.4 million tax dodgers, according to their age groups, sex, geographical background and professions.

Almost 60% of the 2.4 million have a two-member family, while 317,429 have more than five-member families. According to census and data, wealthy people like to have small families.

Also featuring in the list of evaders are 735,212 people who have remained taxpayers but have exited the system through corrupt FBR officials. However, this figure has not been used in working out the percentages in various categories of evaders.  Salaried individuals and withholding agents have not been added to the list either.

According to official figures, as many as 2.2 million or almost 90% of the 2.4 million men and 240,292 (10.2%) women willfully evade taxes.

The government will provide the tax dodgers one last opportunity to avail the tax amnesty scheme before resorting to coercive measures.

Age groups

Ten percent or 242,640 indentified people are between 18 to 25 years of age; 465,549 or 20% are between 26 to 30 years of age and 393,850 people or 17% are between 31 and 35 years of age. This shows that 47% of the total evaders fall between the ages of 18 and 35, indicating the trend of transferring assets to offspring, a common practice among politicians and the industrialists in the country.

As many as 897,242 individuals or 38% are between the age group of 36 and 50 years. Fifteen per cent or 355,744 people fall in the age group of 36 to 40, while 285,409 or 12% are of 41 to 45 years of age. Eleven percent or 256,089 individuals are aged between 46 and 50 years.

In the elderly group of 51 to 60 years, as many as 360,546 people or 15% have been identified.

Top 10 cities

Karachi hosts 326,144 or 13.8% of the identified people followed by Lahore with 238,050 people (10%), Rawalpindi with 117,639 people (5%), Faisalabad with 101,422 people (4.3%) and Sialkot with 97,391 people or 4.2%.

The rest are residents of Gujranwala, Gujrat, Multan, Peshawar and Islamabad.

Top 10 professions

The maximum numbers of evaders, 62,779, are traders by profession, followed by contractors (36,270), importers-exporters (17,853), general-store wholesalers (13,531), jewellers (10,728), small industry owners (10,105), construction industry owners (9,569), doctors (9,330), travel agents (5,426) and owners of filling stations (3,766.)

Published in The Express Tribune, November 13th, 2012.

Multinationals asked to ensure at least 15pc margin to retailers

ISLAMABAD: Pakistan is the land of opportunities offering profitable investment opportunities to both local and foreign investors while private investment was being encouraged in major sectors of the economy. 

Zafar Bakhtawari President Islamabad Chamber of Commerce and Industry (ICCI) talking to Ahsan Iqbal General Manager, Coca Cola Beverages Pakistan said the presence of a large number of foreign companies was showing confidence in the business environment, as they were doing profitable business.

Various multinational companies working in Pakistan were offering very little profit margin to retailers resulting in the companies failed to achieve desired results. 

The culture of imported items was also on the rise due to inefficient output by these companies. He stressed upon all multinational companies to ensure at least 15 percent profit margin for retailers.

Foreign investment in Pakistan has declined by 63 percent because of energy shortfall, poor law and order, institutional fragility and political instability. He expressed hope government would resolve these core issues by adopting remedial measures to attract foreign investors. 

There is greater need to encourage foreign companies to make investments at large scale as well as existing multinational companies should adopt some expansion plans like Telco’s which was making huge profits in Pakistan and contributing in enhancing the over all economic activities.

Coca-Cola Pakistan exists to refresh the consumers, inspire moments of optimism through our brands and actions as well as provides benefits to all stakeholders, Ahsan Iqbal said. 

He said the Company also intended to invest another $300 million in Pakistan, which would further generate employment opportunities in the country.

Published in The Daily Times, November 14th, 2012.

Mechanism developed to curb tax theft: Hafeez

ISLAMABAD – Federal Minister for Finance Dr Abdul Hafeez Sheikh has said that the government has devised a comprehensive mechanism to curb tax theft by identifying potential tax evaders and bringing them into tax net to improve revenue collection.

He was talking to media persons after inaugurating the 3-day 18th Annual General Meeting and Conference of Pakistan Society of Development Economists (PSDE).

The three-day (13-15 November) conference titled, “Economic Reforms for Productivity, Innovation and Growth” has been organised by PSDE in collaboration with Pakistan Institute of Development Economics with an aim to provide the economists a platform to share their knowledge about economic issues and help find their solutions. The federal minister said that the government has established a databank that would help it identify, with evidence, the tax evaders on the basis of their consumption of resources and lifestyle.

He said that credible way of implementation would be ensured and now the government would not just suffice on issuing the notices but would go for proper implementation. He said that it would also seek support within the society by sensitizing the people to take this issue as national issue.

Earlier, speaking at the conference, the federal minister said the tax collection ratio has increased by 21 percent as Rs.350 billion additional revenue has been collected in the financial year 2011-12, which is a highest tax growth in the history of Pakistan.

The federal minister said this year the focus would be on expanding income tax base while the government during the past year had specially focused on sales tax and had brought about many changes in the overall system.

Online adds: Sheikh said that the incumbent government has given Rs.1400 billion on electricity subsidies in last four and a half years.

Dr.Abdul Hafeez Sheikh said the government was pursuing regional balance in development focusing on Balochistan, Gilgit-Baltistan and Federally Administered Tribels Areas (FATA) where special projects have been launched to improve the socio-economic conditions of the people.

He said that after 7th National Finance Commission (NFC) award the provinces have been given more resources to improve the socio-economic conditions of the people as the government had provided Rs.5000 billion to the provinces which will help them to manage their affairs whereas under the changed formula of NFC, additional Rs.1000 billon were given to the province in the last two years. He said Rs. 260 billion were also distributed among 3 million poor families in the country.

He said the present government has spent Rs.3000 billion on Public Sector Development Programme (PSDP)and 650 federal development projects have been completed in last four and half years.

He said that the present government has eliminated 392 regulatory duties out of 397 and all 100 special duties were eliminated and the custom duty on imports has been slashed in order to open the economy to attract the foreign direct investment.

He said the issue of corruption can only be addressed by allowing institutions to work in their domain and it was first time in the history of Pakistan that Securities and Exchange Commission of Pakistan (SECP), Competition Commission of Pakistan (CCP), Supreme Court of Pakistan and other institutions including media were working independently which was a positive development.

Published in The Nation, November 14th, 2012.

End of the file


News selected from Business Recorder, Nation, News, Tribune, Daily Times, Pakistan today, Pakistan Times & Geo TV

Prepared & Circulated under the supervision of:

Muhammad Ashraf Reza        Cell: 0300/333-868 3888      Email: reza888itp@gmail.com

Note: Updates & fresh newsletter is available on  www.ashrafrezaandcompany.com

Enjoy & Pray for us

Publication Committee, Regional Tax Bar Association, Bahawalpur

Published in The Daily Times, November 09th, 2012.

Related Posts

Leave a Reply