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Taxation
Advisor to Prime Minister on Finance Dr Abdul Hafeez Shaikh has said that assets worth Rs 3 trillion have been declared by 137,000 people under the Asset Declaration Scheme 2019 with tax payments of Rs 70 billion, and most of the declarants are new taxpayers.

At a hurriedly convened press conference on Thursday, the advisor said that good news is that not a single member of the IMF Board opposed the programme for Pakistan. Shaikh said he was thankful to the International Monetary Fund (IMF) leadership who by approving EFF programme for Pakistan reposed confidence in it to emerge as a good partner.

The advisor said that primary objective of the Asset Declaration Scheme 2019 was to increase number of taxpayers and 137,000 people have been registered while Rs 70 billion tax payments were made under the scheme. The good thing is that a large number of declarants out of 137,000 are new taxpayers who were, earlier, non-filers and not in tax system. He said that now the government’s priority is to bring about reforms in the FBR system to achieve Rs 5.5 trillion revenue collection target for the current fiscal year.

Chairman Federal Board of Revenue (FBR) Syed Shabbar Zaidi said that notices would be issued to non-filer industrial consumers and those having one kanal house, to become filers. He said that every car owner is required to file returns irrespective of his or her income. The advisor said that the IMF will disburse $1 billion to Pakistan on July 8, 2019 as the first instalment of $6 bailout package. He said that one positive development after the approval of the IMF programme is that other partners have also started releasing funds to Pakistan.The advisor maintained that Asian Development Bank (ADB) will disburse $3.4 billion additional funds to Pakistan with $2.1 billion in the current fiscal year and more important is that these additional funds would be provided for budgetary support. The advisor said that the World Bank (WB) will also provide additional funds for budgetary support.

He said that IMF programme is important for Pakistan because it would satisfy other international institutions that Pakistan is supported by an institution whose basic objective is to help the member countries in need. Pakistan also wants to send a message to the international community that the government wants to control its expenditure and mobilise taxes from the rich to cater for the needs of its people. The advisor said that the government will take difficult decisions but at the same time it will also protect the weak and increased allocations have been earmarked under various accounts as subsidy for them.

The government has also provided incentives to businesses class on account of electricity, gas and loans, and has withdrawn taxes on raw material to reduce the production cost because the government wants to reduce the cost of doing business to help industry increase its exports.

Shaikh said that as the country is going under the IMF programme, many good things are going to happen and “we want a platform from where sustainable growth and increase in income could be ensured.”

The EFF is a long-term repayment period spread over 10 years and Pakistan will be disbursed $2 billion annually from the IMF with mark-up below 3 percent. To a question, he said that the government has estimated $11.8 billion outflow for the current fiscal year against $9.5 billion for the last fiscal year and breakdown of $38 billion estimated from other sources during three years IMF programme included; $8.7 billion project loans, 4.2 billion programme loans, $14 billion rollover of previous borrowing and commercial loans can be between $0-$8 billion.He said that there is no condition of privatisation for Pakistan but an understanding has been reached out with the IMF that the government would prepare a programme about those state-owned enterprises (SOEs) that are to be made operational by the government and those are to be run by the private sector before September 2020. Power sector losses, circular debt, are targeted to be reduced to Rs 8 billion monthly from Rs 26 billion, said the advisor adding that the IMF would also hold a press conference and share details of the programme.

Skaikh said that present government inherited Rs 31 trillion debt and efforts were afoot with the help of friendly countries Saudi Arabia, the UAE and China, for its repayment and oil facility on deferred payment was arranged in this regard.
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Taxation
The Economic Coordination Committee (ECC) of the Cabinet has deferred re-imposition of custom duty and sales tax on import of cotton for one month, well-informed sources told Business Recorder. Ministry of National Food Security & Research stated that cotton produced in Pakistan is largely consumed by 450 textile units across the country which contributes to export earnings of the country.

Area under cotton in Pakistan has witnessed a decline over last few years mainly because of turnover advantage and support price of other commodities. Pakistan produces around 13 million bales of cotton and imports about one million bales to meet the gap between consumption and production. Around 1-1.5 million bales Extra Long Staple (ELS) cotton per annum is also imported at any production level, as this quality is not produced in the country.

The ECC was informed on June 26, 2019 that the government withdrew customs duty, additional custom duty and sales tax on the import of cotton on January 31, 2019 which expired on June 30, 2019.

Resultantly, 1,802,524 bales were imported during July 2018 to April 2019 and local cotton prices went down from Rs 9410 per maund in November 2018 to Rs 9241 per maund in March 2019.
Cotton production in 2018-19 (9.98 million bales) has witnessed 16 percent decrease relative to the past year (11.98 million bales in 2017-18). However, for the year 2019-20, the government has fixed an ambitious target. In this backdrop, it is apprehended that if import of cotton continues to be facilitated as such, it might create an imbalance in cotton stocks in the country.

This in turn, is anticipated to exert a downward pressure on cotton-prices in the beginning of the cotton season. It may be added that the sowing of new crop has also been affected due to accelerated imports.

National Assembly Special Committee on Agriculture headed by Speaker National Assembly, in its meeting held on April 22, 2019, cognizant of this issue endorsed the imposition of duty on import of cotton prior to cotton sowing. Moreover, National Assembly has also passed a resolution on April 30, 2019 that “Federal government should, without any delay restore the regulatory customs duty on cotton import to prevent the massive and set minimum support price for cotton to protect the local farmers and encourage cotton cultivation in the country”.

Ministry of National Food Security & Research further informed that export oriented units would not be affected due to imposition of duty as such units have provision of Duty and Taxes Resumption (DTRE) scheme, to claim the duty on imported raw material. In reality, duty free import is only affecting local cotton prices and is not producing any benefit to the textile exports.It was suggested that in order to increase the cotton cultivated area, the duty and sales tax may be re-imposed on January 15, 2019 as this would help to stabilize the cotton prices in the country and will encourage farmers to improve management and investment to ensure a raise in the overall yield.

Ministry of National Food Security & Research proposed that custom duty, additional custom duty and sales tax withdrawn on January 30, 2019 @ 3 per cent, 1 per cent and 5 per cent may be re-imposed on the import of cotton with effect from July 1, 2019.

During the ensuring discussion, it was agreed that the custom duty/sales tax may be re-imposed on the import of cotton in the public interest. However, due to different harvesting seasons of the crop in Sindh and Punjab, the customs duty/sales tax may be re-imposed after consultation with all concerned.

After detailed discussion, it was decided that the Ministry of National Food Security & Research should re-submit the case after one month.

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Taxation
Australia’s parliament agreed Aus$158 billion (US$111 billion) in income tax cuts late Thursday, delivering the conservative government its first post-election win. The new package is set to reduce income tax in three parts. More than 10 million Australians will receive an immediate rebate of up to Aus$1,080 when they begin filing tax returns this month.

An income tax threshold increase is scheduled for 2020, while the final stage of the cuts will begin in 2024. “As a result, low and middle income earners will keep more of what they earn and have more money in their pockets,” Prime Minister Scott Morrison said. “This will ultimately boost household consumption, which will be good for the overall economy,” he added in a joint statement with Treasurer Josh Frydenberg and Finance Minister Mathias Cormann. The government will be banking on the tax cuts giving a much-needed cash boost to a sluggish economy battling a downturn in consumer spending.

The Reserve Bank of Australia this week cut interest rates in its second straight month to a new historic low. It cut rates by another 25 basis points to one percent, as it struggles to extend a record 28-year-run without a recession against increasing headwinds, including low wages and a housing slump.
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