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Taxation
The Federal Board of Revenue (FBR) Wednesday directed the Collectors of Customs to apply retail price taxation on imported goods and ensure that the declared retail prices are duly printed and sales tax is charged on the basis of such declared retail price on imported items.According to the FBR’s budget instructions (2019-20) issued to the field formations here on Wednesday, the locally manufactured goods specified in Third Schedule are already chargeable to sales tax on the basis of retail price. Now, through amendment in section 3(2)(a), retail price taxation has also been made applicable to imported goods. The importers are required to print the retail price in the manner prescribed in the aforesaid clause and such goods shall be assessed on the basis of declared retail price and not on the basis of customs value under section 25 of the Customs Act, 1969. All MCCs are requested to ensure that the declared retail prices are duly printed in the prescribed manner and that the sales tax is charged on the basis of such declared retail price.

The FBR said that the section 23, relating to issuance of invoices and particulars to be specified therein, has been amended to provide that in case of supplies to un-registered persons, their NIC or NTN number shall be specified in invoice.

The caveats, provided therein, are as under:

The NIC or NTN shall not be required in case of supplies made by a retailer where the transaction value inclusive of sales tax amount does not exceed Rs 50,000 and the sale is being made to an ordinary consumer buying goods for his own consumption and not for the purpose of resale or processing.If it is subsequently proved that NIC provided by the purchaser was not correct, liability of tax or penalty shall not arise against the seller, in case of sale made in good faith; and the condition of providing NIC or NTN shall be effective from 1st August, 2019.

The FBR has further directed field formations that the rate of the Federal Excise Duty (FED) on ghee and cooking/edible oils has been enhanced to 17 percent and FED shall be payable on the basis of retail price on products sold in retail packing.

The FED on ghee and edible oils was payable at 16 percent in sales tax mode. However, payment of Rs 1/kg on input oils spared the manufacturers of any further payment against value addition. In case of input seeds, payment of Rs 40 per kg discharged the manufacturer’s liability on value addition. In case of solvent extraction units, need to apportion input taxes was also done away with. This regime has been abolished. SRO 24(I)/2006 dated 07.01.2006, SRO 507(I)/2013 dated 12.06.2013, SRO 508(I)/2013 dated 12.06.2013, and SRO 68(I)/2006 dated 28.01.2006 have been rescinded. FED of Rs 0.40 per kg of oilseeds, as at Serial number 54 of First Schedule has also been withdrawn by omitting this serial.

Other salient features of the change are: The rate of FED on ghee and cooking/edible oils has been enhanced to 17 percent. In case of products in retail packing FED shall be payable on the basis of retail price. The refund on export of these items, as made on or after 1st July, 2019, shall be paid on the basis of actual excess of input tax under the Sales Tax Rules, 2006 and not the basis of fixed rate notification, FBR added.
The FBR further directed the formations that the provisions relating to 3 percent value addition tax on imported goods have been transposed from the special procedure rules to the newly inserted Twelfth Schedule and necessary enabling amendments have been made to sub-section (2) of section 7A.

Earlier exclusions from 3 percent tax have been maintained with following differences:

(i) Earlier manufacturers importing goods for in-house consumption were excluded from this levy. Now, all raw materials and intermediary goods meant for use in an Industrial process which are subject to customs duty at a rate less than 16 percent ad valorem under First Schedule to the Customs Act have been excluded, whether imported by manufacturers or commercial importers.

(ii) Earlier only those petroleum products, imported by OMCs, were excluded whose prices were regulated. Now, all petroleum products imported by OMCs excluded.

(iii) Cellular mobile phones or satellite phones have been added to exclusions:
(iv) In view of withdrawal of exemption on gold and silver, in unworked condition, the exclusion from 3 percent tax has been provided to these items.


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Taxation
New taxation and tariff hike have halted revival of closed industrial units, expansion of present setups and new investments, according to power sector experts. They also noted that partially operating units have also come to a halt. They said that provision of electricity at the rate of 7.5 cents per unit to zero-rated industry also hangs in balance because of government’s silence on the issue of tariff after abolition of zero-rated regime.The gurus of power sector are predicting that 17pc sales tax and 5pc income tax will be slapped on the electricity tariff after doing away of zero-rated status which will directly increase the tariff by 22pc. Besides, devaluation of rupee against dollar will further increase the tariff and it will be devastating for the beleaguered export-oriented industry.

The experts have estimated a burden of more than Rs 20 billion on this segment of industry after new taxation. Those exporting their products can claim refund of this 22pc additional burden, but it is pertinent to highlight that a sizeable number of refund claims will not be filed because of cumbersome documentation process for which consumers have to bear extra cost. The production cost will swell up in the process and their competitiveness will be eroded with the regional players and in the international market. Resultantly, exports will drastically drop and it will be a setback to the national economy, they said.

Furthermore, they said new industrial tariff for non-zero-rated industry is likely to be fatal for the sector because the latest withdrawal of industrial support package of Rs3 per unit during off-peak hours approved by ECC with effect from 01 July, 2019 will play havoc with them. The continuation of industrial support package during peak hours is of no significance for a single/two shift(s) industry because they don’t operate during peak hours. The anticipated increase in tariff for this segment of industry will just not be around Rs1.50 per unit but more than it.
The experts have suggested that the industry will have to bear an additional burden of approximately Rs91 billion. This is an additional input cost and its impact on the prices will be magnanimous. This will make small and medium enterprises vanish from business scenario. Consumers do not have capacity to absorb this high cost. The inflation will go sky-high and this situation will be disastrous for all the stakeholders. Reportedly, the IMF is emphasising further raise in power tariff in August 2019 which will be tantamount to last nail in coffin of the industry.

The after-effects of Budget 2019-20 on electricity are horrifying the industry and these must be perceived in a rational perspective; otherwise, this sector will be doomed. Those sitting at the helm of affairs must take cognizance of the situation to rid the industry of severe crisis.
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Taxation
France announced Tuesday it would impose new taxes on plane tickets of up to 18 euros per flight, joining other EU states seeking to limit the environmental impact of air travel. The government said that the funds from tickets for flights originating in France would be used to create less-polluting transport options as concerns grow about carbon emissions from planes.

The move, which will take effect from 2020, will see a tax of 1.5 euros ($1.7) imposed on economy-class tickets on internal flights and those within Europe, Transport Minister Elisabeth Borne said. It will rise to 9 euros for within the European Union in business class, three euros outside the EU in economy class and a maximum 18 euros for flights outside the European Union in business class, she added.

The new measure is expected to bring in some 180 million euros a year which will be invested in greener transport infrastructure, notably rail, she said. “France is committed to the taxation of air transport but there is an urgency here,” she said. It will only be applied on outgoing flights and not those flying into the country, Borne added.

Flights to the French Mediterranean island of Corsica and also the French overseas departments – which are hugely dependent on air links for their existence – will be exempt, she said. Shares in Air France fell sharply, down almost 4 percent to trade at 8.54 euros. Its German competitor Lufthansa also traded lower with its shares falling 2.50 percent to 14.8 euros.

Air France slammed the measure, which it said would “strongly penalise its competitiveness” at a time when it needed to invest, notably in renewing its fleet, to reduce its carbon footprint. A similar tax was introduced in Sweden in April 2018, which imposed an added charge of up to 40 euros on every ticket in a bid to lessen the impact of air travel on the climate.Sweden has seen the development of a movement called “flight shaming” (flygskam) spearheaded by 16-year-old schoolgirl Greta Thunberg who has become a symbol of the fight against climate change. The industry has been under fire over its carbon emissions, which at 285 grams of CO2 emitted per kilometre travelled by a passenger far exceed all other modes of transport.

Road transportation follows at 158 and rail travel is at 14, according to European Environment Agency figures. “The sector is under considerable pressure,” Alexandre de Juniac, the chief executive of the International Air Transport Association (IATA), admitted at a meeting of the industry body in June.
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Taxation
No new sales tax registration has been granted since July 1, 2019 as Federal Board of Revenue (FBR) hasn’t finalized the mechanism to implement the amendment made in sales tax registration rules through Finance Act 2019, creating difficulties for new applicants.

According to details, FBR has now made biometric verification mandatory for the new applicants for sales tax registration from National Database & Registration Authority (NADRA) and the amended Sales Tax Rules, 2006 has been issued by FBR.

After the said amendment, field formation of FBR is refusing to accept new sales tax registration from their counters since July 1, 2019, creating difficulties for the new applicants to get registration.

Sources said that meetings were being convened but FBR after the lapse of seven days remained unable to finalise the mechanism and make suitable changes in the system to implement the said amendment, creating difficulties for the new applicants to get enrolled in the system.

Talking to Business Recorder, Munawar Manekia, tax consultant & advocate confirmed the said issue, saying that field formation of FBR was neither entertaining new applications for sales tax registration nor the board was giving any justification on the issue, causing to aggravate the applicants’ problems.

He said that importers were facing financial losses in terms of demurrages as their consignments were stuck at ports due to absence of sales tax registration and no FBR official in Karachi or Islamabad was facilitating them in this regard.

Meanwhile, Adnan Mufti, partner, Shekha & Mufti Charter Accountants said that FBR had taken several budgetary measures on IMF pressure but the practical implementation of these measures were formidable task for the tax authority that tempting unwarranted problems for the taxpayers.

Under the revised rules, the applicant having National Tax Number (NTN) or income tax registration shall use his/her login credentials and upload bank account certificate issued by the bank in the name of the business; registration or consumer number with the gas and electricity supplier; particulars of all branches in case of multiple branches at various locations; GPS-tagged photographs of the business premises; and in case of manufacturer, also the GPS-tagged photographs of machinery and industrial electricity or gas meter installed to get sales tax registration.After the registration, the applicant or his authorized person shall visit eSahulat centre of NADRA within a month for biometric verification. In case of failure to visit or failure of verification, the registered person’s name shall be taken off the sales tax Active Taxpayer List.

In case of manufacturer, the board may require post-verification through field offices or a third party authorized by the board. In case, the field office, during scrutiny after the registration, finds that any document provided is non-genuine or fake or wrong, it may request through the system, to provide the missing document, in fifteen days, failing which the registered person shall be taken off from the sales Active Taxpayer List, subject to approval of the Member (IR-Operations), FBR.
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Taxation
Lahore High Court (LHC) has disposed of various petitions wherein FBR’s Circular No 07 of 2018 was challenged with the prayer that a taxpayer who had paid tax under amnesty scheme may be allowed to file declaration under the Voluntary Declaration of Domestic Assets Act, 2018 and incorporate the assets in his books of accounts.

It is reliably learnt that LHC has issued a written order and instead of declaring FBR’s Circular 07 of 2018 as illegal or allowing taxpayer to file declaration under the Voluntary Declaration of Domestic Assets Act, 2018 and incorporate the assets in his books of accounts, directed the FBR that amounts deposited for declaration of assets under the Act of 2018 shall be refunded without any condition within 15 days from the date of application for refund. Consequently, FBR’s stance vide Circular 07 of 2018 has been affirmed by the LHC.When contacted, tax lawyer Waheed Shahzad Butt who has challenged present the Assets Declaration Ordinance, 2019 before the LHC, told Business Recorder that for all practical purposes any tax amnesty means another financial National Reconciliation Ordinance (NRO). The government instead of entertaining any such scheme should seriously consider introducing ‘asset-seizure scheme’ to confiscate undeclared/ untaxed assets / wealth created from black/ undisclosed / untaxed money and make laws to bring back looted money. In case of recent order passed by LHC, it is stated by tax lawyer that schemes allowing something out of books should be interpreted strictly in favour of State instead of giving any benefit of doubts to the tax evaders.

The LHC order states: “Petitioners, in this and connected petitions, are aggrieved of Circular No. 07 of 2018 dated 24.10.2018 whereby acceptance of assets declaration has been denied for the reason that declaration was made after the cutoff date given in Voluntary Declaration of Domestic Assets Act, 2018.”

The LHC order added, “On last date, it was offered by learned counsel for the petitioner that they will not press these petitions if the deposited amount is adjusted for assets declaration in current Assets Declaration Scheme for 2019. Today it is apprised that under the Assets Declaration Scheme for 2019, a mechanism of adjustment is not available, therefore, request made cannot be accepted; however, it is offered on behalf of FBR/concerned Commissioners that deposited amounts shall be refunded within fifteen days from the date of filing of application for refund. Under the circumstance, this and connected petitions are disposed of upon an undertaking on behalf of FBR that the amounts deposited for declaration of assets under the Act of 2018 shall be refunded without any condition within fifteen days from the date of application for refund. Petitioners are directed to move application for refund”.
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Taxation

The government has formally announced the provisional final results of the Asset Declaration Scheme 2019 that came to an end on July 3 instead of its original sunset date of June 30, 2019 that was approved by the parliament. It was announced on the day of extension that a presidential ordinance would provide legal cover to the additional days but is still awaited.

Read: PTI govt unveils first amnesty scheme

The prime minister was willing to extend the deadline further and indicated so on national television to the surprise of his economic managers. The International Monetary Fund (IMF) went public opposing the extension.

“The IMF is not in favour of tax amnesties. Cross country experience shows that tax amnesties usually have huge costs, such as undermining taxpayers’ morale and sense of fairness, that more than offsets potential short-term gains,” its country representative in Pakistan announced.

A new spin then followed. Federal Board of Revenue (FBR

A new spin then followed. Federal Board of Revenue (FBR) chief Shabbar Zaidi said technically there was no extension but since the last day of the deadline fell on a holiday, the deadline was taken to the next working day. As the day after that (July 1) also happened to be a bank holiday, the actual deadline should have been July 2. The extension was granted till the end of working hours on July 3 to facilitate those already in the queue and choked by the system to complete the process.

Read: Asset Declaration Scheme deadline extended to July 3: Hafeez Shaikh

Conspicuously, then the scheme’s closure was calibrated in a manner that it formally came to an end before the start of office hours on Wednesday (July 3) in Washington DC where the executive board of the IMF was due to approve Pakistan’s case for $6 billion worth of the 39-month bailout programme.

A total of 137,000 people availed themselves of the scheme by offering Rs70bn (about $432 million) in revenue and whitening Rs3 trillion worth of undisclosed assets whereas a year back the PML-N’s scheme fetched a little over Rs124bn (about $1.05bn), brought 83,000 new taxpayers into the tax system and whitened about Rs2.5tr worth of assets

The extension in the deadline came only a day after Mr Zaidi issued the statement that no extension would be given. When reminded, he said “technically we are not giving an extension but helping those already in the queues to complete the process”.

According to the adviser on finance and revenue Dr Abdul Hafeez Shaikh, a total of 137,000 people availed the scheme by offering Rs70bn (about $432 million) in revenue and whitening Rs3 trillion worth of undisclosed assets.

He did not reveal details of the declared assets at home and abroad or the revenue break up. It is also not yet clear how much of the collected funds would be treated against the accounts of fiscal year ending June 30, 2019 and the new fiscal year.

In comparison, a similar scheme announced by the PML-N government at the fag-end of its tenure a year back fetched little over Rs124bn (about $1.05bn), brought 83,000 new taxpayers into the tax system and whitened about Rs2.5tr worth of assets.

That scheme faced two major deterrents. First, the scheme got stuck before the country’s top court for over a month that affected its momentum. Second, the apparent prime minister-in-waiting at the time Imran Khan threatened potential beneficiaries to stay away from the scheme otherwise those availing it and those facilitating it would be put behind bars.

The commoners preferred to stay away from the scheme because the general perception was that it is better to stay away from jail and out of the tax net rather than pay funds out of pocket.

‘First they steal money then introduce tax amnesty schemes,’ said Imran Khan last year, adding ‘Such schemes are created to benefit the corrupt. Only corrupt elements become the ultimate beneficiaries. This is to fool the honest people of the country and encourage corrupt elements to plunder and amass wealth, only to whitewash it later on’

“First they steal money then introduce tax amnesty schemes”, said Mr Khan at that time adding “such schemes are created to benefit the corrupt. Only corrupt elements become the ultimate beneficiaries. This is to fool the honest people of the country and encourage corrupt elements to plunder and amass wealth, only to whitewash it later on”.

Ten months down the road, he himself approved a similar scheme and made at least five dedicated addresses to the nation urging people to take benefit of the opportunity he offered.

“I don’t need to claim credit, numbers talk for themselves,” said former PML-N finance minister Dr Miftah Ismail. He said the scheme announced by the PTI government was ‘very similar’ to that of his government and not the one that Asad Umar had justified on the grounds that foreign liquid assets would be repatriated to Pakistan.

“I think our scheme was more successful because it generated almost double the revenue than the recent scheme”, he said adding that full details of the latest scheme and its breakdown are not yet available to make a fair comment. However, the number of those declaring assets now is higher than 2018, which needs to be analyzed.

Dr Shaikh did not respond to the question why the amnesty schemes in Pakistan always offer a limited time window giving the impression that these are meant only for the ruling elites of the time to avail their benefits.

The two schemes together added about 220,000 return filers and Rs5.5 trillion worth of assets into the system and generated roughly Rs194bn ($1.48bn) in revenue. However, this is peanuts when one compares these schemes to the Indonesian scheme that Pakistan copied which brought in 900,000 people into the tax system and $360bn worth of assets in the formal economy.

The latest scheme proves yet again that successive governments favour tax evaders more than law-abiding taxpayers. Since the early 1960s, successive governments have introduced 11 amnesty schemes, excluding special-purpose items like the regularisation of non-customs paid vehicles.

While many countries including those in the developed world — United States, Australia, Belgium, Canada, Germany, Greece, Indonesia, Italy, Malaysia, Portugal, Russia, South Africa and Spain — have offered similar limited-time initiatives, such avenues were never opened again.

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Taxation
The Federal Board of Revenue (FBR) has prepared a list of around 10,000 staffs from grade 1 to 16 who would be transferred in phase wise manner across the country. In the first phase, the Board has transferred around 3100 employees of grade 9 to 16 from Inland Revenue Service (IRS) across the country. In the second phase, the staffs of Customs Group would be transferred across the country in the next few days.

Sources confirmed to Business Recorder that “the FBR has prepared a list of 10,000 staff that will be transferred within current month”. The government also decided to transfer officers of grade 17 and above but not in such massive scale. The FBR has transferred and posted 3,100 Inland Revenue officers so far up to grade-16 across the country under massive reshuffling.

The Board has made these transfers at Karachi, Lahore, Islamabad, Rawalpindi, Peshawar, Quetta, Hyderabad, Sukkur, Multan and other cities. Officials of BS 9-14 working in IRS (Karachi Station), officials BS 9-15 (Lahore Station), officials (BS 9-15) working in IRS, Assistant Directors (Audit) (BS-18), Senior Auditors (BS-16), BS-16 employees working in IRS, BS-16 employees working in IRS (Lahore Station) and BS-16 employees working in IRS(Karachi Station) have been transferred and posted.
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Taxation
The owner of Benami property would have the legal right to challenge the order of the Federal Board of Revenue’s (FBR) Benami Zones at the level of Adjudication authorities, Federal Appellate Tribunal, High Courts and the Supreme Court of Pakistan.

A tax lawyer told Business Recorder that confiscation of Benami properties by the government is a very lengthy process under the law and it may take years to complete the proceedings of the Benami cases. The entire process covers mainly three stages that would be handled by three different departments/authorities.

According to the official, the FBR will act as a prosecution agency. At the first stage, Inland Revenue Officers of the FBR posted in the Benami Zones would issue notice to the owner of Benami property for provisional attachment of property for a period of 90 days; the attachment can be revoked or stayed by the Inland Revenue Officer. The Commissioner Benami Zones can revoke their orders of provisional attachment of properties or issue an order of continuing provisional attachment.
After provisional attachment of property, the Benami Zones would refer the matter to the adjudication authorities within a period of 60 days.The second part of the law would be dealt with by the adjudicating authority established for adjudication of Benami properties, which is not under the FBR’s administrative control or jurisdiction. Jamil Ahmed, a retired Pakistan Administrative Officer has been appointed as Chairperson of the Adjudicating Authority. Muhammad Tanvir Akhtar, a retired Inland Revenue Officer and Khaqan Murtaza, an officer of Pakistan Administrative Officer are appointed as members Adjudicating Authority.

The adjudicating authority will issue a notice to the parties within a period of 30 days of receiving reference from the Benami Zones. The aggrieved person can file his comments within a period of 30 days. After providing an opportunity to the person whose Benami property is attached, the adjudicating authority can issue order of confiscation of the property.

The third stage of the law would be dealt with by the Federal Appellate Tribunal. Any aggrieved person or officer including the initiating officer aggrieved by an order of the adjudication authorities may file an appeal with the Federal Appellate Tribunal (FAT) against the order of the adjudication authorities pertaining to the Benami accounts and assets.

However, Law Division has yet to notify the constitution of the Federal Appellate Tribunal. Without constitution of the Federal Appellate Tribunal (FAT), the legal process to deal with the Benami properties remains incomplete, he explained.

The FAT would constitute tribunal benches to take up the appeals within a period of 45 days. The tribunal would be bound to decide the appeal in a period of one year from the date of filing of appeal.

Any person aggrieved of the decision of the Federal Appellate Tribunal may file an appeal with the High Court within a period of 60 days.
The High Court would decide the cases and the federal government can also constitute special courts after consultation with the Chief Justice of High Courts for trial of Benami cases, the tax lawyer added.


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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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