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Taxation
With a view to further improving the ease of doing business, the federal government is taking steps to club all taxes into one tax in the next federal budget following which there will be a single tax collector and businessmen will have to pay a single tax and file only a single tax return.

Federal Finance Minister Asad Umer made this announcement while speaking at the Lahore Chamber of Commerce and Industry on Monday. He said this step is being taken to facilitate businesspeople who are paying various taxes. Minister of State for Revenue Hammad Azhar, Federal Board of Revenue (FBR) Chairman Dr Muhammad Jahanzeb Khan, Punjab Minister for Industries, Trade and Investment Mian Aslam Iqbal also spoke on the occasion.

He said that trust building between the government and business community is need of the hour as private sector will be leading economy in the 21st century while government would act as a facilitator. He said that the FBR and private sector would have to give respect to each other. “Promissory note for industrial sector was the idea of private sector that would help resolve the liquidity issue,” he added.

To a question, he said that interest rate is the matter of central bank, adding that savings are a must for sustainable economic development. Last year, savings were only 10.4 per cent which should be 25 to 28 per cent to achieve the annual growth target of 7 per cent. The State Bank of Pakistan would have to maintain a balance, he added.

He said industries are provincial subject after the 18th Amendment. Federal and provincial governments would take stakeholders on board to get their valuable feedback. He said that special economic zones are of utmost importance. Neither politicians nor bureaucrats are trained to run industrial estates. “I believe that operations of these SEZs should be in the hands of private sector,” he opined, adding that a task force has been formed and soon a package will be announced for the IT sector.

He said an 11-member board has been formed for “Sarmaya Pakistan” that would have eight representatives, including chairman, from private sector while the remaining will be from the government side.

About tourism, the Minister said the government is taking steps to tap the tourism industry potential. Malaysia earned US $23 billion while Turkey gained $43 billion from tourism, he added. Talking to media persons, Asad Umar said there is a visible difference between the PTI government and the previous ones which increased GST to raise revenue while we did not shift burden to the masses.

Responding to a question, the Minister said that the Prime Minister is going to launch “Pakistan Banao Certificate” on January 31 for expat Pakistanis which would provide them investment opportunities. However, there would be no specific amount or tenor of the certificate, he added. About the IMF package, he said: “We are not in a hurry to sign agreement so that the country may not face an adverse effects.”

To another question on achieving revenue target, the Minister said the target of Rs 4398 billion given to the FBR would be achieved comfortably.

Earlier, speaking at the Federation of Pakistan Chambers of Commerce and Industry Regional Office, Asad Umar said that matters relating to special economic zones, situation of existing economic zones and cotton crop strategy for 2019 have been placed in the next meeting of Economic Coordination Committee (ECC) that would be held on February 5 while the government has focused on SMEs, cottage industry and small traders to exploit country’s economic growth potential. He said the matter relating to cotton production has been placed before the ECC while agriculture ministers from Sindh and Punjab have also been invited to help chalk out strategy for future crops. Besides, the Board of Investment has been directed to brief the ECC about the facilities in existing economic zones besides suggestions to improve the missing facilities and future plans for SEZs.

The Federal Minister said that old system of power distribution and tariff would have to be deregulated besides framing of new rules and regulations.

Speaking at the LCCI, Minister of State for Revenue Hammad Azhar said that Standard Operating Procedures (SOPs) are being evolved for issuance of tax exemption certificates. He said raids on business premises have been ceased and SOPs are being formed in this regard as well. He said that tax reforms implementation committee is playing an active role while tax policy and tax administration are being separated.

FBR Chairman Dr. Jahanzeb Khan said FBR reforms are one of the top priorities of the government for trust building. He said alternative dispute resolution mechanism is being promoted to settle issues out of court. “The Lahore Chamber will be FBR’s partner in this regard,” he said, adding that tax-to-GDP ratio would have be made better.

Provincial Minister Mian Aslam Iqbal said that the draft of industrial policy has been approved by the cabinet. The cabinet has also passed labour deletion policy while rules and regulations for land lease policy would be forwarded to the cabinet for approval soon.

LCCI President Almas Hyder said the benefit of the payment of refunds through promissory note should also be extended to all the other sectors in addition to five zero-rated sectors. The government should rezone urban centres, demarcate industrial land and set up SEZs all over Pakistan. He also urged the government to announce tax holiday for new SMES.
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Taxation
The leu is expected to weaken this year, underperforming Central European peers as the Romanian government’s revenue-generating measures create economic uncertainty, a Reuters poll showed on Thursday. In the Jan. 2-8 poll of 39 analysts the median forecast put the leu at 4.75 against the euro for the end of the year, a 1.6 percent fall from Wednesday levels.

The Czech crown, meanwhile, is seen gaining 1.3 percent, the zloty 1.1 percent and the forint half a percent. Analysts projected a firmer rate of 4.715 for the leu on the 12-month horizon in a survey a month ago, before the government announced a package of tax measures and changes in pension rules in mid-December.

“The political unpredictability is likely to burden the investment climate sooner or later and also the RON (leu) in the medium term,” Commerzbank said in a Jan. 8 note. The measures, which hit various business sectors including banks and energy firms, knocked Romanian shares, turning Bucharest’s main stock index into one of the region’s worst performers from one of the best.

Romanian stocks have regained some of the losses since then, but the leu touched a 7-month low of 4.6767 versus the euro on Wednesday. The Romanian central bank, which increased interest rates last year, kept them on hold at its first 2019 meeting on Tuesday as inflation has come down sharply from mid-2018 levels of around 5 percent.

But the bank’s veteran governor, Mugur Isarescu warned that the government “reckless” new measure, which links a new tax on bank assets to the level of money market rates, would compromise the efficiency of monetary policy.

“A key question in 2019 is how the NBR would respond to potential weakening pressure on the leu coming from twin deficits and exacerbated by government’s preference for low interest rates,” Erste analyst Eugen Sinca said in a note dated Jan. 8.

“We continue to favour the scenario of a modest depreciation of the leu (2-3 percent), with the exchange rate potentially playing the role of a relief valve for easing pressures in economy,” he added. While a surge in wages in the region’s tight labour markets has increased Romania’s trade deficit by boosting imports, the Czech Republic and Hungary have trade surpluses and stable state finances.

The crown is expected to be driven by expected further interest rate increases by the Czech central bank. The 25.3 rate against the euro projected for the next 12 months is weaker than 25.13 projected in a poll early last month.

Criticism of Polish central bank Governor Adam Glapinski over the pay of a key aide left no lasting mark on long-term zloty forecasts, even though it contributed to some jitters in the market in the past days. The poll sees the zloty firming to 4.25 against the euro over the coming year, compared with a 4.26 forecast a month ago.
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Taxation
Office of the President of Pakistan has been accused of directing the Federal Board of Revenue (FBR) employees of filing further appeals and defend cases in higher judicial forums where orders passed by the President as appellate authority under Federal Tax Ombudsman Ordinance, 2000 have been reversed by the high courts.

It is reliably learnt that Chairman Lahore Tax Bar Association (LTBA) Public Interest Litigation Committee has moved a representation to President Arif Alvi under Article 19A of the Constitution. It has been accused that the representation has been filed for providing information to determine role of functionaries representing office of President in accountability matters against severe mal-administration of justice with the innocent taxpayer citizens by Revenue Division (FBR) employees.

When contacted, Chairman LTBA Public Interest Litigation Committee observed that the office of the President cannot pressurise the FBR to file further appeals and defend cases in higher judicial forums where orders passed by the President as appellate authority under Federal Tax Ombudsman Ordinance, 2000 have been reversed by the high courts, he added.

Earlier, Lahore High Court has ruled that office of President of Pakistan has caused miscarriage of justice to entertain and pass a decision on the representation filed by the FBR against the decision of the FTO. Said petition was moved by a Faisalabad-based taxpayer through Waheed Shahzad Butt Advocate, challenging the FBR’s action to file representation before the President of Pakistan against the order passed by FTO.

Chairman LTBA Public Interest Litigation Committee Waheed Shahzad Butt in a letter to President Arif Alvi states “Being a responsible taxpayer citizen and belonging to the most vigilant community of the Country, instant request is forwarded.

Without any iota of doubt, peoples of Pakistan especially taxpayer citizens of this country have complete confidence on President’s esteemed personality and administrative skills. Article 19-A of the Constitution enabled every Citizen of Pakistan to become independent of power centre to seek information on matters of public importance, therefore, in the light of Article 19A of the Constitution read with PLD 2012 SC 292, PLD 2008 Karachi 68, 2012 PLC (C.S.) 566, PLD 2016 (Lahore) 872, President good office is requested to provide following information:

“Number of cases where office of President had issued instructions/guidance/intimation to FBR to file/prefer further appeals in cases where orders passed by President as an Appellate Authority under Section 32 of the FTO Ordinance, 2000 have been reversed/modified by the High Courts during the period (i) August 11, 2000 to January 25, 2016 and (ii) January 26, 2016 to December 04, 2018 “

The data will expose that in how many cases President office has directed the FBR to file appeals against High Courts orders during the period of August 11, 2000 to January 25, 2016 when compared with January 26, 2016 to December 04, 2018. Required information may be provided at earliest to compare data, LTBA chairman added.
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Taxation
Insufficient release of Public Sector Development Programme (PSDP) funds has hit revenue generation due to slow economic activities, said the Federal Board of Revenue (FBR) sources.

FBR sources said the province of Punjab has been hub of economic activity over the last 15 years out of the funds released under PSDP by the PML-N government. However, the present government is very cautious towards release of PSDP funds that has slowed down economic activity, and ultimately the revenue generation.

The government has disbursed Rs187 billion (27.7%) under the Public Sector Development Programme (PSDP) 2018-19 which includes foreign Rs57.4 billion foreign aid for various development projects. As per latest data released by the Ministry of Planning Development and Reform regarding PSDP 2018-19, the government disbursed Rs79.06 billion including Rs6 billion foreign aid for development projects of several ministries, divisions and related departments out of Rs291.55 billion budgeted allocation, reports an English daily. No funds have been released by the government till now for the commerce division, inter-provincial coordination division and religious affairs and inter-faith harmony division.

According to FBR sources, the development activities in the province of Punjab was main driving force behind the economic wheel of the country and former Chief Minister Shahbaz Sharif was spending heavily out of development funds, both from the PSDP as well as the Annual Development Programme (ADP) of his government. Moreover, there was no uncertainty and everyone had a clear idea about the continuity of the government, a fundamental factor behind the economic activity in the country.

Also, a large number of projects were installed in various sectors that triggered massive activity at that time.

The present government has stalled whole range of economic activities and release of funds from the PSDP is very meager if one compares it with the previous regime of PMLN, said sources and added that no revenue generation is expected until release of development funds is back to normal pace. “Taxpayers could only pay income tax if they are generating income,” the FBR stressed.

It may be noted that the government leads the economy from the front by initiating development works that kick start productivity of some 40 industries relating to development work. Furthermore, a backlog of utility charges has also contributed to slowing down of economy as the previous kept utility charges unchanged since 2015 due to political expediency arising out of Panama scandal and other issues. This situation led to a huge loss to the utility agencies and the present government had no option but to increase tariff after taking charge of the government.
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Taxation
The Federal Board of Revenue (FBR) has said it enjoys powers to raise immediate demand and effect recovery on provisional basis in case of government confiscated local assets under Section 123 of the Income Tax Ordinance. The scope of this Section is proposed to be extended to discovery of undeclared offshore assets through the current Finance Bill. Now the demand and recovery of tax on such persons can be executed immediately after receipt of information in suitable cases.

The measure is necessary to enable FBR to recover tax provisionally before the money moves out of bank accounts and the regular proceedings, which take about a year or two, follow. The FBR has further said that it can also request assistance in recovery of such taxes from foreign jurisdictions wherever it has bilateral and multilateral agreements.

This will ensure that FBR can request freeze of offshore accounts to other countries by conveying demand to such countries.

The FBR is already in possession of information of bank accounts of Pakistanis from 26 countries and this provision will enable FBR to move swiftly in the direction of taxing people involved in holding of offshore assets. As such, this measure has been introduced in addition to measures already available in Income Tax laws, Anti-Money Laundering Act and FIA/NAB laws and, in no way, precludes or overlaps the jurisdiction of such laws and institutions.-PR
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Taxation
Minister of State for Revenue Hammad Azhar Friday said no proposal of tax amnesty scheme is under consideration in the Federal Board of Revenue (FBR) or the Finance Division; however, a five-year tax and tariff plan will be unveiled soon to provide consistency in policy to the investors.

“At present neither has the government any intention to offer any amnesty scheme nor has FBR received any such instruction from the Ministry of Finance,” said the minister in response to a question at a roundtable seminar on “Economic Reforms: Way Forward,” organised by Sustainable Development Policy Institute (SDPI).

Azhar also acknowledged that FBR capacity eroded over the years due to political interference and people are not willing to become filers because of fear of harassment at the hand of tax officials after becoming filers. The government, he said, has decided to make an independent board of Pakistan Revenue Automaton Limited (PRAL) for making its full utilisation. The government will also introduce five years tax and tariff plan to ensure consistency in policy to the investors.

He further stated that the government is bringing a mechanism in consultation with the Pakistan Telecommunication Authority (PTA) to deal with Rs 150 billion mobile phone smuggling. “We will try to limit the budget deficit to 5.6 percent in the current fiscal year,” he said, emphasising that provinces need to fulfill their commitment made under the 7th National Finance Commission (NFC) Award for help in increasing the country’s tax-to-GDP ratio.

“We are also taking a proposal to the Parliament for approval in the Supplementary Finance Amendment Bill 2019 with regard to simplification of tax return to broaden the tax base and a pilot project for small traders and shopkeepers would be launched in the federal capital and it will subsequently be implemented across the country.

The minister said that economic reform package is neutral in terms of revenue (no loss, no gain) but has been designed to revive and facilitate the investments and growth.

The minister said that loose fiscal and monetary policy with huge deficit during the last ten years in general and in the last fiscal year of Pakistan Muslim League (N) administration, in particular, with Rs 2,300 billion or 6.6 percent deficit against the target of 4.9 percent led to consumption based growth. The purpose of economic reform investment and industrialisation package is to move towards supply side of the economy through enhancement in domestic production and exports. Additionally, he said that his government has also proposed a simplified and friendly tax regime to ensure ease of doing businesses.

Chairman Board of Investment (BoI) Haroon Sharif said that all foreign state visits of Prime Minister were fundamentally meant to reach out investors and investments to get economy out of the crisis. He said, “At BOI our objectives are four folds – increasing productivity, technology transfer, facilitating investments that support the export sector and job creation, and concrete proposals from China, Saudi Arabia, United Arab Emirates, Malaysia and Korea in the sectors of oil, renewable energy, hospitality and tourism have been received.
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Taxation
Directorate General Customs Valuation (DGCV) has revised the customs values of various spices and nutmeg under sub-section (7) of the section 25 of the Customs Act, 1969. According to details, the customs values of various spices and nutmeg were earlier determined through valuation ruling no 1047 in 2017.

There were several representations from importers and clearance formations, wherein they contended that customs values determined in the existing valuation ruling were not reflective of prices in international markets. Therefore it has required to be revised in line with the prevailing prices in the international market.

Keeping the said in view, the Directorate has initiated an exercise for re-determination of customs values of various spices and nutmeg under section 25-A of the custom Act 1969. For the purpose, several meetings with stakeholders including importers and representatives from field formations were held where importers said that the customs values of various spices and nutmeg determined vide the exiting valuation ruling were high and required fair revision in line with the prevailing prices in the international market.

The importers of various spices and representatives from Pakistan Kiryana Merchants Association (PKMA) and field formations, who attended the meetings, said the values of different spices especially black pepper and white pepper had reduced in the market and therefore, the existing ruling needed to be rationalized accordingly.

The PKMA also submitted proposals regarding the values of subject goods and requested for the early issuance of the notification as the importers were suffering hardships during assessment due to high customs values. The Directorate after using all relevant methods – valuation method, transaction value method, identical goods value method and deductive value method determined the customs values of various spices and nutmeg under sub-section (7) of the section 25 of the Customs Act, 1969.
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Taxation
The Federal Board of Revenue (FBR) has directed field formations to urgently issue Refund Payment Orders (RPOs) of admissible sales tax refund claims or reject inadmissible claims before issuing the first batch or promissory notes (refund bonds) by February 14, 2019. The FBR has issued instructions to all Chief Commissioners of Large Taxpayer units and Regional Tax Offices Friday.

The FBR instructions to the field formations are related to the sales tax refund liquidation.

According to the FBR, the government intends to clear existing sales tax refund pendency by the end of this year through issuance of promissory notes. First batch of promissory notes is to be issued by 14th February, 2019 as announced by the finance minister in his speech on January 23, 2019 while tabling the Finance Supplementary (2nd Amendment) Bill, 2019. However, the data of refund payment orders (RPOs) as generated after the issuance of aforesaid letter dated 20.12.2018 reveals that 2,274 RPOs have been generated involving an amount of Rs 7.912 billion which is not found satisfactory. Till data, existing pendency still shows huge outstanding amounts as attached. Further, the progress reports as sought vide Board”s letter dated 31.12.2018 have not been received.

All field formations are once again advised to expedite processing of pending sales tax claims through STARR and reduce the refund pendency by half through generation of RPOs for admissible amount and rejection of inadmissible amounts by 10th February 2019. A detailed progress report in the matter may be furnished to the Board by January 31, 2019, the FBR added.
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Taxation
The Federal Board of Revenue (FBR) has directed its field formations to ensure that businessmen who availed Income Tax Amnesty Scheme and completed all codal formalities will not be harassed by the taxmen. In this regard, the FBR has issued instructions to the field formations here on Thursday.

According to the FBR, refer to the Prime Minister’s Office letter received from Deputy Secretary (EA-II), Prime Minister’s Office, Islamabad and to say that directive i.e. Businessmen who availed Income Tax Amnesty Scheme and completed all codal formalities will not be harassed by FBR or FIA, may be implemented in letter and spirit, the FBR added.
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Uncategorized
The Federal Board of Revenue (FBR) intelligensia is not fair with the government on its reform agenda, said the Board sources. “The FBR intelligensia is not in favour of reforms and managing status quo through bureaucratic tactics,” they said, adding: “The government, on the other hand, is too weak to establish its writ against the adamant tax intelligensia.”

Sources said there was no status of reforms in the FBR and the worst economic situation of the country was also favouring those who prefer status quo. They have further pointed out government’s compulsion of collecting maximum revenue before introducing reforms by expanding tax net. Therefore, the government is also following the policy of go-slow on reform agenda, they said.

According to them, the government is also looking into a sense of urgency and pressing the department for reforms without considering the ground realities and without understanding the working environment of the department. The government policymakers should assess the existing tax machinery, mechanism of tax collection and the mindset of taxpayers.

Sources said the government would have to ensure general public that the reform process would ‘inclusive’ to create their trust on the system. It would have to bring a change in existing system of squeezing weaker ones while letting the influential one scot-free, they stressed.

They pointed out that it is fortunate that Pakistan has a regressive tax system and no one files a return voluntarily. Therefore, the FBR has no option but to adopt regressive measures including unearthing the concealed assets, imposing fines on non-filers and infringing the rights of taxpayers in order to tax them.

They said the existing strength of FBR staff is not only too little to match the agenda of ‘change’ of prime minister but also lacks capacity to perform.

It may be noted that the World Bank-sponsored Tax Administrative Reforms Process (TARP) had led to the creation of the Large Taxpayer Units (LTUs) at the FBR back in early 2000. it is generally believed that the LTUs are highly organized with better working practices comparing to the rest of the FBR. But the ground realities suggest that the situation at the LTUs is much in disarray as compared to the non-corporate sector, as there is no organized system to track tax record of taxpayers there. Most of the files are lying in corridors there and it seems that nothing is in order at the LTU Lahore.

According to the sources, the government should start consultation with other stakeholders including tax bar, trade bodies and other segments of the society to defeat the bureaucratic hurdles in smooth implementation of reforms.

It may be noted that both the tax avoidance and tax evasion are plaguing the tax collection machinery in Pakistan. In order to get rid of it, there is a dire need of trust building on the part of taxpayers that the tax they paid by them would be utilized for their betterment and not misused by the state, the departmental, the sources concluded.
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