FBR forcefully withdraws Rs2bn from PRA’s bank accounts
In its desperate effort to come near the downward revised target, the Federal Board of Revenue (FBR) has forcefully withdrawn about Rs2 billion from Punjab Revenue Authority’s (PRA) bank accounts, setting another example of highhandedness.
The incident took place in Lahore where FBR authorities pressurised the National Bank of Pakistan (NBP) to reverse some transactions of PRA, officials in the FBR headquarter told. These transactions, involving nearly Rs2 billion, were reversed on June 28 and June 29, officials said.
Punjab’s Finance Secretary Hamid Yaqoob Sheikh confirmed the development.
It has become a routine matter for the FBR to freeze and attack bank accounts of companies and individuals in the crucial month of June to meet its targets. But it has never happened that the tax machinery forcefully withdrew money from accounts of another revenue authority.
For the last fiscal year 2017-18, which ended on June 30, the parliament approved a tax collection target of Rs4.013 trillion. But despite availing bonanza of the tax amnesty scheme, levying massive regulatory duties during the course of the year and taking benefit of higher petroleum products prices, the provisional collection stood at Rs3.841 trillion.
The FBR’s collection fell short of the target by Rs172 billion or 0.5% of the Gross Domestic Product (GDP), increasing prospects of crossing the budget deficit of over Rs2.4 trillion.
The Punjab government would formally take up the issue with the State Bank of Pakistan (SBP) and the federal government, said provincial finance secretary. Sheikh maintained that such acts were not welcomed, as both the departments could have resolved the issue amicably.
The Punjab government was of the view that the money belonged to the provincial authority but even if there was a dispute, there was no justification of moving without PRA’s permission, said Sheikh.
But officials in the FBR claimed that about Rs2 billion had been deposited in the NBP branch on account of sales tax on goods, which was FBR’s subject. They said that the NBP erroneously credited about Rs2 billion into the accounts of PRA. The FBR only reversed these transactions, they added.
Even if the money was erroneously credited into the PRA’s accounts, this cannot be taken out without the consent of the account holder, said Sheikh. He said that the provincial government believed that the money belonged to it.
The NBP was forced to reverse these transactions, which is also against banking rules, said the finance secretary of Punjab. He said that the Punjab government has long been encouraging the FBR to reconcile its books with the PRA. Sheikh said that FBR owed billions of rupees to the PRA for several years but the federal government department was not ready to sit with the provincial authority.
The provincial finance secretary demanded that the FBR should return its money and also rely on information technology to avoid occurrence of such incidents.
After the 18th Amendment in the Constitution, sales tax on services is a provincial subject.
The PRA wanted that the FBR should use STIRVE software, a real-time sales tax invoice verification system that also focuses entirely on denying bogus claims of input sales taxes. The FBR did not agree.
The PRA has also been urging the FBR to consolidate the databank of the taxpayers aimed at avoiding double counting of transactions and the taxpayers. However, the FBR, which in the last one year has become a hub of secrecy, has never agreed to such proposals aimed at ensuring transparency.
Instead of putting its house in order, the previous FBR management further moved away from transparency. In order to stop the flow of information, the access to the FBR’s revenue collection database was restricted to less than six people. The FBR also did not publish its quarterly reviews of revenue performance for fiscal year 2017-18 and year book of 2016-17.
People of Gwadar can’t be marginalised under ambitious development
The development of Gwadar may very well be a priority under the China-Pakistan Economic Corridor (CPEC), but the people residing in the city cannot be ignored. This was the theme of a session on ‘Urban Design of Gwadar’ held on Thursday where participants discussed the way forward as Pakistan prepares for its single largest infrastructure plan under CPEC.
Naveed Iftikhar, former governance specialist, Economic Reforms Unit, said indigenous people are facing hardships, and need to be incorporated in the development model.
The talk was based on research on Gwadar’s governance, and funded by the International Growth Centre. It was conducted by a team of Pakistani and Chinese academics as well as researchers, led by Iftikhar, a PhD candidate in urban affairs and public policy at the University of Delaware. Iftikhar said the case of startup cities was similar to other startups, where the failure rate remains high.
“China ventured into three such startup cities and only one is considered a success. It is reasonably good to have one of three cities labelled as a success. Pakistan is betting on only one such city,” he said during his presentation.
According to Iftikhar, Rotterdam is considered as the most successful port city in the world.
The success of the Chinese startup city was also attributed to the fact that it was near a bigger city. On the other hand, Malaysia and South Korea have had bitter experiences of establishing startup cities. His remarks come amid reports that residents in Gwadar have been asked to relocate and move away from the traditional fishing areas.
“It is Pakistan’s psyche that they don’t want to see poor people living in the path of development,” he said. A citizen of Gwadar, Fida Hussain, also a teacher by profession, was also present on the occasion. He said that Gwadar port, as a part of CPEC, has affected the source of income of indigenous people.
“Now there’s no place to fish. Further on, the coastline marks the territory of other tribes and our people cannot fish in Pasni or Jiwani areas,” he added.
“The people of Gwadar are upset,” he said.
Punjab govt facing cash flow constraints
Caretaker Finance Minister of Punjab Zia Haider Rizvi has said the interim government has inherited outstanding payments of Rs71 billion under different heads and its first priority is to timely release salaries of government employees.
“Punjab government is facing cash flow issues due to various reasons,” said Rizvi in a statement on Thursday. A major reason behind that was slower transfer of provincial share in the National Finance Commission (NFC) award by the federal government.
Apart from the NFC award, some shortfall in the Punjab Revenue Authority’s tax collection, due to the Supreme Court order that suspended tax collection on telecommunication services, is another factor behind the liquidity crunch.
“In view of this, the Finance Department has anticipated that some cheques/instruments will remain unpaid this year,” he said.
The caretaker chief minister has directed the Finance Department to accord first priority to the payment of salaries as per directives of the Supreme Court.
Second priority is being given to claims of less than Rs5 million to facilitate maximum number of people with comparatively slower cash flow whereas third priority is being given to payments of over Rs5 million.
“The government of Punjab had issued an advice to the State Bank of Pakistan for making payments in accordance with the above priorities and instructing all banks concerned to stay open on June 30,” he said.
Moreover, as per the chief minister’s directives, Rizvi also wrote a letter to the federal finance minister seeking the release of withheld share of Punjab and it was also reiterated in a meeting with the finance czar in Islamabad.
A number of cheques and instruments issued by various departments or organisations of the Punjab government and the payments made on June 30, 2018 could not be cleared because of various reasons.
The provincial minister pointed out that provinces heavily depended on their share in the federal divisible pool distributed according to the NFC formula.
In line with that, Punjab prepared its budget on hopes that the federal government would release its share. However, the latter could not collect the promised amount, resulting in a gap of Rs136 billion Of that figure, Rs44 billion was released in the first week of July, he said.
Moreover, despite the Punjab government’s advice to make payments on June 30, the SBP did not allow it on the last day of the fiscal year on instructions of the federal government.
New companies’ registration rises 28pc
The Securities and Exchange Commission of Pakistan (SECP) has registered 773 new companies during June, showing growth of 28% as compared to the corresponding month of the previous financial year. According to a press release issued by the SECP, the total number of registered companies has reached 87,622. The massive increase was the result of the SECP’s various reform measures including introduction of simplified combined process for name reservation and incorporation, reduction in fee, etc. Around 77% companies were registered as private limited companies, while around 21 percent were registered as single-member companies. Two percent were registered as public unlisted, non-profit associations, foreign companies and limited liability partnerships (LLPs).
Nepra rises K-electric’s multi-year tariff by Rs0.05
The National Electric Power Regulatory Authority (Nepra) has turned down a plea of K-Electric for a significant hike in its multi-year tariff and raised it just by Rs0.05 per unit.
Earlier, the regulator had set the tariff for K-Electric – a private power utility – at Rs12.07 per unit on March 20, 2017, but it did not satisfy the company that filed a review petition for jacking up the tariff.
In its decision, the regulator increased the tariff by Rs0.70 to Rs12.77 per unit, which was still far below the tariff sought by K-Electric.
Then the Ministry of Energy (Power Division) wrote a letter to the regulator, suggesting a further increase in the tariff as a low rate would prove to be a challenge to financial viability of the company.
“The tariff determined by Nepra should not only ensure that K-Electric is able to provide adequate services for its customers, it should also offer an environment conducive to investment to encourage future privatisations as well as expand private sector’s footprint in the power sector,” the ministry emphasised in the letter.
K-Electric had demanded that the tariff should be set at Rs16.10 per unit, but the regulator did not agree and finally raised it only by Rs0.05 to Rs12.82 per unit.
In its decision, Nepra also dismissed a plea for recovery of Rs16 billion worth of losses from power consumers. It also stopped the receipt of Rs8 in bill collection charges and Rs7 in meter rent.
The new multi-year tariff is applicable from July 2016 to June 2023.
Industry officials, however, caution that the regulator’s decision is expected to destabilise the company’s financial and operational vision and has caused alarm among industrial circles that fear disruption in a smooth supply of electricity.
Industrial and business experts have time and again raised concerns that an inadequate tariff will lead to deterioration in services provided by the mega city’s sole power utility.
PKR stable against $
The rupee remained stable against the dollar at Rs121.4/121.6 in the inter-bank market on Thursday compared with Wednesday’s close of Rs121.4/121.6. Contrary to the impression created after the previous round of devaluation, the Pakistani currency weakened further by 3.65% in its third round last month. Since December, the rupee has cumulatively shed close to 13% of its value after the central bank reportedly abstained from intervening in response to the pressure due to a widening current account deficit. The State Bank of Pakistan has maintained that the slide in the rupee’s value is due to supply and demand dynamics of foreign exchange in the inter-bank market. While it has promised prompt intervention in case of speculative or momentary pressures, the central bank will sit on the fence and let “market-driven adjustment in the exchange rate to continue to contain the imbalance in the external account and sustain a higher growth trajectory”, according to a press statement.
Foreign exchange: SBP’s reserves rise 1.31pc to $9.79bn
Foreign exchange reserves held by the State Bank of Pakistan (SBP) increased 1.31% on a weekly basis, according to data released by the central bank on Thursday.
On June 29, foreign currency reserves held by the central bank were recorded at $9,788.8 million, up $126.3 million compared with $9,662.5 million in the previous week.
The increase has been attributed to due to official inflows.
Overall, liquid foreign reserves held by the country, including net reserves held by banks other than the SBP, stood at $16,385.7 million. Net reserves held by banks amounted to $6,596.9 million.
In April, the SBP’s reserves increased $593 million due to official inflows. Pakistan also raised $2.5 billion in November 2017 by floating dollar-denominated bonds in the international market in a bid to shore up official reserves.
A few months ago, the foreign currency reserves surged due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank. The SBP also received $350 million under the Coalition Support Fund (CSF).
In January, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.
The low level of reserves has already put severe pressure on the Pakistani rupee that has witnessed three rounds of devaluation, cumulatively shedding around 13% to the US dollar in the last six months.