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Finance adviser says 0-rated regime intact for exporters

The government faces a mammoth challenge by way of bringing the economy back on track. A key priority in its agenda to push the country towards economic growth is addressing the twin deficits; fiscal and current account. Although it has considerably devalued the rupee against the US dollar, the level of exports has failed to rise.

Despite this development, the government is not ready to concede to the demands of the five zero-rated sectors to provide them complete relief by restoring SRO 1125 and withdrawing the imposition of 17percent sales tax announced in the federal budget for fiscal year 2019-20.

While on one hand the exporting sector is rigorously protesting against the measure, Adviser to PM on Finance Abdul Hafeez Shaikh remains firm on his stance, saying that the zero-rated regime stays intact for the businesses if they export, while the 17percent sales tax will be levied if they are making their sales domestically.

The five zero-rated sectors will have to pay a 17percent sales tax on their exports, however, these will be refunded. Nevertheless, the exporting sector feels burdened as their refunds are stuck with the government and the 17percent tax is going to add to their liquidity crunch.

“At the external front, the growth rate of exports in the past 10 years has been zero percent,” acknowledged the financial adviser at a public dialogue, hosted by Karachi Council on Foreign Relations, in Karachi on Friday.

Putting his point of view across, he said, “There are a lot of businesses conducting exports and there is a misconception that somehow their benefits are being taken away. They’re not.”

He said that all exports will continue at zero rating and there will be no tax on them. However, these businesses will have to pay taxes like any other business if they are also selling within the country.

“So we have to make a distinction between the company’s exports and the domestic sales.”

There are many businesses claiming zero duty, which is allowed on exports, on domestic sales as well.

Expressing his aggravation, five zero-rated export sectors Chief Coordinator Muhammad Jawed Bilwani said the zero-rating facility is offered in every country and technically the government cannot abolish the regime.

“The zero-rated facility is available to every country, as we can never take tax from foreigners,” he enlightened.

Punjab targets new services to increase revenues

The Punjab government, in the first full-fledged budget under the Pakistan Tehreek-e-Insaf administration, has focused on increasing provincial revenues by imposing taxes on more services.

Ten new services have been proposed to be added to the provincial taxation network, most of which were never considered by previous governments.

For the next fiscal year, the Punjab government expects general revenue receipts of Rs1.99 trillion, which is 20percent higher than the current fiscal year’s original estimate of Rs1.65 trillion and 36percent more than the revised estimate of Rs1.47 trillion.

A major chunk of revenue, amounting to Rs1.6 trillion, is anticipated from the federal divisible pool. However, the province itself is expected to generate Rs388.4 billion from provincial taxes, which is almost 7percent higher than the current fiscal year’s original estimate.

As per the finance bill tabled in the Punjab Assembly on Friday, under the second schedule, it was proposed to slap a fixed tax of Rs10,000 on companies registered under the Companies Ordinance 1984 with paid-up capital up to Rs5 million.

A major chunk of revenue, amounting to Rs1.6 trillion, is anticipated from the federal divisible pool. However, the province itself is expected to generate Rs388.4 billion from provincial taxes, which is almost 7percent higher than the current fiscal year’s original estimate.

As per the finance bill tabled in the Punjab Assembly on Friday, under the second schedule, it was proposed to slap a fixed tax of Rs10,000 on companies registered under the Companies Ordinance 1984 with paid-up capital up to Rs5 million.

Similarly, a tax of Rs30,000, Rs70,000 and Rs100,000 will be imposed on companies with paid-up capital of Rs5-50 million, Rs50-100 million, Rs100 million and above respectively.

Persons other than companies, who owned factories under the Factories Act 1932, were proposed to be taxed at Rs1,500, Rs5,000 and Rs7,500 for workforce size of 10, 10-25 and 25 or more respectively.

Persons other than companies owning commercial establishments having 10 or more employees were recommended to be taxed Rs6,000 per annum.

Similarly, persons engaged in the import or export of goods valuing at Rs0.1-1 million were suggested to be taxed Rs2,000 per annum.

In addition to these, persons involved in the import or export of goods valuing at Rs1-5 million and Rs5 million and above were proposed to be taxed Rs3,000 and Rs5,000 per annum respectively.

Contractors, builders and property developers, who supplied goods, commodities and services in the preceding year amounting up to Rs1 million, Rs1-10 million, Rs10-50 million and over Rs50 million were recommended to be taxed annually at Rs1,000, Rs6,000, Rs10,000 and Rs20,000 respectively.

Eleven new professions proposed to be taxed include medical consultants or special dental surgeons, who would be charged Rs5,000 per annum.

Registered medical practitioners were proposed to be taxed Rs4,000 per annum and homeopaths, Hakeems and Ayurvedics would be charged Rs3,000 annually.


Sindh allocates Pkr 8.4bn for agriculture sector

The Sindh government has proposed an allocation of Rs8.4 billion for the agriculture sector, which includes Rs4.7 billion in foreign assistance, in the provincial budget for fiscal year 2019-20.

“Agriculture plays a significant role in the country’s economy and generates employment opportunities for more than 42.3percent of the total workforce besides contributing 18.9percent to the country’s GDP,” said Sindh Chief Minister Syed Murad Ali Shah while presenting the budget in the provincial assembly on Friday.“Sindh’s contribution to national rice production is 36percent, sugarcane 29percent, cotton 34percent and wheat 15percent,” he said.

In fiscal year 2018-19, the agriculture department made an expenditure of Rs893.4 million against the release of Rs1.74 billion.

The department’s allocation in the ADP 2019-20 is Rs8.4 billion, which includes Rs4.7 billion in foreign assistance, according to the budget documents.

In the coming year, the provincial government is considering lining 1,850 watercourses through the Sindh Irrigated Agriculture Productivity Enhancement Project (SIAPEP).

It has proposed subsidy on the provision of 400 thrashers, 400 rotavators, 400 zero tillage, 500 auto loaders, 20,000 power sprayers and 500 tractor trollies to farmers.

Remittances cross $2b mark in may due to Ramazan

Enticed by a sharp slump in the rupee’s value against the dollar, Pakistanis living abroad sent home more remittances, which surged 30.17percent in May 2019 over the previous month and crossed the $2-billion mark.

The arrival of Ramazan and Eid also triggered the inflow of remittances from overseas Pakistanis, helping bolster the nation’s efforts to provide cushion to a high current account deficit.

Talking to source, Next Capital Managing Director Muzammil Aslam said the surge in inflows was in line with expectations as the rupee fell massively last month, which was also the month of fasting. He said an increase in remittances “is witnessed every year in the holy month”.

Remittances mostly hit the highest level in Ramazan as people send money to their close relatives back home to help them cope with the swelling kitchen budget and meet expenses before Eid.

Moreover, Aslam said, the measures taken by the government to tackle the black economy, by initiating a crackdown on the Hawala and Hundi system, also reflected in May’s data. The government is currently offering an incentive of Rs2 on the receipt of each dollar.“Moving forward, the post-Eid remittances are expected to slow down, considering the previous trends,” he added.

The remittances were up 28.36percent over May 2018.

These inflows have remained a big source of foreign exchange for the government because they assist in meeting foreign expenditures mainly on two important fronts – imports and foreign debt repayment.

On a yearly basis, the remittances surged to $20.2 billion in first 11 months (July-May) of the current fiscal year, showing an increase of 10.42percent over $18.3 billion in the same period of preceding year, according to data released by the State Bank of Pakistan (SBP).

Tax levied on ride-hailing services, online shopping in Sindh-province

The Sindh government has imposed sales tax on services provided by a number of new sectors, including online cab service like Uber and Careem, online shopping platforms and construction machinery, in order to collect an additional Rs25 billion in the next fiscal year 2019-20.

The provincial government has also imposed sales tax on car tracking and alarm services, according to the Sindh Finance Act 2019 presented on Friday.

The provincial government collects sales tax at different rates in the range of 13-19.5percent on different sectors.

It has set a collection target for the provincial sales tax on services at Rs145 billion for the next year, which is Rs25 billion higher than the target of Rs120 billion in the preceding fiscal year 2018-19.

New taxes will be charged with effect from July 1, 2019.

Besides, the provincial government has revised rates of taxes under the Sindh Motor Vehicles and Stamp Duty Act.

As per details, the provincial government has imposed 13percent sales tax on services provided or rendered by cab aggregators and owners or drivers of the motor vehicles using cab aggregator services.

It imposed 13percent sales tax on warehouses or depots for storage or cold storage, 13percent sales tax on coaching and training services, except for educational coaching centres.

Other services, which attracted 13percent sales tax, include actuarial services; services of mining of mineral and allied and ancillary services in relation to; construction site preparation and clearance, excavation and earth moving and demolition services; waste collection transportation, processing and management services; vehicles parking and valet services, electric power transmission services and insurance agents, the finance act said.

The government would charge 19percent sales tax on vehicle tracking and other tracking services, tracing and alarm services, telecommunication services not elsewhere specified, audio text services, tele-text services, trunk radio services, paging services, including voice paging services and radio paging services.

The government has imposed fixed tax of Rs20,000 on all limited companies with paid-up capital or paid-up share capital and reserves not exceeding Rs25 million. The companies include modarabas, mutual funds and any other body corporates.

Such companies whose paid-up capital would exceed Rs25 million, but not exceed Rs50 million, will pay Rs40,000; companies with paid-up capital of over Rs50 million but less than Rs75 million, will pay Rs60,000; between over Rs75 million and less than Rs100 million will pay Rs80,000 and companies whose paid-up capital exceeds Rs100 million will pay a fixed tax of Rs100,000.

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