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Body to probe aTT scam
TaxYear2012-13
SBp’s new monitory policy
FBrChairmanTariqBajwa ISLAMABAD
FaIZa ISrar
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Diverging from the govt’s thrust to stimulate growth, the State Bank of Pakistan has raised the policy rate by 50 basis points to 9.5 percent | See page 4 |
allegations are baseless
Customs agents are facing multiple problems including ATT scam, division of PaCCs Collectorate and failure ofWeBOC system, says APCAA Chairman | See page 5 |
Cartoons Special
| See page 11 |
F
ive per cent taxpayers selected from different categories would be issued notices for their detailed audits but the random selection of cases did not mean that all these persons or companies had evaded taxes, FBR Chairman Tariq Bajwa told Customs Today, while explaining the audit process. Talking to this scribe, he said those who will receive notices for the audit purpose should not panic as FBR wants to countercheck whether they honestly declared their income and sales details in the returns or not. “The difference between this exercise and the past ones is that this time fresh balloting has been conducted without the element of subjectivity,” said Bajwa. In the past, FBR used pre-determined parameters, which the taxpayers challenged in the courts, resulting in the failure of all such exercises. FBR high-ups, he said, were aware that the taxpayers might again take FBR to the court but this time the mechanism devised is such that the authorities could defend themselves in any court of law. He said FBR was implementing the Self-Assessment Scheme because it believed that the taxpayers would honestly declare their income and liabilities but a robust audit was essential to remind the taxpayers that they could be caught for giving misleading and incorrect information to tax authorities. He said in addition to the cases
selected through random balloting, FBR would also conduct desk audit in cases where the commissioners prima facie believed that the return Nilers under-declared their income and sales. Bajwa said there was signiNicant difference between tax collection and actual tax potential, and to minimise this gap FBR has planned three interventions. In addition to audit functions, FBR was also sending notices to potential taxpayers and to those who are taxpayers but did not declare their actual income. These interventions, he said, are expected to fetch minimum 13% additional revenues over and above the tax paid by the taxpayers. Explaining the new audit strategy, FBR Chairman Tariq Bajwa said that Large Taxpayer Units (LTUs) and Regional Tax OfNices (RTOs) would issue system generated notices to the units selected for audit. Each electronic notice would contain speciNic barcode for identiNication purposes. The electronic notices with the bar-codes would ensure transparency in the process of audit. If any registered person receives notice without bar-code, the same should be ignored. Such manual notices which are not system generated are not genuine and taxpayers should not respond to such notices. Tariq Bajwa said that if people demand more services from the government then it is their duty to be more responsible in filing their tax returns as per their actual incomes. If more revenue is raised, the government could provide basic amenities and services to the people. If fewer taxes are collected, government services would definitely be slashed too, he maintained. Due to less revenue and more expenditure, the
— Exlusive Customs Today photo
No container can be taken out from any port without clearance by the Customs authorities, says Ports and Shipping Minister Kamran Michael | See page 3 |
Robustauditessential tocountercheck taxdetails
See page 02
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02 NATIONAL
SEPTEMBER 24 - SEPTEMBER 30, 2013
Trade deficit decreases by 3.07pc in July-august
LAHORE: Pakistan's trade deficit narrowed by 3.07 percent during the first two months of the current fiscal year as exports expanded by 3.66 while imports witnessed a nominal increase of 0.54 percent as compared to the same period of last year. On year-on-year basis, the trade deficit decreased by 11.45 percent in August 2013 as compared to the same month of last year, according to the latest data released by Pakistan Bureau of Statistics (PBS).
Robustaudit essentialto countercheck taxdetails
— Exlusive Customs Today photos
From page 01
71biggestcasesof
corporate sector selected for audit ISLAMABAD
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ax authorities have selected 71 biggest cases of corporate sector for audit through random computerized balloting in three major Large Taxpayer Units (LTUs) located in Karachi, Lahore and Islamabad. Out of selected cases of 42,000 in all three major taxes including Income Tax, Sales Tax, Federal Excise Duty (FED) in both corporate and non corporate sectors, the biggest cases of corporate sector involving billions of rupees turnover including M/s Unilever, M/S Gillett, M/S Mobilink, Itthehad Steel Mills Lahore and Nive renowned Flour Mills of the country. It is highest ever cases of 42,000 selected for holding audit in the coun-
try as FBR had selected around 11,000 cases in 2011, indicating that this time the audit exercise was four time high compared to the last one. “Of biggest cases, 40 corporate sector giants have been selected for random audit in LTU Karachi, 16 in LTU Lahore and 15 cases in LTU Islamabad,” ofNicial record of FBR disclosed. In non-corporate sector, Regional Taxpayer OfNice (RTO)-1 Lahore is on top in terms of highest number of cases selected for audit purpose as total selected cases of this RTO-1 stood at 3,760 while RTO-II Karachi clinched the second position with selected cases of 3,534. FBR has selected 5 percent of total returns received in each respective RTOs and LTUs in all over the country. “We have also developed Tax Audit Monitoring System (TAMS) to track down progress on the selected cases for audit,” said the ofNicial and added that it would also help FBR to avoid misuse of this ongoing exercise.
In order to make audit exercise more effective, FBR excluded certain cases from this exercise such as salaried class as well as those sectors where Ninal tax regime (FTR) is applied to discharge due taxes. FBR, the sources said, also excluded those cases from random selection which the respective commissioner Inland Revenue (IR) had already selected for audit exercise. “There will be around 500 such cases where the audit is already underway,” said the ofNicial. To another query regarding revenue impact in the wake of audit exercise, the ofNicial said that it would be hard to Nloat any Nigure at this stage because this exercise can only be done after analyzing each case through desk audit and then Ninal picture will become clear after taking into account book of accounts in each of the case. Total selected cases stood at 41,962 in both corporate and noncorporate sectors of income tax, sales
tax and federal excise duty (FED) to detect tax evaders for the Niscal year 2011-12. It selected 5% or 41,727 out of the total 834,563 tax returns Niled for income tax, sales tax and federal excise duty. In income tax corporate sector, FBR selected 1,163 cases; in non-corporate sector 35,596 cases; sales tax corporate sector 568 cases, Sales Tax non-corporate sector 4,380; FED corporate sector 12 cases and FED non-corporate sector 8 cases from all over the country. Of these the total number of income tax Nilers for both corporate and non-corporate sector was 735,188 and FBR has selected 1,163 corporate cases and 35,595 non-corporate cases for audit. In the category of sales tax, the total numbers of Nilers was just 98,966 and FBR selected 570 companies and 4381 non-corporate cases for the audit. In the category of federal excise duty, total 409 returns were Niled and FBR selected 20 cases for the audit purpose.
government is compelled to borrow from the lending agencies like IMF and World Bank to meet its budget deNicit. Bajwa told Customs Today that FBR keeps every aspect of revenue collection in view and this is an effort and a step forward in this regard. He said that Board-in-Council had already decided that government departments are exempted from the audit but not the corporations. In an answer to a question, he said that the taxation and tax Niling system would also be made easier so that everyone can Nile tax returns even online. He said that now FBR is making it possible that commercial electricity and industrial gas bills also come under sales tax registration. Member Taxpayers Audit Haroon Tareen said that balloting was a transparent procedure and the Board had made some exemptions in it and even excluded some major cases to make it more Nlexible for taxpayers. Member Administration Shahid Hussain Jatoi said that the balloting was highly transparent. The audit process would bar the taxpayers from Niling wrong returns. Customs Today correspondent also talked to Member FATE and FBR spokesperson Ms. Riffat Shaheen Qazi regarding audit plan. She said that the balloting system is completely transparent and FBR has tried hard to make it possible that this system does not harm anyone. As a routine when taxpayers audit starts, “we send notices to the selected persons and ask them for submitting their tax details as per their actual incomes.” It will be a kind of deterrent but does not bar the process of Article 177 under which audit cases are dealt by the commissioners. Talking exclusively with Customs Today, President Islamabad Chamber of Commerce and Industry Zafar Bakhtawari said that the process for taxpayers’ assessment is completely transparent due to the automation of system and the random computerized selection of cases President Rawalpindi Chamber of Commerce and Industry also told Customs Today that the balloting seems transparent and there is no reason of doubt its authenticity.
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LAHORE
SEPTEMBER 24 - SEPTEMBER 30, 2013
03
auto industry suffering from inconsistent import policy
LAHORE: Chairman Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam), Munir Bana, said that the lobby of used car importers, who made billions of rupees by misusing import policy in the past, are making all-out efforts to misguide the new government again, while the country’s automotive industry and auto parts manufacturers are still suffering from the aftershocks of inconsistent import policies, rampant import of used cars and frequent amnesty schemes introduced by the previous government.
Customs clearance a must for every container
Body formed to probe missing containers case, says kamran michael LAHORE
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ederal Minister for Ports and Shipping Kamran Michael has said that no container can be taken out from any port without clearance by the Customs authorities. Talking to media persons at the Lahore Press Club, he said that a committee had been formed to probe into the matter of missing containers and its report would be made public. The Minister stated that fake documents might have been used in the past for the clearance of containers at Port Qasim. He said the United States Embassy has also rejected the news items about the missing containers. “However, we should wait for the investigation report”, he added. Presenting the three-month performance report of his ministry, Kamran Michael told the media that his ministry had successfully got removed the European Union’s ban on import of Nish from Pakistan and now the country would be able to earn billions of dollars through Nish export to EU countries. The Federal Minister informed the reporters that an agreement with Belgium was in the pipeline for the provision of cold storage, latest warehousing facilities and packaging system of international standard for the export of Nish and other sea products at Gwadar Port. He said that Belgium had ex-
pressed its willingness to provide technical training and scholarships to the ofNicers of Pakistan National Shipping Corporation (PNSC). Regarding the provision of facilities to Nishermen, the Minister said that Nibre-boats with life-saving gear and installed navigation system would be provided on easy instalments to
through tenders during the current month to improve the performance of the corporation. He said that Sri Lanka had also expressed its interest in utilising Pakistani oil-tankers for its trade which would be helpful in generating more revenue. Kamran Michael said that Pakistan’s ship-breaking Industry was
170 acres had been allocated for this purpose. He said that only one marine academy was in operation to train ofNicers, but the ministry was now trying to give it the status of a university. The Minister said a biometric system to tackle ghost employment had been installed at all the ports, as about 600 ghost employees had been identiNied only at Port Qasim who were appointed during the previous regime. He announced that a ferry service between Karachi and Gwadar will be initiated soon. Negotiations with the governments of Oman and UAE were also underway to operate such ferries between Pakistan and the two Gulf states. He said that all the previous tenders, which were termed dubious by the Transparency International, had been cancelled. He added: “A tender was Nloated to buy a helicopter for Rs8.75 billion for Port Qasim but the Ministry has cancelled the tender as the port doesn’t need it.” The Minister said that the ports are being connected to the Railways so that containers could be transported at low cost. LPC President Arshad Ansari of-
The matter of missing containers and its report would be made public. Fake documents might have been used in the past for the clearance of containers at Port Qasim, says ports and Shipping minister them. He said the PNSC was in deNicit and it was operating with just three oil-tankers and seven bulk-ships, adding that more new oil-tankers would be purchased
one of the best in the world but now it was facing a decline. However, he maintained that the government has taken steps to revive the industry and a piece of land measuring
fered honorary life membership of the club to the Minister. Secretary Shahbaz Mian and other members of the governing body also spoke on the occasion.
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04 NATIONAL
SEPTEMBER 24 - SEPTEMBER 30, 2013
Foreign remittances up by 7pc
LAHORE: Overseas Pakistanis remitted an amount of $2637.27m in the first two months - July & August - of the current fiscal year as compared to $2463.69m during the same period of last fiscal year, marking a growth of 7.05 percent, according to a statement by the State Bank of Pakistan. The inflow of remittances in July-August from Saudi Arabia, UAE, USA, UK, GCC countries including Bahrain, Kuwait, Qatar and Oman, and EU countries amounted to $732.50m, $506.78m, $448.60m, $419.74m, $295.59m and $74.97m respectively.
ATT Directorate not yet streamlined KARACHI
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he Directorate of Afghan Transit Trade (ATT) has not yet been organized and systematized to work as a unit owing to lack of interest among Customs officials. Sources informed Customs Today that the 12th floor of the Customs House building, which was marked out for the construction of the Directorate of ATT offices quite some time back, still presents a deserted look. No other office except that of ATT Assistant Director has been set up so far, they added. The sources disclosed:“The construction of ATT offices on the top floor has been at a standstill for a long time and none of the high officials of the Directorate of Afghan Transit Trade are interested in inspecting and expediting the construction work.” It is pertinent to mention here that there is no lift to go to the said floor and the offices of the Director General (DG) ATT and all other officials concerned are on the 8th floor of the Customs House.
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Customs seizes 14 drums of NATO, ISAF fuel LAHORE
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ahore Model Customs Collectorate’s anti-smuggling wing confiscated 14 drums of special airplane fuel. According to details, the antismuggling wing seized 4,000 litres of special airplane fuel in 14 drums and auto parts worth millions of rupees near Shahdara, Lahore. Sources said that the drums contained the fuel which is used in NATO and ISAF airplanes. The fuel was being smuggled into Lahore in small quantities from the missing containers of ISAF and NATO, sources added. Lahore Collector of Customs Junaid Akram, however, could not be reached for his comments despite repeated attempts. It is pertinent to mention here that National Accountability Bureau (NAB) has been investigating the cases of NATO/ISAF’s 19,000 missing containers on the directives of Supreme Court of Pakistan. On the other hand, the United States, through its embassy in Islamabad, has announced that all of their containers had reached Afghanistan safely and no container was missing. The Lahore Anti-Smuggling Wing has done a great job by confiscating 14 drums of special fuel.
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anaLYSIS
SBp’s new monitory policy and its impact on economy LAHORE
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olicy rate is an important tool used by the State Bank for monetary management: to regulate money supply in line with the liquidly requirements of the economy and to stimulate economic growth, production and trade without fuelling inNlation. Diverging from the present government’s thrust to stimulate growth and investment, the State Bank of Pakistan has raised the policy rate by 50 basis points to 9.5 percent in less than three months after having slashed it to 9 percent. It was generally expected that in the present economic climate in the country the policy rate would either be cut further or kept at its existing level. But this did not turn out to be the case. The main reason cited by the central bank to justify its decision is the threat of rising inNlation fuelled by the increasing domestic energy prices, instability in the world oil markets, continued government borrowings for bridging its budget deNicit, and pressures on the exchkange rate. According to SBP, inNlation has risen considerably in the last two months, and the prognosis is that the average annual price inNlation will soar to 12 percent at the end of the current Ninancial year from 7.4 percent last year. It is estimated that an increase in GST together with the removal of certain exemptions and the outlook of oil prices could put further pressure on inNlation in the coming months. It is pertinent to recall here that keeping in view the continued deceleration in inNlation over the last
two years, SBP cut its policy rate by as much as 500 basis points. During the last six years, the money supply increased at Nive times the rate of growth of output due to excessive government bank borrowing. The changes in the policy rate would have been effective in controlling money supply if the private sector credit was the main factor for mon-
decline as shown by a newly constructed consumer price index and also that lowering of the policy rate would increase credit off-take by the private sector and help promote investment. But the actual outcome was different. Bank credit to the private sector stagnated, rates of saving and investment went down further, the
needless to say, the new monetary squeeze will also increase the government’s domestic debt servicing, adversely affect economic growth and encourage commercial banks to continue investing in treasury papers etary expansion. But this was not the case. SBP steadily reduced the nominal policy rate by over one third from 14 per cent in July, 2011 to 9 percent in July, 2013 on the ground that inNlation had begun to
foreign exchange reserves depleted, the nominal exchange rate depreciated rapidly, monetary expansion remained excessive and inNlationary pressures continued to build up. The only beneNiciaries of the reduction in
SROs affecting Sialkot export industry SIALKOT
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t an emergency meeting held recently Chairmen of trade bodies representing all Nive zero-rated export-oriented sectors and Sialkot Tax Bar Association discussed the negative effects of SROs 505(I)/2013 and 98(I)/2013 on the export industries with Sheikh Abdul Majid, President Sialkot Chamber of Commerce and Industry (SCCI). The SCCI President told the chairmen that he had taken up the matter in meetings with Finance Minister Muhammad Ishaq Dar, FBR Chairman Tariq Bajwa, RTO Sialkot, Chief Commissioner and other high-ups of the Board. He also disclosed that the Finance Minister and FBR chairman were also requested in writing to give
the policy rate were the government and the existing large borrowers. The government paid a lower interest cost on its borrowing from the banking system, and the rich borrowers got an implicit subsidy fattening their take-home proNits. Both beneNited at the cost of small savers and small borrowers. Although SBP has argued otherwise, the rise in the bank borrowing cost will signiNicantly affect private sector activities. The SBP chief’s argument, that higher interest rates are not the major constraining reason for the private sector credit off-take but energy shortages and a steady deterioration in law and order conditions are also to blame, does not hold water as these factors were present when it was previously cutting basis points. Needless to say, the new monetary squeeze will also increase the government’s domestic debt servicing, adversely affect economic growth and encourage commercial banks to continue investing in treasury papers. The role of monetary policy is crucial in keeping inNlation low and stable and supporting private investment activity. While the government goes about addressing fundamental structural issues and tightening Ninancial and Niscal disci-
relief to Sialkot’s export industries but in vain. Sheikh Abdul Majid, expressing concern over the government’s lack of response, said that implementation of SROs 505 and 98 had increased the cost of production by 510 per cent. He said that declaring
Implementation of Sros 505 and 98 increased the cost of production by 5-10pc
exporters as Sales Tax Withholding Agents would render businesses noncompetitive in the global market. Pakistan Sports Goods Association Chairman Muhammad Iqbal Saleemi, Surgical Instruments Manufacturers Association Chairman Bilal Tanveer, Pakistan Leather Garments Manufacturers and Exporters Association (North Zone) Chairman Tassawar Hussain, Pakistan Readymade Garments Manufacturers and Exporters Association (North Zone) Chairman Mir Muhammad Farooq Meyer, Pakistan Gloves Manufacturers and Exporters Association Chairman Khurram Azeem Khan, Pakistan Hosiery Manufacturers Association VC Muhammad RaNi Sony were present in the meeting. Aftab Hussain Nagra, President; ZulNiqar Ahmed Nasir, Arshad Nawaz Mann and Waseem Arshad also attended the meeting on behalf of Sialkot Tax Bar Association.
pline, the central bank will have to play a supportive role by striking a Nine balance between the need to contain cost-push inNlation and divert the Nlow of credit into the productive sectors.
new rules stall gold imports akistan is unlikely to resume gold imports soon even though the government has lifted an outright ban imposed during August, as the new rules for buyers are too restrictive, sources in the jewellery industry revealed today. Pakistan stopped all gold imports in August after purchases soared in the first half of the year and topped $514 million in July alone, more than double of what was imported in the first six months of 2012. Smuggling into neighbouring India was cited as a reason. The government issued a directive to the effect that only 25 kilograms of precious metals - gold, silver and platinum - can be imported on a revolving basis and cannot be used in the domestic market.The future prospects of gold import/export business are quite bleak. —CT Report
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INTERVIEW 05
SEPTEMBER 24 - SEPTEMBER 30, 2013
China Customs uncovers infringing automobile spare parts
BEIJING: Chinese officers of Dalian Customs District said that they had seized 44 turbochargers that had infringed upon the trademark rights of “Holset” and “BorgWarner” a few days ago. The case involved a value of $7260, said customs officers. According to customs officers, the goods were declared to Dayaowan Customs House by a company in Shenzhen. “The company declared the goods as items having no brand names”, said Duan Guoqiang, a customs control officer.
afghan Transit Trade scam
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he issuance of over 1,100 Order-in Original (ONOs) by Model Customs Collectorate (MCC) Port Qasim against the Customs agents in Afghan Transit Trade (ATT) scam are baseless and the scam should be resolved on merit. This was stated by All Pakistan Customs Agents Association (APCAA) Chairman Syed Shams Burney during an exclusive interview with Customs Today. Burney demanded of Federal Board of Revenue (FBR) and Pakistan Customs to implement the verdict of Supreme Court of Pakistan in which the apex court ordered the authorities to conduct an impartial probe into the ATT scam by National Accountability Bureau (NAB). In reply to a query, APCAA Chairman Burney informed this scribe that a committee comprising Muhammad Saleem, Collector of Customs, Appraisement (West), Abdul Rasheed Sheikh, Collector of Customs, Appraisement (East), SM Tariq Huda, Collector of Customs (Preventive), Jawwad Owais Agha, Collector of Customs, Port Qasim, following the directives of FBR, had held a meeting with a joint delegation of KCAA and APCAA and assured the Customs
PSMA opposes 5pc duty on DRI import akistan Steel Melters Association (PSMA) has opposed the federal government's intention to impose 5 per cent customs duty on import of Direct Reduce Iron (DRI). In a letter to Federal Board of Revenue (FBR) chairman, the PSMA has said that levying of any duty is against the legislation proposed by the Competition Commission of Pakistan (CCP) and can lead to many legal and anti-trust implications. Sources said that business of the local steel melters was based on imported scrap because of the competitive price and quality and presently imported scrap is being used along with DRI to produce billet for steel bars.They said that levying of duty on DRI would cause an unaffordable cost burden on steelmakers.They maintained that in the last few months, only 5,000 metric tons of DRI was imported as the local DRI manufactures had the capacity to produce just 1.28 million metric tons. The letter further says that the duty will force the local DRI manufacturers to increase prices artificially at any time in the absence of any competition, which is against the rules of fair market competition. —CT Report
Customs agents are playing a vital role in revenue generation and their grievances should be redressed as per law, says Syed Shams Burney
agents that the fate of show-cause notices in ATT scam on merit. “Customs agents are facing multiple problems including ATT scam, division of PaCCs Collectorate and collapse of WeBOC system”, he said, adding that the partition of PaCCs Collectorate would open the doors to corruption as the importers and agents will have to deal with several Customs ofNicials. “The creation of more Collectorates is an attempt by the bureaucracy to recruit more ofNicials on upper grades in the Customs Department”, Burney added. He urged the Federal Finance Minister, Federal Board of Revenue (FBR) chief and Member Customs to take notice of the illogical division of PaCCs Collectorate. Commenting on the performance of WeBOC, Syed Shams Burney said that no automation exists in it (WeBOC), adding that the “Care”, (PaCCs) System was much better than WeBOC in compatibility, efNiciency and advancement. The APCAA chairman further said that the Customs agents were playing a vital role in revenue generation and their grievances should be redressed as per law. Burney, while commenting on the TPL Tracker Company, said that the company was damaging the national exchequer and the FBR should review the contract with the Nirm, as it was causing the loss of billions of rupees to the national exchequer.
— Exlusive Customs Today photo
KARACHI
pakistan can boost halal meat export: Saifi LAHORE
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— Exlusive Customs Today photo
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he Lahore Chamber of Commerce and Industry (LCCI) Convener for Standing Committee on Halal Meat Export Naseeb Ahmad SaiNi said that halal meat export from Pakistan can touch $5 to $6 billion mark in next Nive years if the government patronises livestock farmers and devises a coordinated and comprehensive policy for promotion of this industry. Anis Associates (Pvt) Ltd CEO Naseeb Ahmad SaiNi while taking to Customs Today said that Pakistan had plenty of resources of hala food, however, these resources were not being utilised fully due to the lack of awareness among the masses. Pointing out that the business of halal food products have great potential, he urged the investors from across the world to invest in livestock and dairy farming to get hefty returns in the country. He asked the local investors to start joint ventures with foreign investors in the halal food projects. He also stressed on the government to fully support and facilitate lo-
cal and international investors in developing the sector which will not only generate employment but also enable the country to build huge foreign reserves. SaNi reiterated that special attention should be given on development of agricultural sector and export of fruits, vegetables, fruit juices and pulp and setting up of factories producing value-added products should be encouraged, adding that the government should also pay attention on export of manpower and those sending foreign exchange to the country should be given a handsome exchange rate. He underscored those factories wanted to produce their own energy through bio or solar means should be exempted from all taxes. Giving his valuable suggestion on the menace of corruption, the exporter said that corruption should be dealt with an iron hand to improve economy and help arresting the increasing Ninancial deNicit. He was of the view that Pakistan had to increase its manufacturing and especially export-oriented should be ensured working roundthe-clock to enhance the export. The exporters should be given incentives such as import should be banned of such items which are produced locally, he added.
06
SPECIALREPORT
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SPECIALREPORT 07
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08 EDITORIAL
SEPTEMBER 24 - SEPTEMBER 30, 2013
Founder & Chairman Zulfiqar ali Editor nasim ahmed editor@customstoday.com.pk For advertising & subscription marketing@customstoday.com.pk +92-322-3370002 www.customstoday.com Phones: 042-35781643-4, Fax: 042-35781645 Address: 627, Siddiq Trade Centre, Gulberg, Lahore
eDITorIaL
empowerIng FBr
I
t is the consensus of opinion among economic experts as well as international donors, including IMF that the problem of fiscal deficit, the albatross around the neck of the national economy, cannot be addressed without reforming and empowering the Federal Bureau of Revenue, the key government agency tasked with the collection of taxes. But while expenditures are constantly rising, revenue collection has remained stagnant. Pakistan’s tax-to-GDP ratio, at about 10 percent, is among the lowest in the world for nonoil exporting countries. In a review report for the latest loan program of $6.64 billion for Pakistan, IMF has pointed out that in a country of 180 million people, only 1.2 million individuals and firms file income tax returns. Some 118,000 entities are enrolled in the sales tax system but only 15,000 actually pay any tax, with 82 percent of the total sales and federal excise revenue coming from only 100 companies. IMF has diagnosed that tax loopholes, exemptions and concessions leave little space for FBR to exercise its authority and enhance tax revenue. IMF says that these constraints drastically reduce FBR’s ability to generate enough tax revenue and recommends the development of a comprehensive strategy to remove the weaknesses of the tax administration system. IMF’s advice is that urgent steps should be taken to strengthen FBR’s enforcement activities and legal authority to facilitate the seizure of assets of tax evaders and to presumptively bill taxpayers.The anti-money laundering framework also needs to be fully applied in this context. In line with IMF’s recommendations, the present government has launched a number of initiatives to meet the multiple challenges on the tax front. These include incorporation of three hundred thousand new taxpayers into the income tax net. The 2013 Finance Bill granted FBR access to bank information enhancing the scope and quality of information in its database.The first step in this connection has been taken with the issuance of ten thousand notices to large potential taxpayers.The income tax initiative will be complemented with moves to improve and streamline revenue administration for sales, excises and customs, to be developed and launched by end-December 2013. Another significant step is an increase in the number of risk-based tax audits to 4.2 percent of declarations from the existing 2.2 percent.The audit strategy has also been changed. Instead of the previous pre-determined parameters basis which was often challenged in court, cases are now selected through computerized balloting which is transparent and objective in scope and application. In pursuance of this decision FBR last week selected 41,727 IncomeTax, SalesTax and Federal Excise Returns for audit through transparent random computerized balloting. Needless to say, a reformed and empowered FBR is the most potent weapon in the hands of the government to fight the all devouring monsters of fiscal deficit.
Closing the trade gap LAHORE
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akistan's foreign trade gap has been widening from year to year. While imports have been rising at a fast pace, exports have been lagging far behind. Against this background it is welcome news that during July-August this year, the trade deNicit has narrowed by 3.07 percent as compared to the corresponding period last year. According to the latest Nigures released by the Pakistan Bureau of
Statistics, the trade gap has declined to $3.295 billion in the Nirst two months of the current Niscal year as compared to $3.400 billion in the same period last year. This has resulted from a 3.66 percent increase in exports and 0.54 percent increase in imports during the period under review. Details show that while exports rose to $4,091 million in July-August 2013 against $3,946 million in the same period last year, imports increased to $7,386 million from $7,346 million last year. Encouragingly, in August the trade gap decreased by 8.31 percent as com-
pared to the previous month. However, while on the face of it narrowing of the trade gap is a positive development, what should be a matter of concern is that exports are not rising. This is evident from the fact exports decreased to $1,996 million in August from $2,095 million in July, reNlecting a decrease of 4.75 percent. It may be noted here that in the last Niscal year, Pakistan’s trade deNicit widened to $20.5 billion, far more than the projected Nigure of $17.2 billion. In other words, the country missed its export target for yet another year, with total exports
valued at $24.5 billion, while imports jumped to $45 billion. For the new Niscal year, the government has projected a trade deNicit of $16.7 billion by setting the export target at $26.2 billion and import bill at $47.4 billion. Will this target be achieved? The Nigures for the Nirst two months show an encouraging trend, but the real battle is to increase exports which is not happening. It is hoped that things will look up in the days ahead because the new government has adopted a business friendly policy and is trying to stimulate manufacturing and industrial growth.
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PICTORIAL
SEPTEMBER 24 - SEPTEMBER 30, 2013
JFk International airport has longest Customs lines
NEW YORK CITY: John F Kennedy International Airport has the longest average wait time, according to a report by the Global Gateway Alliance on summer 2013 airport customs line delays. The average delay at JFK during the summer months of June, July and August was 23 minutes. The average maximum delay was 57 minutes and average maximum delay during peak hours in August reached two hours. “There needs to be a significant change in the way US and Border Protection (CBP) operates.”
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prImelaunchesreportonpakStatusoneconomicFreedom
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SEPTEMBER 24 - SEPTEMBER 30, 2013
Sri Lankan Customs seizes four containers from pakistan
COLOMBO: Sri Lankan Customs has seized four containers from Pakistan on suspicion of drug smuggling effort. The police had detained the four 20-foot containers of plaster of Paris after receiving a tip-off on a large-scale smuggling racket of heroin along with the consignment. The Customs Revenue Task Force and the Central Intelligence Unit of the Customs have reportedly seized the containers, based on separate tip-offs.
FBr collects 127.9pc more revenue in Sept ISLAMABAD
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ederal Board of Revenue (FBR) has collected 127.9 per cent more revenue during the first 18 days of September 2013 as compared to the same period of last fiscal year. The sources revealed that the FBR has collected Rs363.003 billion in July-September 18, 2013 against Rs 269.852 billion in the corresponding period of the last fiscal year, showing an increase of 11.9 per cent. The FBR has collected Rs90.281 billion during September 1-18 as compare to Rs39.618 billion in the same period of fiscal year 2012-13, reflecting an increase of 127.9pc. Figures show that the FBR has collected net Rs322.079 billion under the head of domestic taxes during the above said period as compare to Rs229.293 billion during this period of last Niscal year with an improvement of 40.5pc. The direct taxes collection stood at Rs101.840 billion during the period under review against Rs70.674 billion during the last Niscal year, showing an increase of 44.1pc. Rs197.263 billion were collected under the head of sales taxes during July to September 18, 2013 as
compare with Rs143.337 billion in the same period of the last fiscal year, reflecting a growth of 37.6 per cent. Sales tax collection at the import stage was Rs99.840 billion during this period against Rs88.844 billion last year with an increase of 12.4pc. Sales tax collection on domestic consumption remained Rs97.423 billion as Rs54.493 billion were collected in the corresponding period last year, showing an increase of 78.8pc. The collection of the Federal Excise Duty (FED) amounted to Rs22.975
billion during July-September 18, 2013 against Rs 15.282 billion in the same period of last fiscal year, showing an increase of 50.3pc. The monthly revenue collection shows that the FBR has collected Rs90.281 billion during the first 18 days of September against Rs39.618 billion in the same period of last fiscal year, reflecting an increase of 127.9 per cent.
FBRseeksrecoveryofRs1.370b frombankingcompany LAHORE
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ederal Board of Revenue (FBR) has sought recovery of Rs1.370 billion taxes from NIB Bank on the account of income tax derived from various sources of operations and businesses. The tax authorities had notified the banking company to deposit its outstanding taxes of 2011 under the account of capital gains, dividends and interest income otherwise it will be imposed penalty on the nonpayment of government revenues. NIB Bank was reluctant to pay taxes as it has been posting losses for the last many years. But its management is still hesitant to pay their taxes seeking various exemptions from the tax authorities. The management said that the FBR had made certain disallowance to bank including additions on account of proration of expense against dividends and capital gains. It made disallowance of interest
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The direct taxes collection stood at rs101.840 billion during the period under review against rs70.674 billion during the last fiscal year, showing an increase of 44.1pc.
and administrative expenses and renovation expenses incurred on rented premises. The management blamed that the imposition of taxes was unjustified and a bid to impose tax on the false interpretation of the law, hence the bank has filed an appeal against tax authorities at various appellate forums. “All these disallowance were avoided historically for exPakistan Industrial Credit and Investment Corporation Limited (PICIC) pertaining to tax years 2003-08. Also PICIC Commercial Bank and National Development Leasing Company were also granted exemption of disallowance in the period of 2004-08,” the management reasoned. The bank management also recorded deferred tax asset based on financial projections indicating absorption of deferred tax asset over a number of future years through reversals as a result of recoveries from borrowers and absorption of remaining deferred tax asset against future taxable profits.
HELPDeSk wrITe uS Your grIeVanCeS: Through CuSTomS ToDaY platform, now you have chance to DIreCTLY write your problems to top govt. functionaries. If you face any difficulty or have any grievances, queries, questions or suggestions, you can write in our special section as it provides easiest access to you to approach Customs and Revenue authorities. who can write in this section? Importers & Exporters, Customs Agents, Chambers of Commerce, Trade Associations and Customs Officers To whom you can write through our platform? Honourable PM, Minister/Secretary for Finance & Revenue, Minister/Secretary for Ports and Shipping, FBR Chairman, Member Customs and Chairperson Senate/National Assembly Standing Committee on Finance & Revenue. Send your letters at: letters@customstoday.com.pk
augmenTIng CuSTomS reVenue Member Customs FBR Headquarters, Islamabad
Sir, Following are few suggestions to boost Customs revenue: 1). Laboratory Test Reports of the goods may be provided on the system to the Traders/Agents like examination reports. 2). The commercial importers of plant and machinery have to submit a pay-order or bank guarantee equivalent to the amount of Sales Tax payable at import stage, and the registered manufacturer or industrial importers have to submit a post dated cheque equal to the amount of Sales Tax for availing exemption of Sales Tax under SRO 727(I) 2011. On Submission of Sales Tax Return’s Acknowledgement to the Collector of Customs, after the import of machinery, the pay order or the
post dated cheque is to be returned to the importers duly cancelled by the Customs. It should be automatic when all documents are correct and complete and submitted online. The securities may be dispatched to importers by courier service. This will save time of the Customs Officers as well as of the importers. 3). To get the benefits of SRO 565(I) 2006, the importer cum manufacturer has to submit a post dated cheque for the differential amount of statutory duty and concessionary duty for release of the goods. The importer cum-manufacturer has to inform the collector concerned of customs within sixty days of the consumption of goods. On receipt of information AC/DC should give approval for release of securities automatically. The securities may be dispatched directly to the importer cum manufacturer by
courier. This will also save time of the Customs Officers as well as of the importers.
4). Online collection of duties National Bank of Pakistan has started branchless banking for pensions, salaries and income tax. Online collection of Customs duties and taxes should also be introduced for collection of Customs duties and taxes. 5). Saturdays as working day. It is suggested that Saturdays to be a working day for Customs & other Revenue Departments and Banks to observe half working day on Saturday. This will enable Pakistan economy to get rid of IMF shackles. Sincerely, M S Lodhia DFB Gypsum Industries Karachi, Pakistan
www.customstoday.com SEPTEMBER 24 - SEPTEMBER 30, 2013
151 bottles of liquor conďŹ scated
LAHORE: Pakistan Rangers Punjab, foiling a smuggling bid, confiscated 151 bottles of liquor of Indian origin at the Kanganpur border. Sources said Rangers on a tip-off about anti-state activities along the border in Kanganpur Sector raided the area and seized the illicit liquor. "Smugglers opened fire at troops but due to timely retaliation by the Rangers, the criminals fled abandoning the smuggled goods," sources said.
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SEPTEMBER 24 - SEPTEMBER 30, 2013
Published by M. F. Riaz, Off. 91, 3rd Flr, Gul Plaza, M.A. Rd., Karachi, for Customs Today and Printed at Dhoom Printing Press Masheer Mahal Building, Off: I. I. Chundrigar Road, Karachi