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Sunday, 12 August, 2012
Telecom sector launches
REBUTTAL BLITZKRIEG KARACHI
T
ZAIN ALI
he telecom sector has released a joint statement refuting recent reports issued in the media that have supported the NAB’s allegations of not depositing Sales Tax on interconnection charges over the last five years. The statement was issued following incorrect media reports claiming that the telecom sector had agreed to make payments against alleged tax evasion as claimed by the NAB. Telecom sector has also refuted the claim that they have at this stage threatened the stoppage of their services in response to the enquiry currently being conducted by NAB on the issue of alleged evasion of FeD. however, the CMOs strongly reserve their right to take all necessary measures at the appropriate time to protect the mobile telecom industry and to record their legitimate protest against the unjustifiable persecution and media trial to which the industry is being subjected. A representative of the telecom sector has revealed that no agreement has been reached with the NAB on the payment of this alleged tax evasion, and the sector has requested a period of one week to pre-
Not depositing sales tax on interconnection charges one of the charges rebuffed pare a legal response to the allegations leveled against it by NAB. The source also clarified that this alleged tax evasion is based on a misinterpreted understanding of the facts and procedure of law related to the case (Background included in Annexure). The telecom sector has highlighted that the sector first learned about the alleged tax evasion and its extent through reports circulating in the media in the past few weeks. NAB and FBR have never issued any show cause or demand or shared how these figures were calcu-
lated against the revenues of each telecom organization against their operations over the last five years. The telecom sector has also highlighted that in addition to the stay order from Islamabad high Court, it has also approached the office of the respectable Prime Minister, as well as the National Assembly and PTA to notify them of the media and public trial that the sector is being subjected to. It should be noted here that a highly publicized hearing of the NA’s Standing Committee on ICT reached a unanimous conc l u s i o n that the telecom sector has not been involved in the alleged tax evasion and the sub-
committee was constituted to fix the responsibility on the FBR official who was responsible for this alleged claim of tax evasion. This conclusion was reached following supporting statements by independent tax and legal experts, the FBR, and the PTA. In the light of the above, the telecom sector humbly requests the support of the media in creating clarity in the public domain to put an end to this damaging public trial for the telecom sector to save these foreign investments within the already fragile economy of the country. The facts of the issue under consideration start from the year 2000 when the Pakistan Telecommunication Authority (PTA) implemented Calling Party Pays (CPP) regime in line with the pattern followed in developed counties. The CPP regime translated simply into the calling party’s network taking the responsibility of collecting and depositing the total tax on all applicable charges during the call. however, in 2010 the Department (which had not objected to this practice earlier) developed a new interpretation of law that tax should be charged separately on charges being collected by both operators. This means that the tax amount still remains the same, and the only difference is that two parties, rather than one would be collecting and depositing the tax. The only difference this change makes is making the process more complicated and cumbersome
without any change in terms of revenue for the Government. Accordingly, the Telecom Operators of Pakistan strongly BeLIeVe that the Department cannot collect tax beyond what is due on telephone calls. Total tax on the telephone call has already been deposited in retail mode. No tax is due on interconnect as it is mere after tax sharing of revenue on which tax has been collected/deposited on gross amount by each of the concerned telecom operator from whose network the call was initiated. Departmental contention that tax should be paid in two parts by the calling party network and receiving party network is a mere procedural matter with no additional tax revenue for the Government. Arbitrary proceedings contrary to sales tax mode cannot survive the test of appeals. As a means of resolving this debate, the telecom operators negotiated with the Department and offered to adopt the procedure proposed by the Department who in turn provided waiver of past practice of industry under section 65 of the Sales Tax Act, 1990 through notification issued by the Additional Secretary of Revenue Division on June 30, 2012. The notification was proposed to be published in official Gazette effective 30th June 2012. Please again note that there was no loss to the Government exchequer as alleged in the news media. In the past Revenue Division has issued numerous procedural waivers through notifications issued under section 65. Therefore, it is clear from the above that current public opinion is based on the misunderstanding that FeD on interconnection charges, which have already been paid, have not been deposited. Such opinion does not take into account the fact that the entire FeD has already been charged by the Telecom Operator where the call has originated. The fact is that under the current practice the calling party is required to pay F.e.D for the entire charges of telephone call (calling party network + receiving party network) which is subjected to tax in sales tax mode @ 19.5%; and therefore there is no loss of revenue to the Government.
Raja eyes Iran ENTREPRENEURS DANCE TO SBP’S BEAT Urges boost in trade
Business community appreciates new monetary policy 2012, and the policy rate cut LAHORE/ISLAMABAD
ISLAMABAD
APP
APP
Pakistan’s Prime Minister Raja Pervez Ashraf has said that Islamabad will go ahead with its multibillion dollar projects with Iran, calling for immediate steps to lift the ceiling of the bilateral trade to $10 billion. According to a private Radio channel, in a meeting with Iranian Ambassador to Islamabad Alireza haqiqian, the Pakistani premier said both countries should ensure the expeditious implementation of bilateral projects including the Iran-Pakistan gas pipeline and other electricity projects. Tehran and Islamabad have repeatedly stressed the importance of constructing the Iran-Pakistan gas pipeline despite the pressure from the United States. The multi-billion-dollar gas pipeline is aimed at exporting a daily amount of 21.5 million cubic meters of the Iranian natural gas to Pakistan. The maximum daily gas transfer capacity of the 56-inch pipeline which runs over 900 km of Iran’s soil from Bushehr Province to the city of Iranshahr in Iranian Balochistan Province is 110 million cubic meters. Iran has already constructed more than 900 kilometers of the pipeline on its soil. The Pakistani Premier further said that his country’s relations with Iran were deeply rooted in historical, cultural and religious levels. he also pointed to the forthcoming 16th summit of the NonAligned Movement (NAM) in Tehran and added that Pakistan looked forward to working closely with Iran for a positive outcome of the summit to uphold the NAM principles.
The Pakistani business community has appreciated and pleased with the new monetary policy 2012 as announced by State Bank of Pakistan. Talking to a private news channel, Chairman Lahore Chamber of Commerce and Industries Irfan Qaiser Sheikh said that Pakistani industry will get revival after SBP’s announcement regarding new interest rate as industrial sector is in standstill since long due to high interest rate in the country and business community was demanding of the government to decrease mark up rate keeping in view national and international economy. “There will be now betterment in industrial growth. International and local investors will now invest in the country and new jobs will be created which ultimately cast good impact on the national economy”, he added. Chairman A K D group Aqeel Karim said that new SBP’s step will help increase the industrial growth and new investments in the country. “It is a good step of the government.In coming days, our economy will perform better due to lessening of mark up rate”, he said. Chairman APTMA Mohsin Aziz said that it is good step which will help attract investments and will boost industrial sector and business activities in the country. POLICY RATE CUT BY 150 BASIS POINTS: The business community here on Friday welcomed the government decision of reducing the mark up rate by 150 basis points. The State Bank of Pakistan (SBP) has announced in its monetary policy to reduce the mark-up rate by 1.5 per cent from 12 percent to 10.50 per cent. “It is great news for the businessmen of the country as the reduction of bank policy rate by 1.5 per cent would revive the business activities, overcome low-growth scenario and en-
courage new investments which would ultimately improve the economic growth of the country”, President of Islamabad Chamber of Commerce and Industry , Yassar Sakhi Butt told APP on Friday. he said that the present decision would also reduce the non-performing loans as the business community would able to pay back their outstanding dues on time. however, Reduction in government’s borrowing from banks is a must for expediting investment process in the industrial sector, he added. The ICCI President said cut in markup rates would not only strengthen economic activities but would also go a long way in controlling stagflation that was giving birth to many economic problems besides jacking up the graph of unemployment. he said that the availability of cheaper money to the business doing would bring down
the cost of business in the country as the trade and industry were already facing problems due to high cost of energy and its crisis. Yassar Sakhi Butt said that reduction in bank mark-up rate could encourage fresh investment in the industry which had declined to 13.4 percent in FY11, thus reduction in markup rate would increase employment and exports of the country in long-term. Zaheer Ahmad, a businessman told APP that the decision of SBP of cutting the policy rate would create vacuum for new investment as the loan will be available at low rate which was highly desired by the business community. “With the increase of investment, the economic activity will automatically increase by creating more employment opportunities in the country”, he remarked. Besides, the government will collect more revenues in term of taxes
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Standard Chartered, regulators in settlement talks Standard Chartered is in talks with multiple lawenforcement officials, including New York’s banking regulator, to resolve a probe into improper Iranian money transactions by the British bank, according to people familiar with the situation. NEWS DESK The settlement negotiations are expected to last through the weekend and could result in a resolution by next week, these people said. The negotiations are at a delicate stage and could collapse, they added. One set of talks is with federal officials while a separate negotiation is taking place with the New York bank regulator, underscoring a divide that exists between New York officials and other regulators, the sources said. The negotiations come after a rancorous week that began when Benjamin Lawsky, superintendent of the New York Department of Financial Services, alleged in an order on Monday that the bank processed thousands of illegal transactions tied to Iran and that Standard Chartered had covered up its actions using incomplete or false records. Lawsky demanded that Standard Chartered officials appear at his office next Wednesday to explain why the bank should be allowed to keep doing business in New York, a global hub for the processing of dollars. The hearing remained on the calendar as of Friday afternoon. The bank had been cooperating in a long probe that dates to 2010 and subsequent settlement talks with federal and local regulators. Those talks continue. The U.S. Justice Department, Federal Reserve Bank of New York and Manhattan District Attorney’s office had been engaged in those talks. The discussions with Lawsky’s office are taking place separately, the people familiar with the situation said. Standard Chartered is engaging in those discussions even though the bank strongly disagrees with the regulator’s findings, they said.
Oil falls as China buys less, global demand seen weak
Business 02
Oil prices slipped on data showing China’s crude oil imports dropped in July and on weaker global oil demand forecasts by the International Energy Agency. NEW YORK
T
AGENCIES
he data added to concerns about demand for oil going forward and countered supportive hopes or expectations that central banks will introduce more stimulus measures aimed at lifting global economic growth. Brent and U.S. crude posted their second straight weekly gains, with Brent up 3.68 percent and U.S. crude adding 1.6 percent. Maintenance that should curb North Sea production and potential threats to supply from violence and tensions in the Middle east sent prices to 12-week peaks this week and lent support especially to Brent prices. Brent crude’s premium over U.S. crude ended at $20.08 based on settlements, reaching $20.42 intraday, the highest since April. “Crude futures are retreating on both sides of the Atlantic ... after reports showed that exports from China collapsed in July and its net-imports of crude were the lowest since December,” Addison Armstrong, senior director for market research at
Tradition energy, said in a research note. Brent September crude eased 27 cents to settle at $112.95 a barrel. It recovered after falling intraday to $111.31 and finding support 2 cents below the 200-day moving average. US September crude fell 49 cents to settle at $92.87 a barrel, ending below the 100-day moving average of $93.06 after trading from $91.71 to $93.87. Trading volumes continued to show summer-lull weakness, with turnover for Brent and U.S. crude below their 30-day averages. Money managers raised their net long U.S. crude futures and options positions in the week to August 7, the U.S. Commodity Futures Trading Commission (CFTC) said. <ID:L2e8JAFWG> They also raised net long positions in heating oil and gasoline, the data showed. U.S. heating oil futures slumped more than 2 cents, while U.S. gasoline managed a higher settlement on support from refinery problems and Monday’s fire that curbed output from a refinery near San Francisco, California. Tropical depression number seven in the Atlantic could become a tropical storm before reaching the Caribbean, the U.S. National hurricane Center said, another supportive element to keep investors cautious ahead of the weekend. MIDDLE EAST TENSIONS: An Israeli newspaper reported that the country’s prime minister and defense minister want to attack Iran’s nuclear sites before the U.S. election in November, but lack crucial support within their cabinet and military. The report added to the recent increase in speculation that war with Iran could be imminent. IEA CUTS DEMAND OUTLOOK: The International energy Agency on Friday cut its estimates for global oil demand for several years, trimming its 2013 demand forecast by 400,000 barrels per day in the light of a “worrying slowdown” in global economic activity. China’s imports of crude oil sank in July to a nine-month low as refineries cut output due to reduced demand as growth in the world’s second-largest economy sputtered.
Samsung takes on Apple over value of phone features An Apple Inc expert witness testified on Friday that consumers would be willing to pay $100 for three patented smartphone features that are at issue in its high stakes trial against Samsung Electronics Co Ltd. SAN JOSE AGENCIES
John hauser, a marketing professor at MIT, said he surveyed consumers over the Internet about how much they would pay for some of the technology in the lawsuit, like scrolling and multitouch, which Apple claims Samsung stole from the U.S. company. however, Samsung hammered hauser on whether his study actually relates to real world customer decisionmaking. Additionally, Apple patent portfolio director Boris Teksler described the company’s licensing strategy, saying he could count “on one hand” the number of instances it has permitted other companies to use its design patents. Teksler did not name those companies. Apple and Samsung are going toe-to-toe in a patents dispute mirroring a struggle for industry supremacy between two rivals that control more than half of worldwide smartphone sales. The U.S. company accuses Samsung of copying the design and some features of its iPad and iPhone, and is asking for a sales ban in addition to monetary damages. The Korean company, which is trying to expand in the United States, says Apple infringed some of its key wireless technology patents. As the second week of trial drew to a close in a San Jose, California federal court, most of the testimony focused on technical patent features. however, toward the end of the day hauser said tablet consumers would be willing to pay $90 for the same patented features as what they would pay $100 for on smartphones. That information could be relevant when calculating potential damages for Apple, which is seeking over $2.5 billion from Samsung. Samsung attorney William Price asked hauser why he didn’t tell jurors what consumers would pay for features like additional computer memory on different tablet models. Those could be compared to the real world prices that Apple charges, Price said.
Next stop: South Sudan South Sudan could be the hero, as the West hankers after options to fill Iranian oil vacuum CRUDE AWAKENING KUNWAR KHULDUNE SHAHID
W
ITh the eU embargo on Iranian oil over a month old and the US pulling out another
sanctions dagger last week against global banks’ maneuvers to deal with the black gold from Tehran, the West understandably is hankering after reservoirs to quench their inflating oil thirst. Taking Iranian oil out of the commodity picture not only eradicates a major chunk of the
global oil supply, it also results in massive oil price hike owing obviously to the gargantuan demand-supply disparity that it creates. And unless one believes in fairy tales there is no chance in hell that the sanctions screws would loosen up any time soon, hence the need for a regular oil supply source is becoming critical, especially for those that are dutifully abiding by the sanctions from Washington. Saudi Arabia has vied to fill the void created by the absence of Iranian oil from the market, in a move that has put its stature as the leader of the ‘Islamic world’ under scrutiny. even so, its own oil output has been slashed with 9.8m bpd pumped last month which was a 300,000 bpd decrease from June. Nonetheless, there is an oil-rich – albeit conflict stricken – zone in North Africa that is being touted by experts as the next go-to play for those nations whose industry is being aggravated owing to oil shortage. That hero of the day for the West, ladies and gentlemen, could be South Sudan. Goldman Sachs, a well renowned energy team, sees South Sudan coming to the fore in the world oil markets, while it overcomes a neighborly row. A recent Sudan-South Sudan dispute resulted in 400,000 bpd of oil supply being shut down. The issue was miraculously resolved when hilary Clinton, the US Secretary of State, had a nice little rendezvous with Salva Kiir, the South Sudan President. After which it took a
matter of hours before the two North African neighboring countries took the first steps in overcoming a protracted dispute. The row basically was a propos oil transit frees, since South Sudan being landlocked needs to supply its oil through pipelines running through Sudan to the global markets. The issue had resulted in the closure of South Sudanese oil production and around 50% of Sudanese oil output this year. And now with the transit fee issue settled expect oil to flow from the reservoirs of South Sudan, much to the delight of global oil markets. Analysts however are still a bit apprehensive about the oil supply from South Sudan and claim that there is a lot to be
done before the country becomes an oil supplier worth reckoning. The first thing that needs to be considered is that the timeframe and the roadmap with regards to South Sudanese oil returning to the market are still up for debate. Transit fee agreement might have settled the fiscal side of the debate but the dynamics and the schedule is still pretty ambiguous. 26th August will be a crucial day, when the concerned parties get together and mull the whole issue and try to come to a timely conclusion. however, there is not even a shadow of a doubt that if the oil from South Sudan were to return to the global markets it would indubitably ease quite a million Pascals of pressure created by the Iranian oil vacuum.
Sunday, 12 August, 2012