Saturday, July 21, 2007

Sindh excise collection target surpassed

Source: The News Daily

KARACHI: Sindh Excise and Taxation Department has surpassed the tax collection target for the year 2006-07, said Director General of the department Muhammad Asif Marghoob Siddiqui.The department managed to collect Rs8.577 billion under different heads assigned to it during the year. It had collected Rs8.366 billion during 2005-06.The target allocated to the department under the heads of motor vehicle tax, excise duty, infrastructure cess, cotton fee, professional tax and hotel tax was Rs8.133 billion.According to details available with The News, the department collected Rs1.985 billion under the head of motor vehicle tax, Rs1.488 billion in excise duty, Rs4.665 billion infrastructure cess, Rs95.686 million cotton fee, Rs178.799 million professional tax and Rs164.029 million hotel tax.Siddiqui further said that Rs1,000 million has been deposited by the taxpayers in the shape of bank guarantee with the Nazir of Sindh High Court under the head of infrastructure cess and the actual amount collected does not include these bank guarantees.DG of the department said that property tax and entertainment duty has been devolved to the city/district governments, but the collection of this tax and duty is still the responsibility of the Excise and Taxation Department.The amount collected under the head of property tax during the year stood at Rs1.291 billion and Rs33.019 million under the head of entertainment duty.The collection made by the department reflects a healthy growth despite reduction in rate of duty on liquor following the judgments of the Supreme Court. The department is now collecting only Rs270 a bottle. Previously, it was charging Rs375 a bottle.

FBR to focus on manufacturing, services

Source: The News Daily

By Mehtab HaiderISLAMABAD: The Chairman Federal Board of Revenue (FBR), Abdullah Yousaf has tasked the tax authorities with identifying potential taxpayers in the manufacturing and services sectors in order to achieve the ambitious tax collection target of Rs1.025 trillion during the current fiscal.“During a recently-concluded conference, tax authorities were tasked to find out potential taxpayers from two crucial sectors - manufacturing and services,” an FBR official told The News on Friday.Currently, out of a population of 160 million, there are only 1.8 million taxpayers and tax authorities view this number as dismal. The FBR, therefore, envisages an increase in tax return filers by 20 per cent during the current fiscal year.For achieving this increase in taxpayers’ numbers, the government needs to launch a vigorous campaign to bring a vast majority of non-filers into the tax net.The FBR achieved a record growth of 47 per cent in direct tax collection in fiscal year 2006-07 compared to the year 2005-06, mainly contributed by corporate tax and withholding tax.It may be noted that sector-wise studies are being conducted for the purpose of plugging leakages and to lessen tax evasion. Special attention is being paid to identifying these potential areas which still remain out of the reach of the tax net.It is pertinent to mention that direct taxes helped the FBR make up for the shortfall in other sectors during the last financial year.The shortfall in collection of customs’ duties and sales tax was mainly blamed on a fall in dutiable imports, which dropped by 4.1 per cent against projected growth of 15 per cent.

Friday, July 20, 2007

Work on land record automation begins

By: The News Daily

LAHORE: Descon Information Systems has started work for developing ‘Land Record Management Information System’ (LRMIS). The project has been undertaken by the Punjab government after studying problems faced in the current paper-based land record system.Descon Information System’s is one of the four companies selected by PITB (Punjab Information Technology Board) for the development of Land Record Management Information System.The current paper-based land record management is cumbersome and obsolete and due to this local as well as foreign investors have been reluctant to invest in businesses based in rural Punjab.The electronic system will help automate the management of land record and will provide a central land data repository for monitoring and revenue collection. This automation system will streamline the land record processes and will gain the confidence of investors.The pilot project of LRMIS will be initiated in district Kasur. All key components of LRMIS and business processes will be tested in Kasur before introduction in the entire Punjab involving 18 districts.The key components include LRMIS software, hardware, networking, data entry, construction of booths, and business processes associated with land revenue administration.

Trade policy focuses on creating export surplus

By Mubarak Zeb Khan
ISLAMABAD, July 19: Commerce Minister Humayun Akhtar Khan said on Thursday measures taken in Trade Policy 2007-08 would help achieve the ambitious export target of $19.2 billion set for the current fiscal year.“The focus of the policy is to encourage value addition and more tax holidays for attracting investment to produce exportable surplus,” the minister said while replying to a question at a post-Trade Policy press conference.While defending the role of his ministry, Mr Khan said the if there were no surpluses in industrial production, what will be exported as the growth in the large scale manufacturing (LSM) declined from 18 per cent to less than 10 per cent during the current fiscal year.He suggested for a proactive and balanced policy to encourage industrialisation and create exportable surplus in the country. He said that the government introduced equity fund for brand acquisition, encouraging sanitary and phyto-sanitary (SPS) compliance and provided sectoral investment incentives to trade companies.Answering a question he said despite several challenges and difficulties exports increased from $8 billion to $17 billion in the last five years. However, he said focus of economic policies on revenue generation, reducing debt-to-GDP ratio has resulted in increase in imports but still there was no cause for alarm.He said that growing economies do need imports as there happens to be a strong correlation between higher imports and GDP growth.” However, the highest-ever trade deficit will be bridged through remittances and foreign direct investment.Mr Khan said Pakistan's trade policy was going on right direction adding that the public as well as the private sector can now go to international market and freely raise debt without affecting foreign reserve position.---He said that efforts were afoot to replace the non-recurrent with the recurrent adding that this would help enhance export growth.To a question he said that the current account deficit would not affect the government spending. The government has many ways to generate revenue like one per cent federal excise duty (FED)on imports, which would help generate additional Rs20 billion for the kitty.The minister defended his trade diplomacy, which, he said, had helped in getting preferential market access for Pakistani goods. He said many preferential trade agreements with many East Asian, Middle East and Far East countries are in the pipeline.Answering a question the minister said the legislation of the Reconstruction Opportunity Zones (ROZs) will be passed by the US congress soon. He said that these zones will be established in the entire NWFP, tribal areas and border districts of Afghanistan. The products produced in these zones will be exported to US duty free.He said that the expansion of positive list for trade with India has nothing to do with the trade policy. He said that exports to Afghanistan declined only in the POL products.Mr Khan defended the FTA with Sri Lanka and claimed that the trade with that country had increased. However, he said, that no auto parts are allowed to be imported under FTA from Sri Lanka.He said that major portion of the country’s imports was in oil and telecom sectors adding that the government has been working on a comprehensive strategy to increase exports and decrease the trade deficit.

Oil and gas production prices up by 6-8pc: New energy policy

By Khaleeq Kiani
ISLAMABAD, July 19: Pakistan, under a new five-year energy policy announced on Thursday, increased oil and gas production prices by 6-8 per cent on new discoveries the petroleum exploration and development companies would make from now on.A cap of $36 per barrel oil equivalent on locally produced gas has been done away with and replaced with a formula-based pricing mechanism allowing 100 per cent linkage with the international prices, Secretary Petroleum Ahmad Waqar told a news conference as the Economic Coordination Committee (ECC) of the cabinet approved the Petroleum Exploration and Production Policy-2007.The impact of the new oil and gas finds under the new policy would pass on to domestic consumers after about five years later, said Mr Waqar on his last working day as secretary petroleum. He has been appointed as secretary finance.He said Pakistan met only 20 per cent of its total oil requirements from domestic sources and gas requirements were also rising with growing economy and hence the target was to ‘maximise indigenous’ production of oil and gas. He said the country was at 12th position in 2001 in terms of petroleum activity level but slipped to 16 in 2006.India that was at 17th position improved its environment and secured 7th position during the same time. The new policy would put Pakistan ahead of India at sixth position, he said.He said to attract quality investment, the policy envisages work programme based bidding to pre-qualified companies which would be graded 80 per cent on work programme basis at rate of $10,000 for one work-unit and 20 per cent gas price gradient (GPG). By doing so, the government has tried to restrict small investors, who used to be granted concession licence and then pre-qualified.He said the new investments would get a secure price in case of international oil prices falling below $45 and the government would get benefit through the GPG concept as prices remain over $45 a barrel of oil equivalent.The policy also provides a windfall levy under which the gas producer would pay about 50 per cent of the difference to the government in case the gas is sold to a third party. Earlier, the producer could sell its gas only to the government or its entities.Mr Waqar said the producers would be allowed to sell their production during extended well-testing phase at a 15 per cent discount to the gas companies. He said the rates for fees for social welfare programme, rentals, maritime fee and coastal areas development fee have been increased.He said the existing oil and gas producers would continue to be governed under the existing policy and their rates will remain unchanged. However, the companies that were currently under exploration phase or have applied for the concession licence under the old policy would be allowed to switch over to the new policy but they would have to offer a price at 0.2 GPG.He explained that assuming oil price at $60 per barrel, the gas price in Zone III (the easiest area) would be $3.06 per MMBTU at 0.2 GPG and $3.30 per MMBTU at 0.1 GPG. Under the existing policy, the same rate would have been $2.82 per MMBTU with $36 per barrel price cap.In zone II, the gas price would increase from $3.31 to $3.55 per MMBTU, up by 7.25 per cent, while in Zone I, the gas price would increase by 6.6 per cent to $3.85 per MMBTU from existing rate of $3.61. For Shallow fields, the rates would increase by 5.38 per cent to $4.35 per MMBTU from $4.11 per MMBTU. The prices for deep shallow would range between $4.46 per MMBTU to $4.70 per MMBTU.The producers would be required to pay marine research fee and coastal area development fee at the rate of $50,000 per year until first delivery, which would double to $100,000 thereafter and until declaration of commerciality. These fees would go up to $250,000 per year during development phase and reach $500,000 during production phase. 75 per cent of this fee would be expensed for coastal area development and 25 per cent for marine research.The producers would be required to sell their production through a 25 km from the field gate and then get a transportation tariff for participating in pipeline development beyond obligatory 25km.

Thursday, July 19, 2007

100pc global prices to local crude, gas allowed: New petroleum policy

By Khaleeq Kiani

ISLAMABAD, July 18: The new ‘Petroleum Exploration & Production Policy 2007’, which is expected to be approved by the Economic Coordination Committee (ECC) of the cabinet on Thursday, offers 100 per cent international crude price to the domestic production of crude oil, natural gas, condensate and liquefied petroleum gas.The existing policy of 2001 provides a maximum of 67.5 to 77.5 per cent of the international crude price depending on three different zones. Even these prices are capped at a maximum of $36 per barrel of international crude price.For all practical purposes, the new reference crude price would be assumed at $45 per barrel and the producer gas prices would then be calculated using a three linear formula for Zone III, commonly known as lower Indus basin.The formula ensures that gas production price never falls below $2.70 per MMBTU even in case of crude pricing falling below $30 per barrel but goes beyond $3.06 if crude prices are above $45 and so on.As a result, the average well-head price known in the layman terms as production price will increase from an average of $2.85 per MMBTU (million British Thermal Unit) to more than $3 and less than $4 per MMBTU when the 2007 policy comes into effect. Generally, a simple 18 page petroleum policy of 2001 has been converted into a detailed 59 page document in 2007 that will remain in force for five years.A copy of the 2007 policy obtained from the ministry of petroleum says that the producer policy price for crude oil delivered at the nearest refinery gate shall be based on the reference crude price equal to cost & freight (C&F) price of a comparable crude or a based of Arabian and Persian Gulf crude oils plus or minus a quality differential between the comparable crude and domestic crude.Similarly for all gas pricing, a reference crude price (RCP) equal to C&F price of a basket of Arabian/Persian Gulf crude oils imported in Pakistan during the first six months period of the seven months period immediately preceding the relevant price notification period as published in an internationally recognised publication will be used.The C&F price will be arrived at on the basis of FOB (freight on board) price of imported crude into Pakistan plus applicable freight. The producer policy for condensate will be the FOB price of internationally quoted comparable condensate delivered at the nearest refinery gas plus or minus a quality yield differential. No other adjustment of discount will apply.The well-head price in Zone-II (Kirthar, East Balochistan) Punjab Platform and Suleman Basins) would ensure at least $3.31 in case of crude prices are at $45 per barrel. Frontier areas would get special pricing incentives and get comparative higher rates to encourage exploration in Zone-I (West Balochistan, Pishin and Potohar), Zone 0 Shallow water and Zone 0 deep and ultra deep waters.A senior petroleum ministry official explained that Director General of Petroleum Concessions has been given greater discretionary powers in case of qualification of exploration and production companies, bidding and award and cancellation of petroleum concession agreements but according to a well-defined criterion.The new policy also envisages giving special ‘Strategic Partner’ status to national oil companies representing foreign governments and in fact the government will promote direct negotiations with selected strategic partners to develop specific acreage, exploit special areas. Such partners would also be given privileged award of petroleum rights without following competitive bidding for certain blocks.The new policy also allows E&P companies to export their share of crude oil and condensate as well as their gas based on export licences subject to the considerations of internal requirements and national emergencies.For the purpose of the grant of such export licences for gas, the export volumes will be determined in accordance with “L15” concept provided a fair market value for such gas is realised at the export point.Under this concept the gas reserves that exceed the net proven gas reserves in Pakistan including the firm import commitments vis-à-vis the projected gas demand for next 15 years can be considered for export. Once dedicated for export, no such export volume would be revoked.Also the gas companies would be free to sell their gas to gas transmission and distribution companies and other third parties except residential and commercial consumers. The E&P companies would be required to sell their gas to an outlet within 25-km radius of the production outlet and would not be paid any pipeline tariff.The royalty will continue to be 12.5 per cent while tax on income will be payable at 40 per cent of profit or gains. Windfall levy will also be applicable on crude oil, condensate and LPG.In case of joint ventures, the local exploration and production companies including Government Holdings will have working interest of 15 per cent in Zone 1, 20 per cent in Zone 2, and 25 per cent in Zone 3 on full participation basis but without becoming an operator.Some incentives have also been offered to the E&P companies to make joint ventures, taking more areas for their activities and relinquishment of given areas besides extension of licence periods.The licence holders would be required to pay a rental of Rs3,500 per sq. km a year for initial five-year term and then Rs800 per In case of renewal of the licence, the rental would be Rs5,000 per sq. km per year and then Rs2750 per sq. km.The E&P companies will need to submit guarantees that at irrevocable and unconditional including bank guarantee equal to 50 per cent of minimum financial obligation from a bank of international repute, or a parent bank guarantee, a production lien, first and preferred asset lien and escrow account.The foreign companies to move their earnings and profits in foreign exchange up to a 70-75 per cent guaranteed amount while local companies would be provided up to 30 per cent of their earnings in foreign exchange.

47pc growth in IT collection

By DAWN Reporter
ISLAMABAD, July 18: The income tax collection has recorded a growth of 47 per cent to Rs330 billion during the fiscal year 2006-07 as against Rs224.988 billion over the same period last year.Chairing the 14th National Tax Conference here on Wednesday, chairman, Federal Board of Revenue (FBR), M Abdullah Yousuf, said the number of taxpayers filing the tax returns up to June 2007 had reached 1.8 million.He said the FBR had already taken some far-reaching measures to further expand the tax base. Sectoral studies are being conducted for detecting leakages and for tax gap analysis.Special attention is being paid to those potential areas which are still out of the tax net.The chairman pointed out that the present number of taxpayers was in no way near to what it should have been.“We still have a huge gap. We have to first evaluate and analyse and then strategise to get the desired results,” he emphasised.“We may expect some tangible outcomes, if target groups are correctly and genuinely identified.”He said it was actually direct tax collection through which we managed to make up shortfall faced in other taxes.He said shortfall in collection of customs duties and sales tax was mainly due to reduction in dutiable imports.Member, Direct Taxes, Salman Nabi, informed that total advance tax collection during the year was Rs117 billion as compared to Rs63 billion in the year 2005-06, showing a growth of 86 per cent.On payment of refunds position, Mr. M. Abdullah Yusuf remarked that the balance on this account must be totally negligible.He directed the commissioners to address this issue through policy changes. He also advised them to send a regular feedback in this regard.Whereas, tax collection achieved with the tax returns was Rs48 billion, as compared to Rs24 billion in the preceding year, indicating an increase of 100 per cent. However, collection out of demand and refunds issued during 2006-07 were less as compared to those of 2005-06.Mr Yousuf reminded the tax managers that “we can do well, if economy does well”.Directors-general of large taxpayers unit (LTUs) and regional tax offices (RTOs), in their presentations, highlighted the performance of their departments on account of revenue collection achievements in last financial year, strategy for achieving current year’s targets, liquidation of arrears, broadening of tax base disposal of pending tax /appeals, monitoring of WHT progress on data entry, progress of were on reforms units etc.On liquidation of litigation pendency, the chairman advised the member (legal) to aggressively pursue the cases pending at Supreme Court, High Court and tribunal level.

Monday, July 16, 2007

Tax burden on the poor

By Huzaima Bukhari & Dr Ikramul Haq

The adoption of the Finance Bill 2007 by the lower house on June 22 in utter haste, without assessing its impact on the economy and the burden of regressive taxes on the poor, once again proves that the elected representatives are not allowed to perform their constitutional duty.The government ignored suggestions and amendments by the opposition and the Senate, disregarding all the norms of parliamentary process and transparency. The ministry of finance even managed to get a number of laws, not falling in the ambit of Money Bill, approved under the garb of the Finance Bill, 2007.And the outcome is that the financial managers and tax collectors have persistently failed to overcome fiscal deficit as their tax policies are based on collecting taxes at source and without adequately taxing the renter class.There is a direct link between the growing poverty and distortion in tax base since 1991, when major tax burden was shifted to consumers by introducing presumptive taxes in income tax law. The lack of judicious balance between direct and indirect taxes and levy of regressive taxes in the garb of income tax, petroleum development surcharge etc is a factor in pushing an overwhelming majority towards the poverty line. Since the fiscal policy has not been devised by a representative Parliament, the priority has never been given to tax the rich and provide relief to the poor.The indirect taxation under the garb of presumptive tax regime on transactions, without evaluating its impact on the life of poor masses is a serious cause for concern. According to official figures, the contribution of income tax [although a major portion of it is now composed of indirect levies or expenditure taxes) as percentage of GDP is continuously declining; it was merely 2.8 per cent in 2006-07, 2.9 in 2005-06, three n 2004-05, 3.01 in 2003-2004, whereas in 2002-2003 it was 3.15 per cent.The FBR chairman in his press conference on July1, made the tall claim that the direct taxes during fiscal 2006-07 maintained “its marvellous growth throughout the year”. The claim made in respect of the direct taxes, “the year-end overall growth has been over 45.6 per cent, is however not sustained. In the direct taxes of Rs328 billion for fiscal 2006- 2007, the share of various taxes is as under:Taxes collected at source on goods and services/contracts/supplies/rent etc, being full and final discharge, are in substance indirect levies, if subtracted from income tax collection, the actual figure comes to Rs220 billion. Thus the share of income tax as percentage of total revenue is not more than 26 per cent, whereas the same is claimed at 31.7 per cent.Out of total collection of Rs840 billion by FBR in FY2006-07, regressive taxes are to the tune of Rs620 billion (after making adjustment of indirect taxes collected under the name of income tax!). It has distorted the economy, raised the cost of doing business, widened the gulf between rich and the poor and made the national industry non-competitive.The revenue deficit, despite this collection of Rs840 billion, is high atRs200.5 billion and fiscal deficit at Rs373.5 billion. The FBR chairman claimed that the share of direct taxes was sharply increased to 39 per cent in fiscal 2006-07 against 30 per cent in FY06. This is gross misrepresentation of data. If presumptive taxes on goods and services camouflaged as income tax are included it touches 70 per cent.The average share of direct taxes for high income countries is 46 per cent while in the low income countries it is 28 per cent. In 2006, Iran and India posted direct tax shares of 40 per cent and 29 per cent respectively as compared to 39 per cent by Pakistan [in reality it is not more than 30 per cent.The present tax policies of government are detrimental for economy, social justice, business and industry. The ability-to-pay principle is regarded as the most equitable method of taxation. It is emphasized primarily for its redistributive role. Our rulers have completely deviated from this principle, which is, in fact, a constitutional obligation of the government.The common man is subjected to sales tax of 15 plus one per cent Federal Excise (tax incidence is 42 per cent on finished imported goods after applicable customs duty, sales tax, federal excise, mandatory value addition and income tax) on essential commodities [even salt sold under brand names is subjected to 15 per cent sales tax] but big industrialists, landed classes, generals and bureaucrats avoid paying taxes. In a country where billions of rupees being made in speculative transactions in real estate and shares, tax-to-GDP ratio is pathetically low [just 9.5 per cent in fiscal year 2006-07] and the government is least bothered to tax undocumented economy and benami {name-lender) transactions.