In addition to holding back tax payments, the traders also decided not to pay water bills until supply was ensured in urban areas. – File photo

MANSEHRA: Traders in Mansehra have announced not to pay any tax to tehsil municipal administration until civic services are provided to them. They also decided to observe complete shutter down during prayer timings.

“There is no water in the city and heaps of garbage are scattered all around, but the TMA officials are involved in money-making business.

Henceforth we will not pay any tax to the TMA,” said Haroonur Rasheed, president of Anjuman-i-Tajran, while speaking at a meeting of traders here on Sunday.

He said that despite availability of large number of sweepers the TMA failed to ensure cleanliness in the city.

“It is unfortunate that over 140 sweepers have been receiving salaries without performing their duty, but this would not be tolerated anymore,” said Mr Rasheed.

Other speakers said that over 90 hand pumps had been installed in the city area for provision of drinking water to traders and citizens, but these dried up as they were not dug up to 200 feet deep.

The traders also decided not to pay water bills until supply was ensured in urban areas. They demanded of Peshawar Electric Supply Company to immediately change outdated wires, which were causing frequent faults and breakdowns otherwise the traders would also launch agitation against it. — Correspondent

“The next couple of months are critical since the country would again be facing default if foreign exchange inflows are not revived soon. The rupee may actually slide to Rs100 to a dollar level,” said Anwar Jamal, a currency expert and dealer. – File photo

KARACHI: Around $450 million drained out from the State Bank’s reserves within a week despite the fact that no extra-ordinary payments were made.

These were all routine payments, the central bank had made, experts said.

The State Bank reported that total reserves of the country fell to $15.046 billion, a fall of $371 million in a week (June 8-15).
However, State Bank’s reserves fell by $437 million to $10.680 billion. Reserves of commercial banks were up by $65 million to $4.365 billion.

The falling reserves may cast a dark shadow on country’s already strained payment capability, particularly in the wake of rising current account deficit and trade gap.

The repayment to International Monetary Fund has started.

To avoid external payment default, the country had acquired a loan of $7.8 billion in 2008 from the multilateral donor.

Pakistan paid $400 million on May 24 to the IMF while another $400 million was paid in February this year.

Another installment of over $110 million is scheduled at the end of this month.

The local currency has already taken a weak position losing ground against the US dollar as it lost 3.5 per cent of its value within a month.

Currency dealers said falling reserves are a clear message the country is heading towards another default like situation similar to the one it faced in 2008.

Despite a sharp increase in remittances of overseas Pakistanis, touching high mark of $13 billion in the current fiscal, the current account deficit is rising.

Pakistan expected dollar inflows from the Coalition Support Fund for services it offered to Nato forces in Afghanistan and disbursement of IMF loan but worsening relationships with Untied States eroded these hopes.

Pakistan stopped Nato supplies to Afghanistan in November last year after the Salala incident in which US forces attacked and killed two dozen Pakistani army personnel. The situation has yet not improved despite continued bilateral talks on the issue.

Experts say the huge trade gap is the real problem for the country. This is due to falling exports and increasing imports that created a gap of about $19 billion. The gap may widen by the end of the current fiscal year on June 30.

“The next couple of months are critical since the country would again be facing default if foreign exchange inflows are not revived soon. The rupee may actually slide to Rs100 to a dollar level,” said Anwar Jamal, a currency expert and dealer.

The government has projected the import of oil bill at $15.287 billion for the year 2012-13. However, this is a very conservative projection as the oil import bill will cross this figure next year because of high consumption in domestic market. – File photo

ISLAMABAD: Pakistan’s import bill of oil and eatables increased by over 22pc in the first 11 months of the current fiscal year over the last year because of high domestic consumption and surge in oil prices in the international market.

In absolute term, the import bill of these two products climbed to $18.576 billion in July-May period this year from $15.18 billion during the same period last year, suggested data of the Pakistan Bureau of Statistics on Wednesday.

Consequently, the overall import bill reached $40.932 billion during the period under review as against $36.551 billion, showing an increase of over 11.99pc.

This shows that less than half of the total import bill was consumed by import of these two commodities in 11 months.

Statistics showed the oil import bill reached $13.937 billion in July-May this year as against $10.467 billion over the last year, indicating an increase of 33.15 per cent.

Of these, the import of crude oil was up by 6.49 per cent to $4.574 billion during July-May period as against $4.296 billion last year.

This suggests a rising oil demand in the domestic market as the quantity of crude oil import also witnessed an increase of 10.69pc during the period. This will increase further following the import of oil for transport purposes the CNG prices were increased to make it less attractive for consumers.

The import of petroleum products reached $9.362 billion in July-May, down by 51.71 per cent from $6.171 billion last year.
The increase indicates that domestic refineries have not improved their refining capacity.

The government has projected the import of oil bill at $15.287 billion for the year 2012-13. However, this is a very conservative projection as the oil import bill will cross this figure next year because of high consumption in domestic market.

On the other hand, the import bill of food products reached to $4.639 billion in July-May period this year as against $4.713 billion over the corresponding period last year, showing a marginal decline of 1.56 per cent.

The food items import was mainly driven by import of palm oil in July-May period this year. Statistics show that import of palm oil was up by 16.01pc to $2.131 billion during July-May as against $1.837 billion earlier.

An increase of over 20pc was witnessed in the quantity of palm oil during the period under review. The import of milk products witnessed an increase of 2.8 per cent, tea 5.6 percent, and all other food items 27.92 percent in July-May period this year over the last year.

Pyongyang’s military threatened rocket attacks on the Seoul offices of seven media outlets in revenge for their critical coverage of a mass children’s event north of the border this week.             — File Photo by Reuters

SEOUL: South Korea accused North Korea Friday of “crossing the line” with its recent threats and insults, and pressed the impoverished country to start repayments for past food aid.

The unification ministry, in charge of cross-border affairs, said the North should immediately halt threats and slander against the South’s  President Lee Myung-Bak.

“Such threats are crossing the line the two Koreas must keep in their relations,” said spokesman Kim Hyung-Suk.

The North has for months heaped insults on Lee and other conservative leaders, terming them “rats” and “human scum”.

It threatened “sacred war” against the South in retaliation for perceived insults during Pyongyang’s April commemoration of the centenary of the birth of founding leader Kim Il-Sung.

On Monday Pyongyang’s military threatened rocket attacks on the Seoul offices of seven media outlets in revenge for their critical coverage of a mass children’s event north of the border this week.

It listed the coordinates of some of the offices and said missile units and other forces had already targeted the buildings.

“We once again demand gravely that North Korea immediately stop such provocative acts,” the ministry spokesman said.

He also urged Pyongyang to start paying for food aid shipped by Seoul between 2000 and 2007, saying the first payment of principal and interest worth $5.83 million was due on June 7.

“The position of our government is that loans for food aid… must be repaid as agreed, and we demand North Korea keep the agreement sincerely,” the spokesman said.

He said Seoul could take further steps if Pyongyang fails to pay up but did not elaborate.

Seoul sent a notice through its Export-Import Bank in May giving advance notification of the date for the first payment. It sent a second notice on Friday.

Under the previous left-leaning government, the South provided the North with some 2.6 million tonnes of food worth $720 million in six instalments between 2000 and 2007.

Repayments for the food were to be made in the form of a long-term cheap loan, while fertiliser worth a total of 799.5 billion won ($683 million) was given free from 2000 to 2007.

The South also lent the North equipment and material worth $140 million for railways and roads, and another $88 million for developing light industry and natural resources.

The food and fertiliser aid ended after President Lee took office in early 2008 and rolled back the “sunshine” policy of aid and engagement with the North.

Nurali Barkatali, analyst at brokerage BMA Capital, observed: “As per our discussion with the company and as mentioned in the company accounts, it will be liable to pay Rs1.6billion, in case Supreme Court decides against Hubco.” - File photo

KARACHI : Hub Power Company (Hubco) — country’s largest independent power producer (IPP) — is yet again in the news.

It announced on Tuesday that the payment of interim dividend at Rs3 per share declared by the board would now be delayed.

The development follows the dismissal of appeals of the company by the Islamabad High Court, against the levy of tax by the Federal Board of Revenue (FBR) on issuance of shares against the project development costs. “Following the said judgment, the FBR immediately issued notices under Income Tax Ordinance 2001 to banks with which the company maintains its accounts, including the dividend payment accounts, with a direction that all funds, available in the bank accounts, for and on behalf of the company be remitted to the Deputy Commissioner, Inland Revenue Enforcement, Large Tax Payers Unit, Islamabad.”

Hubco said, adding that the company has filed appeals before the Supreme Court along with the stay application in order to restrain FBR from taking any coercive action until the matter is finally adjudicated by the Supreme Court.

“Under the circumstances, until such time the company obtains an interim order from the Supreme Court restraining the FBR from taking any action against the company, it is constrained to delay the payment of dividend to its shareholders,” Hubco said.

The company also stated that it was applying to the SECP for permission to delay the payment of dividend, which it assured shareholders would be paid as soon as possible.

Hubco had declared an interim cash dividend of Rs3 per share along with its first half financial year 2012 results with book closure from March 9 to March 16, 2012.

Nauman Khan, analyst at Topline Securities recalls: The company has been in dispute with the country’s tax authority regarding the company not deducting withholding tax at the time of issuance of shares to sponsors against project development cost incurred by them.”

The analyst calculated that it represents an exposure of approximately Rs2 billion (earning per share: Rs1.7) on company’s profit.

Nurali Barkatali, analyst at brokerage BMA Capital, observed: “As per our discussion with the company and as mentioned in the company accounts, it will be liable to pay Rs1.6billion, in case Supreme Court decides against Hubco.”

This translated into a one time hit of Rs1.38 per share. The analyst stirred a serious concern: “This situation raises questions over ability of Hubco to continue its operations and to make payments to its fuel supplier PSO,” but he went on the comfort the public: “We are of the opinion that plant operations will not suffer as fuel supply to senior plant in south is guaranteed by the government under power policy of 1994.”

The FTO sought information from the revenue division secretary about the refund claims. According to details, out of 169 pending claims submitted by PAF members, regional tax offices in Karachi already sanctioned refunds in 70 cases. About 90 per cent of the claims submitted by Site Association members have already been settled. - File photo

KARACHI: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to clear payments of all pending sales tax refund claims within a prescribed period of four weeks.

The FTO issued the order on a suo motu notice against non-settlement and payment of long due ST refunds worth millions of rupees belonging to exporters. The FBR has been asked to direct its field offices to clear all pending refund claims.

Ombudsman Dr Muhammad Shoaib Suddle had taken action on media reports which suggested that the Pakistan Apparel Forum (PAF) and the Site Association of Industry had levelled serious allegations against FBR’s field offices for non-settlement of refund claims. He took both the trade bodies as complainants in its proceedings.

In his order issued by the FTO secretariat recently, he asked the FBR to put in place an efficient and foolproof mechanism for expeditious disposal of bona fide refund claims. The ombudsman also settled 214 outstanding ST refund claims amounting to Rs1.262 billion.

Dr Suddle also asked the trade bodies to file a monthly statement with the FTO registrar on more than two months’ old pending claims and submit its copy to the chief commissioner concerned so that it could be monitored on a regular basis at the FTO office.

During the proceedings, the ombudsman sought details from PAF and Site Association about their members’ pending ST refund claims filed with the FBR field offices under Section 10 of the Sales Tax Act, 1990.

The trade bodies said that 214 cases of outstanding sales tax claims having a revenue impact of Rs1.262 billion were pending with the FBR field offices. The PAF filed 169 cases with outstanding refund of Rs975 million and the Site Association 45 cases with outstanding refund of Rs288 million.

The FTO sought information from the revenue division secretary about the refund claims. According to details, out of 169 pending claims submitted by PAF members, regional tax offices in Karachi already sanctioned refunds in 70 cases. About 90 per cent of the claims submitted by Site Association members have already been settled.

However, the revenue division requested the FTO to seek complete monthly details, along with supporting evidences, from the PAF and Site Association in respect of pending claims so that the same could be processed and refunds sanctioned as per law. The two parties sought time and held various meetings to reconcile the discrepancy in the number and
amount of claims and sort out jurisdictional issues as well.

The department in the case of PAF accepted pendency of 67 claims amounting to Rs410 million. But the PAF submitted a revised list and claims of 77 cases with outstanding refund claims of Rs559 million.

Similarly, the cases submitted by the Site Association on reconciliation reduced to 15, with outstanding refund amount at Rs57.997 million.

A sharp decline in foreign reserves due to Western banking sanctions imposed over Iran’s nuclear programme forced the central bank in November to halt its policy of massive injections of dollars into the open market to support the rial. - File photo

TEHRAN: The central bank of Iran is to enforce a single exchange rate after a dramatic slide in the value of the Iranian rial on the open market, state television reported on Thursday.

“From Saturday, there will be a single fixed rate for the dollar which will be 12,260 rials,” central bank governor Mahmoud Bahmani announced on television.

“This rate is valid for all transactions and authorised imports… as well as for students abroad or those travelling,” he said. Iran previously had two official exchange rates: one of 11,300 rials to the dollar at the bank for state operations and official imports, and a variable rate for businesses and individuals to purchase from foreign exchange offices.

A sharp decline in foreign reserves due to Western banking sanctions imposed over Iran’s nuclear programme forced the central bank in November to halt its policy of massive injections of dollars into the open market to support the rial.

The weakening of the Iranian currency, which slumped in past weeks from 13,500 to the dollar to more than 18,000, prompted the government in mid-Nov to set a fixed rate of 14,000, while retaining the official rate of 11,300 rials.—AFP

The lack of political will and weak tax machinery at provincial level leaves these lucrative avenues largely untapped. - File photo

As the economy groans under the pressure of a rising budget deficit worsened by falling foreign financial inflows and the tax-to-GDP ratio, the elite should brace themselves to answer the knock of the desperate taxmen at their door.

It is time to acknowledge that indirect taxes that provide bulk of the tax revenue, already cutting into the bones of the average households, have ceased to be an option.

“The stabilisation rhetoric has backfired. All said and done, the tax-to-GDP ratio has actually dipped from 11 to eight per cent over the past few years of slow economic growth. It is sad that those who have toiled to create national wealth will be forced to pay for follies of the political elite,” said a textile tycoon expecting a harsher treatment by the tax administration in the period ahead.

There is no way to go on funding a growing national budget, currently at Rs3 trillion, with tax revenue of about half of its requirement or a little over one and a half trillion rupees.

The petty contribution, post devolution, of all provinces at less than one per cent of the GDP is not justifiable and will have to be improved.

The Gilani government still recovering from a series of political crises might find it difficult to survive a feared dramatic economic meltdown. The government seems set to cut corners and stretch the sheet to balance the budget.

“To me completion of five-year term by the elected government essentially hangs on the ability of the leadership to negotiate a new deal with power brokers defining features of new tax sharing formula,” commented a retired civil servant.

However, while the elite maintains an uneasy calm waiting for miracles to happen, the government has opted to act unilaterally without going through the difficult path of much needed intensive consultation in or outside the parliament.

The recent decision of the government to withdraw electricity subsidy on 300,000 tube-wells and to install energy meters to ensure recovery of electricity cost, needs to be seen in this context. Currently tube-wells are charged at flat rates and enjoy subsidy worth about Rs5 billion. The share of tube-wells in total power consumption is 14 per cent.

Federal Minister for Finance Dr Abdul Hafeez Sheikh last week said the government had decided to go after tax evaders who own properties and travel abroad frequently.

“We will go after these 700,000 evaders and collect taxes from them as the country cannot progress without growing tax revenue,” he was quoted to have said.

The tricky question is as to which segment of the elite, rural or urban or both will be targeted to collect the required tax revenue.

“I do not see a major breakthrough in resource generation unless traders, realtors, importers and shop-owners are taxed. The FBR is making efforts to plug holes and streamline administration but a significant improvement looks improbable unless the tax base is broadened,” Syed Shabbar Zaidi, partner at A. F. Ferguson and Company and an advisor to Federal Board of Revenue, told Dawn over telephone.

The representatives of the business community resent the very idea of an additional tax on existing tax-payers who, they feel, have been at the losing end all along the past nearly four years of Pakistan People’s Party government.

“I know it for a fact that there has been a net transfer of wealth from urban to rural economy over the past few years. I personally know people with rural land holdings who have done very well. The commodity prices have increased and the commodity producing sector reaped profit. It is time they are asked to chip in their share in tax collection,” Kamran Y. Mirza, President Pakistan Business Council, said.

He appreciated the decision of withdrawal of power subsidy on tube-wells but found it more to be symbolic. “Well I am not sure how the decision is played out. Installing of electricity meters at tube-wells at farms scattered all over the country is difficult, and the actual collection may prove too costly an exercise,” Mirza added.

Zaidi was not convinced. “For too long we neglected the huge rural economy, so even if there has been net transfer of wealth from urban to rural sector it will serve to address the income disparity. In fact we need to transfer more resources to agriculture for productivity gains and for ensuring food security. If the government needs resources it should tax retail and real estate sectors,” he said.

“The government will tax traders as it does not enjoy any constituency in this class,” a tax consultant felt. “The PPP cares two hoots if cities simmer as its vote bank is not located there.”

“With MQM as coalition partner and PML(N) in the opposition, both representing urban constituencies of Karachi and Punjab, it will be hard for the government to tighten the tax-noose around traders and importers,” another public finance expert said.

“The long honeymoon of rich and powerful (landed and urban elite) is coming to an end. For decades they had full liberty to multiply their wealth and enjoy near complete immunity from tax liability. The country can no longer afford to pamper the pampered,” said an observer.

In the current environment, the government will need to heed to the Federal Fiscal Responsibility Act. As fiscal challenge deepens, all public expenditure will come under scrutiny and tax collection regime will have to be made just and equitable, to nurture tax culture.

“The days of easy access to foreign money—- by selling a cause or a crisis—- are behind us. For too long, the country has begged and borrowed to support perks and privileges of the elite,” an analyst said.

Pakistan has high income disparity with skewed asset ownership. The tax regime continues to be regressive. The direct taxes contribute hardly four per cent of the GDP with many exemptions to powerful segments.

A major chunk of tax receipts is raised from sales tax that disproportionately burdens the poor who spend their entire income on consumption of bare essentials. Low resource generation is often attributed to the fact that some of the major segments of the economy such as agriculture, real estate and a part of the services fall in the provincial domain and remain inadequately taxed.

The lack of political will and weak tax machinery at provincial level leaves these lucrative avenues largely untapped.

The farm sector that makes over 20 per cent of the national income(GDP) virtually pays no income tax. And of the two million tax payers, 1.8 million are salaried whose tax is deducted at source.

The sports agent pleaded guilty at a pre-trial hearing in September but the judge has only just lifted reporting restrictions. - AFP photo

LONDON: Sports agent Mazhar Majeed has pleaded guilty to conspiracy to cheat at the Pakistan match-fixing trial and conspiracy to making corrupt payments, the Press Association reported on Wednesday.

Majeed, 36, now faces sentencing along with three Pakistani cricketers, former captain Salman Butt and fast bowlers Mohammad Asif and Mohammad Amir.

The sports agent pleaded guilty at a pre-trial hearing in September but the judge has only just lifted reporting restrictions.

Butt, 27, and Asif, 28, were found guilty on Tuesday of taking bribes to fix part of a test match against England at Lord’s in August 2010.

Amir, 19, admitted his part in the scam before the trial at Southwark Crown Court started.

Butt and Asif are facing up to seven years in jail or large fines. The trio have already been banned from playing by the International Cricket Council for a minimum of five years.

The court has been told the spot-fixing plot was orchestrated by Butt and Majeed.