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News Clips 07 July, 2015

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[ WHT on banking transactions: Prime Minister's intervention sought ]
[ Textile: Nails in the coffin ]
[ FBR introduces new procedure for exemption certificate ]
[ Senate body okays changes in trade remedy laws ]
[ German factory orders slip in May ]
[ Piqued by lower exports government mulls new STPF ]
[ Banking transactions: FPCCI urges government to withdraw WHT immediately ]

WHT on banking transactions: Prime Minister's intervention sought   [ top ]

Business Recorder, July 7, 2015
Chief Executive of Trade Development Authority (TDAP) S M Muneer, who is also patron-in-chief of Korangi Association of Trade and Industry (KATI), has sought the intervention of Prime Minister Nawaz Sharif to direct concerned authorities to withdraw controversial withholding tax on banking transactions, as the fragile economy can not afford any protest or agitation. 

He said that the trade and business community was in state of agony due to deduction of 0.6 percent withholding tax by banks on all type of transactions from non-filers of income tax returns. He said that most of the transactions from July 01 had been shifted to cash payment, which was also affecting the banking system. He said that the withholding tax in income tax form had been implemented in Pakistan for the past several years yet the tax machinery failed to increase the return filers as at present the return filers were around 0.88 million. 

The figures of return filers show that the measures taken in the past have proved counterproductive as the number of return filers further decreased last year, S M Muneer said and added that Federal Board of Revenue (FBR) should adopt alternative measures to enhance the taxpayers instead of taking measure that discourage people from becoming registered persons. 

He further said that Pakistan's banking system was one of the best and it was resilient even in the time of global financial crisis. Such measures will also hurt the banking industry, which was contributing major share to the national revenue collection. President KATI Rashid Ahmed Siddiqui also urged the government to avoid such measures which create chaos in the system. He said that city like Karachi could not afford further disturbance. He said that the government should facilitate the business community, which was already facing multiple issues including law and order, electricity crisis, water shortage etc. 

KATI President said that withholding tax on banking transaction had affected entire business community irrespective of manufacturers, distributors or wholesalers/retailers. He appealed to the prime minister, the president, finance minister and chairman of Federal Board of Revenue (FBR) to revisit the decision. 

Textile: Nails in the coffin   [ top ]

Business Recorder, July 7, 2015
Things really hit the fan last week when APTMA announced the voluntary closure of textile mills. On Friday, it was reported that around 30 percent of textile mills had shut down their operations owing to lack of competitiveness. 

Time and again, this column has listed the ongoing problems that textile mills are facing - depressed cotton and yarn prices, competition from regional players like India, lacklustre demand from China. These are things that are out of ones hands. But what of the things that are within the governments control? What of loadshedding? What of the high cost of doing business? 

An industry source told BR Research that Punjab - home to the textile industry of Pakistan - is the most troubled region, where mills face over 8 hours loadshedding of electricity on average. Although one could argue that some textile mills have set up in-house power production, an industry source says that such firms form a very small portion of the overall industry. And to add insult to that injury, Finance Bill 2015/16 has raised electricity tariffs and there is now also a ariff rationalization surcharge, which has brought the electricity tariff for the textile industry to Rs14.5 per kilowatt hour from Rs9 per kWh in May 2013. 

Where other countries subsidize their industries, Pakistan chooses to tax the daylights out of them. The rebates and refunds are untimely; there are cesses and super taxes. And the latest 0.6 percent WHT on banking transactions to broaden the number of filers harms pretty much any and every industry under the sun. 

Islamabad Chamber of Commerce and Industry told BR Research that local textile firms are setting up shop abroad simply owing to the non-conducive business environment that the FBR has created. At a time when textile was already dying because of the high cost of doing business, the new fiscal year has brought with it policies that, as is becoming obvious by the voluntary closure of mills by APTMA, might just put the whole industry to rest. Textile accounts for nearly 60 percent of Pakistans total exports. Something needs to be done, and quick. 

FBR introduces new procedure for exemption certificate    [ top ]

The News, July 7, 2015
KARACHI: The Federal Board of Revenue (FBR) has introduced procedure for filing application electronically to get exemption certificate for imports and supplies during the tax year 2016. The exemption certificate will be valid for six months.

According to the procedure issued by the revenue authority on Monday for availing of reduced rate of withholding income tax on imports, the taxpayers will provide overall annual requirement of raw material, including Harmonised System Codes, quantity of raw material consumed during the previous year and quantity of raw material required during present year, (which is restricted to 110 percent of previous year’s consumption) with the application.

The applicant is not required to provide details of the letter of credit (LC) with the application.

According to the procedure, the computerised system of the FBR will provide data of taxpayers' import of raw material during the previous year.

The commissioners of Inland Revenue have been authorised to allow import at reduced rate of withholding tax after due diligence to make sure that the taxpayer is eligible for such imports.

For availing of exemption or concession of withholding income tax on the import of plant and machinery, the taxpayers are required to provide details of LC with the application.

Furthermore, to avail of the reduced or exempted rate of withholding tax on supplies / contracts or services, the taxpayers are required to e-file the application for six months.

The taxpayers are not required to provide details of supplies / services / contracts such as party’s name, party’s address, etc, with the application.

However, while changing the particulars in the application at later stages, the taxpayers will require to provide details of supplies, services or contracts. 

Senate body okays changes in trade remedy laws   [ top ]

DAWN, July 7, 2015
ISLAMABAD: The Senate Standing Committee on Commerce has approved amendments to trade remedy laws, empowering the National Tariff Commission (NTC) to conduct investigations into unfair trade practices in an unhindered way.

The amendments will shortly be placed before the Senate for approval, and subsequently sent to the National Assembly.

Trade remedy laws were implemented through a presidential ordinance for four months.

The focus of the amendments was on up-gradation of entire system for settlement of trade remedy disputes to provide relief to businesses. There were serious concerns of the domestic industry against the previous trade remedy laws. Now a balance in the laws has been created to the benefit of both importers and manufacturers.

Established in 1990, the NTC enjoyed limited powers and scope for protecting the domestic industry against unfair trade practices.

Islamabad pursued free trade at multilateral and bilateral levels, but it ignored WTO-compliant trade remedy laws, which allow anti-dumping, countervailing and safeguard duties to counter surge in imports, especially because of free trade agreements (FTAs).

As per amendments, clauses have been created on conflict of interest, disclosure, disqualification and removal and powers of NTC to access information.

Moreover, changes were made in anti-dumping law and countervailing duty law to reflect best practices in world trade.

Appellate tribunal has been empowered with enhanced jurisdiction, reflecting will of the domestic industry as well as problems faced by importers to provide relief and remedies.

The NTC has launched 77 investigations, and currently anti-dumping duties are being enforced in 45 cases.

Standing Committee Chairman Senator Shibli Faraz has included all the amendments in the laws. All the three laws will provide a level-playing field to domestic industry, he said.

The chairman also recommended the NTC to launch awareness programme in Balochistan regarding business opportunities and protections available under the laws.

Ilays Ahmad Bilour, Mufti Abdul Sattar, Mohammad Usman Khan, Saleem Mandviwala, Saifullah Khan Bangash, Secretary of Commerce Shahzad Arbab attended the meeting. 

German factory orders slip in May    [ top ]

Business Recorder, July 6, 2015
FRANKFURT: German industrial orders, a key measure of demand for goods in Europe's top economy, slipped slightly in May, the economy ministry said on Monday.

Provisional official data showed a decrease of 0.2 percent month-on-month, following an increase of 2.2 percent in April.

Analysts polled by financial services firm FactSet had pencilled in a slightly bigger drop of 0.4 percent for May.

The decline was attributable to weaker domestic demand for German-made goods. Domestic orders fell by 0.6 percent, while export orders edged up by 0.2 percent, the ministry calculated.

Orders from the eurozone were down 1.5 percent, while orders from outside the single currency area grew by 1.2 percent.

The economy ministry said that looking at data for April and May combined, factory orders increase by 2.7 percent compared with February and March. The trend, therefore, "remains pointed upwards, particularly for foreign orders," the ministry said. "German industry is gaining momentum." 

Piqued by lower exports government mulls new STPF   [ top ]

Business Recorder, July 5, 2015
Commerce Ministry(MoC) has reportedly given final touches to another three-year Strategic Trade Policy Framework (STPF 2015-18) envisaging several incentives for exporters besides tariff rationalization aimed at achieving the $40 billion exports mark by 2018, well informed told Business Recorder.

MoC, sources said, will request allocation of Rs 20 billion for a period of three years ie 2015-18. The government has already earmarked Rs 6 billion for export promotion in the federal budget 2015-16. 

Commerce Ministry had set an export target of $95 billion for 2012-15 but it remained far behind the target because of energy crisis, law and order, isolated fiscal and monetary policies, international economic turmoil and traditional approach of Commerce Ministry. Exports during 2012-15 are expected to be $69.5 billion against imports of $127.8 billion, showing a trade deficit of 58.3 per cent. Exports in 2009-12 were t $67.72 billion which shows that export growth in 2012-15 was only $2.2 billion in three years. 

The country's exports during the first 11 months (July-May) 2014-15 declined by 5.30 per cent to $21.869 billion from $23.092 billion in the corresponding period of 2013-14. 

Exports' share in American region has been declining gradually. For instance, exports' share in the American region during 2006-09 was 24.49 per cent which declined to $19.20 billion in 2009-12 and $17.70 billion in 2012-14. Pakistan's export share in Europe is almost unchanged but showed growth in Asia, followed by Africa and Oceania. 

Commerce Minister, Engineer Khurram Dastgir Khan, is of the view that it's not the Commerce Ministry which failed to achieve exports target but several otherfactors. 

Commerce Ministry says that monetary policy, tariff and tax regime and synergic industrial and investment policies are key enablers for exports. Quality infrastructure, Labour productivity, access to utilities and level of technological development are also key enablers for exports. 

STPF 2015-18 will be based on improvement in export competitiveness, transition from 'factor- driven economy' to ' efficiency- driven' and' innovation-driven economy' and an increased share in regional trade. 

Pillars of STPF 2015-18 will be product sophistication and diversification, R&D, branding and value addition, reducing cost of doing business and standardization. 

New trade policy will put a special focus on pharmaceutical, leather, surgical, sports goods, cutlery, fans and home appliances. 

According to some Commerce Ministry officials, the potential of sports goods during 2015-18 is $7.763 billion, surgical items' $7.4 billion, cutlery's $1.9 billion and home appliances' $7.75 billion, fisheries' $1.3 billion, rice's $6.6 billion, meat's $843 million and fruits' and vegetables' $3.3 billion. 

Analysts are of the view that Pakistan's regional trade cannot grow until relations with regional trading partners are normalized. Commerce Ministry will set up a technology upgradation fund for potential sectors - fans and home appliances, sports goods, cutlery and rice and mark up support will be extended to these sectors. 

Likewise fisheries, pharma and leather and surgical sectors will be given support for machinery acquisition and certification and compliance. 

Matching grants will be extended to facilitate branding and certification for faster growth of the SME sector in Pakistan's economy through brand registration, intellectual property support, certification and accreditation. 

The following value-added sectors will get drawbacks of local taxes and levies @ 4 per cent of 10 per cent enhanced exports over last year (i) food group;(ii) sports goods;(iii) leather infrastructure;(iv) footwear;(v) surgical goods;(vi) cutlery;(vii) engineering goods;(viii) furniture and ;(ix) pharmaceutical. 

Commerce Ministry will lend support to imported plant and machinery for value addition of meat, fruits, vegetables, dates, olives and Guar gum. A 50 per cent support will be extended on entire cost for rural Sindh, KPK, FATA, Balochistan, South Punjab and GB and 100 per cent mark -up support for rest of the country. 

Pakistan will enter into multilateral arrangements for better market access such as TFA, ITA, GPA. Pakistan will also enhance access to regional markets such as ASEAN, SAARC, Afghanistan and beyond. 

The sources said, Commerce Ministry will negotiate bilateral preferential access with Thailand , South Korea , Turkey, Iran , China , Malaysia and Indonesia. 

Commerce Ministry, TDAP and PHDEC will be restructured and IPO-Pakistan will be attached with Commerce Ministry. 

Commerce Minster will announce establishment of Pharmaceutical & Cosmetics Export Promotion Council and Rice Export Promotion Council. 

According to the Commerce Minister, implementation on STPF 2015-18 will start soon after its announcement. A Trade Committee(TC) headed by Commerce Minister will be set up to monitor implementation on STPF, remove bottlenecks, examine issues of promoting foreign trade and strengthening international competitiveness. TC will present an annual STPF implementation report to Federal Export Development & Promotion Board (FEDPB). 

An official told Business Recorder that though Commerce Ministry has proposed an export target of $40 billion by 2018 with $5 billion growth per annum, the Prime Minister can enhance it to $45 billion. 

Banking transactions: FPCCI urges government to withdraw WHT immediately   [ top ]

Business Recorder, July 5, 2015
The Federation of Pakistan Chambers of Commerce and Industry (FPPCI) has urged the government to withdraw withholding tax on banking transactions immediately otherwise businessmen would be left with no other option but to close down their operations. The FPCCI Regional Chairman Khawaja Zarar Kaleem in statement on Saturday said the government should bring the untaxed sectors into the tax net. The imposition of tax on all banking transactions has caused unrest and put the business community on the horns of dilemma. 

Kaleem said that the representatives of traders and industry have opposed the government's decision of taxing all the banking transactions as it may lead to promote the culture of cash dealing, usage of non-banking channels besides hitting hard the genuine businesses. The government should have promoted transactions through banking channels but such steps will force them to pay in cash or use other non-banking channels, he added.