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News Clips 06 November, 2015

[ Leading export-oriented sectors: Ministry backs restoration of ST zero-rating regime: Dastagir ]
[ High cost of doing business: over 1 million spindles closed down in three months: APTMA Chairman ]
[ FBR officials, businessmen discuss ST issues ]
[ Pakistan must comply with GSP+ conditions ]

Leading export-oriented sectors: Ministry backs restoration of ST zero-rating regime: Dastagir   [ top ]

Business Recorder, November 06, 2015
Expressing serious concern over huge blockage of sales tax refunds of textile sector, Commerce Minister Khurram Dastagir Khan on Thursday announced that the ministry strongly advocates restoration of sales tax zero rating regime for leading export oriented sectors to enhance country exports. 

The Federal Board of Revenue (FBR) is not timely paying refunds to exporters resulting in piling up of huge backlog and exporters working capital is drying out, said the minister while briefing the Senate Standing Committee on Textile Industry. The committee which met with Mohsin Aziz in the chair was informed that sales tax rate is nominal on textile industry but it is on big industry and resultantly the impact is huge. 

The industries stakeholders are of the view that many of their genuine claims were rejected to reduce the quantity of refunds, said the minister, adding that zero rate regimes are the best option. The FBR needs to ensure the financial ability for timely refunding, then there would be no issue, otherwise the government should go for zero rating regimes for export oriented sectors, the minister added. 

FBR representatives informed the parliamentary panel that the government has decided to withdraw all concessionary SROs and the zero-rating to textile industry could not be reverted. The board also turned down the committee recommendation of collecting sales tax at retail stage, while saying that it envisages a paradigm shift in the existing VAT mode. The probability of single stage sales tax at the retail stage only possible in the fully documented economies and the indigenous economic environment of the country do not favour any such major change considering the revenue implication for the country. 

The committee expressed serious reservations over the withholding tax on banking transaction while saying it is negatively affecting industry as 95 percent of their dealers are non-filers and they have ultimately to pay the price. The parliamentary panel recommended the government to reconsider the withholding tax on banking transactions. 

The body also expressed concerns over increase in gas prices while observing that it incurs 40 percent impact on industry. Aziz said that high cost of doing business including high power and gas prices, making the industry uncompetitive in the region. 

However, the Ministry of Petroleum and Natural Resources said that since 2013 gas prices were not increased which resulted in loss of Rs 47 billion to SNGPL and Rs 30 billion to SSGCL. Despite the increase in gas prices both the companies are still in deficit as the purchase price is higher than the sale price. Currently, average purchase price is Rs 4.64 per MMBTU against the sale price of Rs 4.45 per MMBTU, hence the recommendation of the committee to withdraw increase in gas price is not viable, the ministry official added. However, they failed to convince the committee on prescribed price determined by Ogra and asked the authority to attend next meeting and brief. 

Representatives of All Pakistan Sizing Industry Association, Pakistan Yarn Merchant Association and All Pakistan Cotton Power Looms Association apprised the committee of the challenges they are facing and incurring huge losses to the industry. They said that energy crisis; increase in duty on import of yarn withholding tax on bank transactions and not giving sales tax zero rating in electricity bills to newly registered power looms units are negatively the industry to earn foreign exchange earnings. The committee recommended giving priority in power and gas provision, withdrawing sales tax on starch, raw material of sizing industry and reconsidering the withholding tax on bank transactions. 

The minister said that imposing duty on yarn was a balancing act to give protection to local industry. He said that major sectors should contribute in tax to generate revenue. The committee expressed serious concerns at the Pakistan Textile Company limited and Karachi textile city project and directed the authorities concerned to brief the committee in next meeting. 

High cost of doing business: over 1 million spindles closed down in three months: APTMA Chairman    [ top ]

Business Recorder, November 06, 2015
Over one million spindles capacity has closed down in the country during the last three and a half months primarily because of the unbearable high cost of doing business. According to Chairman All Pakistan Textile Mills Association (APTMA), Tariq Saud has said that all these spindles were predominantly producing exportable goods. 

He said that the major cause of closure of these spindles was the unaffordable cost of energy, particularly the extra-ordinary and unjustified burden of Rs 3.63 per unit surcharges included in the electricity bills and being enforced on industry to cater for the continuing in-efficiency of the power sector. 

"Such an unjustified addition of surcharges has escalated the cost of electricity to Rs 14 per unit as against the regional competitors who have to pay less than Rs 9 per unit," he deplored. Because of unprecedented losses, majority of the textile mills are unable to pay monthly electricity bills and thus falling one after another, especially in the province of Punjab," he added. He has apprehended further casualties of textile mills ahead, when they would receive the hefty monthly electricity bills by 20th November onwards. 

Chairman APTMA said that the closing down of one million spindles means that more than one million unsold cotton bales, besides and loss of one million jobs production losses. He thus wondered as to why the government instead of improving efficiency of the power sector was bent upon closing industry through the illegal levy of surcharges on Nepra determined tariff of just Rs 9.10/unit for the industrial customers. Furthermore, he said, the whole supply chain would get disrupted amidst world-wide recession and fall of commodity prices, causing problems for local industry to compete internationally. 

He said that there is an immediate need to arrest free fall of basic textile exports by lessening the high cost of doing business of this premium industry. Tariq Saud said that APTMA proposals with regard to the much-awaited textile package meant to reduce cost of doing business for the textile industry, having enormous size economic significance. 

The package would held revival and growth of the textile industry, earn precious foreign exchange through merchandise exports, provide employment to the work force directly and indirectly attached with the industry. More importantly, reduce dependence on IMF for borrowing, he concluded. 

FBR officials, businessmen discuss ST issues   [ top ]

Business Recorder, November 06, 2015
A meeting of the Committee on Sales Tax was held here on Thursday with Rana Muhammad Afzal Khan, Member National Assembly in chair to discuss issues related to sales tax. A statement received here said the Committee on Income Tax was also met under the chairmanship of Shahid Hussain Asad, Senior Member Inland Revenue Policy, Federal Board of Revenue (FBR). 

Leading representatives from the business community and FBR senior members participated in day-long discussions. There were animated discussions on issues of sales tax at length and the modalities of arriving at a consensus on the stalemate issue that stemmed originally from the 0.6 percent withholding tax on bank transactions, but have expanded into many other directions. 

The business community on deliberations, finally agreed to focus discussions to 28 points of contention that were listed down. The senior members of FBR Shahid Hussain Asad and Muhammad Ashraf Khan assured the representatives of the business community that FBR is not to take any decision on the proposals but will place all proposals of the business representatives before the Finance Minister for decision, therefore they must rest assured that all their proposals will be considered by the government and that FBR will not hold back any proposal. 

There are three separate committees formed by government to address sales tax, income tax and communications issues. The committees are to complete their internal deliberations and submit recommendations to the Finance Minister by 15 November. The sum of decisions on all items will finally be announced by the Finance Minster after discussions with the Prime Minister and Cabinet. Representatives of the business community were satisfied with progress on many items and expressed positive expectations on a timely agreement on issues by 15th November. They agreed upon issues including one-page simple return form for non-filers.-PR 

Pakistan must comply with GSP+ conditions   [ top ]

DAWN, November 06, 2015
ISLAMABAD: The prerequisites for GSP+ include implementation of 27 international human rights conventions and the country must take a cautious approach in this regard, said European Union Ambassador to Pakistan Jean-Francois Cautain on Thursday. 

Speaking at the ‘GSP+ in Pakistan: Opportunities and Challenges’ conference, hosted by Democracy Reporting International (DRI), he said that under the GSP+ conditions, Pakistan has to comply with all the 27 human rights conventions and these would be beneficial for the country in the long run. 

The EU mission in the country collects and compiles data regarding Pakistan’s compliance to these conventions which will be forwarded to the EU parliament on Jan 1, 2016. 

“The case will be taken up by the EU parliament and the decision to extend or suspend the programme to Pakistan will be decided after hearings from the Pakistani delegation,” Cautain said. 

He said that compliance conditions include acceptance without reservations, maintaining ratification and taking steps for the effective implementation of all the conventions. 

“Though abolishing death penalty is not directly linked with the GSP+ status, the concerns have been to ensure transparency and fair justice in this regard,” he added. 

Later, talking to media, Cautain said that the request by the EU to have observers in military courts has been turned down. He further added that this move was not directly linked with Pakistan’s GSP+ review. 

While denying that Pakistan was currently in the red zone with regards to extension of GSP+ status, he added: “The human rights situation in Pakistan is a matter of concern to the EU.” 

Commerce Minister Khurram Dastagir Khan highlighted that Pakistan’s exports to the EU have increased by more than 33 per cent since the GSP+ facility was extended to it. 

“Pakistan is the only country which has made institutional arrangements and created a Treaty Implementation Cell to ensure compliance to international commitments,” the minister said. 

Chairman National Commission for Human Rights, Justice Ali Nawaz Chowhan stressed that the government should inquire why the conventions were not implemented.

He opined that child labour was a different issue as it was directly linked with poverty and could not be banished at once. 

However, Dr Kaiser Bengali, economist and adviser to Balochistan’s chief minister, said that Pakistan’s approach towards GSP+ was not sustainable. 

“The first and foremost rationale to be noted is that this facility is not merely for industrialists — the GSP+ should benefit the labour as well,” he said. 

“Labourers were denied their legal benefits under the Essential Services Act which relates to specific industries. There is another law that if any company operates in more than one province than the provincial law will not apply to it — but the federal labour laws are too weak,” he said. Labour laws are not applicable in Free Trade Zones, he added.

He commented that if Pakistan wanted to improve its human right record, it has to improve its justice system fir