news story Archives - Page 11 of 11

Investors discouraged: NEPRA proposes cut in solar, wind power tariffs

Posted on July 4, 2016 - 12:40 pm by riaabgmanager

The National Electric Power Regulatory Authority (Nepra) has recommended a significant reduction in solar and wind power tariffs that may discourage future investment in renewable energy resources. The recommendation came after member tariff from Punjab, Khawaja Naeem, completed his tenure in Nepra. Taking a suo motu notice, the regulator has proposed a cut of Rs1.44 per unit in the tariff for solar power projects in Balochistan. The new price will be Rs9.45 per unit. It has also proposed a reduction of Rs1.53 per unit for solar projects in Punjab that will take the tariff to Rs10 per unit.

For wind power plants, Nepra proposed a hefty tariff reduction of Rs4.10 per unit. The new tariff will be Rs8.60 per unit. It has decided to set per megawatt cost of solar power at $1.8 and per megawatt cost of wind power at $1.93. Nepra also took the opinion of different experts who suggested that the tariffs should be reduced. Now, it has sought comments of stakeholders including the Ministry of Water and Power. It will announce its decision after holding a hearing.

Last year, foreign investors had warned the government and power regulator that they would stop work on solar power projects worth billions of dollars because of the cut in tariff. Prospective foreign investors, who have planned to establish solar energy projects in Pakistan, are increasingly worried over the proposed reduction in tariff – the high rate of which was a major incentive for them. They are also uncertain whether their projects would see the light of day, though they have invested millions of dollars in feasibility studies and acquired letter of intent from the government.

Source: The Tribune: Investors discouraged: NEPRA proposes cut in solar, wind power tariffs

Cross-adjustment of input tax

Posted on July 4, 2016 - 12:35 pm by riaabgmanager

The Federal Board of Revenue (FBR) has conveyed to provinces that the provincial authorities can also review corresponding provisions in their respective laws in response to the Finance Bill 2016 amendment to disallow cross-adjustment of input tax against provincial services.

Sources told Business Recorder here on Saturday that Chairman FBR Nisar Muhammad Khan made these remarks during a recent meeting of the FBR with the Punjab Revenue Authority (PRA) to discuss and resolve the issue as highlighted by the Minister for Finance, Government of Punjab.

Moreover, the FBR has rejected the provincial interpretation regarding capital gains taxation on the sale of immovable property through the Finance Bill 2016. The FBR responded that omitting the phrase “on capital gains” from S. No 50 of the Federal Legislative List in the Constitution only removes capital value tax on immovable property from the purview of federal legislative powers. Capital gains are globally treated as income, and taxes on capital gains are also treated as income taxes. As per the constitution, all taxes on income, except agricultural income, are within the competence of federal legislature, the FBR added.

The first issue concerns the deletion of provincial sales tax from the definition of ”input tax” in the Sales Tax Act 1990. During the meeting, Chairman, FBR, explained the reason for the proposed deletion of the clause. Tax authorities informed provincial authorities that MoUs were signed with the provincial revenue authorities to settle cross-input tax adjustments. But these Memoranda of Understandings (MoUs) were being rendered ineffective because one province is insisting on irrational reconciliation parameters through which input adjustments worth a few thousand rupees only get reconciled against adjustments of Rs 30 b. Accordingly, it was decided to propose to omit a related clause allowing cross-adjustment of input tax. He also highlighted that the provinces could review corresponding provisions in their respective laws, as the sources quoted the Chairman FBR as saying.

The Punjab Revenue Authority (PRA) Chairman stated that the proposed amendment would affect the businesses. Therefore, the same may be reconsidered. He maintained that if the omission is carried out as proposed, PRA would also review the corresponding clauses of its law. He, however, maintained that the omission should not affect the past adjustments made and that FBR should finalise the settlement process as was underway. The FBR Chairman assured that the reconciliation process would be completed and efforts would be made to finalise the same in July 2016.

The second issue concerns the advance tax under proposed section 236W from provincial sales tax registered persons. On the said issue, the PRA Chairman stated that the proposed new section was a harsh measure and it would have a cascading effect. He maintained that FBR has all the provincial data available through Pakistan Revenue Automation Limited (PRAL) and can collect the proposed tax directly. He also expressed apprehension that in the event of some lapse in the required collection, FBR authorities may resort to some coercive measures, as has been observed in the past.

The FBR Member (SPR&S) informed that the proposed measure was only for non-filers and that the tax to be collected was adjustable. He maintained that FBR would consider providing in the law that no coercive measure be taken against the collecting agent for the proposed section. The Chairman, FBR, assured PRA that their reservations have been noted and the same will be duly discussed. On the insistence of the PRA Chairman, he agreed to propose an alternative mechanism for collecting income tax from the service providers registered with the provincial revenue authorities by making suitable amendments in the Finance Bill, which will absolve the provincial revenue authorities from the proposed role of withholding agent. However, this proposal would be subject to the approval of the Federal Government.

Source: Business Recorder

Speak to Mayhar Kazi today regarding your cross-adjustment of input tax queries.

Proposed Benami Act Provisions not apply to deals made in names of spouses, kin: FBR

Posted on July 4, 2016 - 12:31 pm by riaabgmanager

According to the brief Federal Board of Revenue (FBR) submitted to the National Assembly Standing Committee on Finance, the proposed bill restricts the right of any person who is claiming to be the real owner to recover such property. In addition, no person would be able to retransfer such property to the beneficial owner. The FBR stated that the problem of property held Benami has been causing concern to the tax authorities and past practice and experience shows that Benami transactions have often been resorted for furthering illegal or questionable objects, including the evasion of taxes. The assets, which are taken through illegally-earned money, can be used for evasion of material amounts of taxes or something more serious like financing terrorism.

  The proposed legislation for regulation of the Benami transactions was initiated in 2008 by the Ministry of Finance; however the legislation could not materialise. The proposal has also been forwarded by Tax Reform Committee (TRC) in the consultative process of collecting budget proposals. Moreover there is a realisation that the Benami Transactions (Prohibition) Act is in operation in neighbouring country (India), while Pakistan is two decades late on the issue, the FBR said. The FBR stated that the legislation defines the Benami transaction as an arrangement where property is held by a person (other than in fiduciary capacity) on behalf of another person who has paid for it; or the transaction is made for a property in a fictitious name; or the owner of the property is not aware of or denies knowledge of such ownership. The Bill prohibits all persons from entering into Benami transactions. Any property held in “Benami” would he confiscated by the federal government. Once a property is confiscated, all rights as well as title of such property would vest completely with federal government and no compensation would be payable.

  The proposed legislation would not be applicable retrospectively and it would be applicable to those transactions which will be executed after the said legislation will come in to force. Any person aggrieved by an order of the Adjudicating Officer would have the right to appeal to the Federal Appellate Tribunal proposed to be headed by a serving or retired Judge of a High Court. Appeal against the orders of the Tribunal would lie before the High Court. In addition to that, Special Courts will be established for trial of an offence punishable under the proposed legislation, FBR added. The bill would strengthen the law through empowering provisions prohibiting holding property as Benami and restricting the right to recover or transfer property held in Benami. The bill would also establish Adjudicating Authority, set up Appellate Tribunal and specify the penalty for entering into a Benami transaction and provisions for confiscation of Benami properties, it added.

Renewable energy: SBP revises financing scheme

Posted on July 4, 2016 - 12:29 pm by riaabgmanager

The State Bank announced the scheme for financing power plants using renewable energy in 2009, with a view to promoting renewable energy projects in the country. Keeping the low utilisation of the scheme in view, the scope and financial mechanism have been revised to make it more attractive to borrowers and financing banks/DFIs.  Pakistan’s economy is currently facing the dual challenge of energy shortage and climate change. The inadequate supply of energy has severely impacted the growth of industries/businesses and the welfare of public in general. Similarly, the effects of climate change have been observed in the form of devastating floods, droughts, heat waves and changing weather patterns. These changes essentially inhibit our ability to develop sustainably. In order to overcome these challenges, the SBP decided to promote green banking, ie, use of indigenous esources, especially renewable energy in order to ensure sustainable banking and development. For this purpose, the scheme has been amended based on the feedback received from various stakeholders. The scheme will provide concessionary financing for large renewable energy power projects as well as for small scale renewable energy solutions.  The scheme shall be available for power generated by using alternative/renewable energy sources (solar, wind, hydro, biogas, bio-fuels, bagasse cogeneration, and geothermal as fuel). Financing facilities under the scheme will be provided through all commercial banks and Development Finance Institutions (DFIs). The State Bank shall provide refinance to each bank/DFI on service charge (mark-up) basis in terms of Section 17 (2) (d) read with section 22 of State Bank of Pakistan Act 1956. Refinance shall be allowed to banks/DFIs by the concerned office(s) of SBP BSC (Bank) on submission of documents as may be required by State Bank of Pakistan.
Source: Business Recorder

38 amendments introduced to Finance Act

Posted on July 4, 2016 - 12:21 pm by riaabgmanager

The government has introduced 38 new amendments to the Finance Act 2016, with most of them relating to income tax measures. Of all, 21 amendments are related to income tax measures, 15 to sales tax and two to federal excise duty (FED). These amendments will come into effect from July 1. Through the Finance Act 2016, the formula was amended to allow benefit of tax credit of 100 per cent for establishing a new industry in case of reduced equity–investment ratio of 70pc. Similar amendments were made to allow the tax credit, for equity investments on expansion of machinery or a new project.

It was also proposed that in the event of discontinuation of business within five years of availing credit, the tax credit will be deemed to have been wrongly allowed. The government has barred commissioner of income tax from determining fair market value of immoveable property. Under the amendment, the State Bank of Pakistan (SBP) will approve a panel of ‘valuers’ to determine fair market value.

The disputed clause regarding foreign trusts in the definition of a company has also been withdrawn. The government has empowered commissioners to issue notices if a taxpayer has not filed returns for the past 10 years. Earlier, the notice for any tax prior to five years could not be sent. Yet another amendment allows commissioner to recover only 25pc of the tax demand created in case an appeal before commissioner appeal is pending. The excess tax collected or deducted on account of higher rate for non-filers will be adjustable to the return filed for the relevant tax year only.

An explanation was introduced in the Finance Bill 2016 to calculate the limit of Rs50,000 to be aggregate withdrawals from all the bank accounts in a single day for withholding tax. Through the Finance Act 2016, the explanation has been further refined that the limit of Rs50,000 will be calculated on the basis of aggregate transactions, instead of aggregate withdrawals, from all bank accounts in a single day. The amendment has the effect that limit of cash withdrawals will still be calculated on a single-account single-day basis.

The exemption limit of income from gratuity from an approved gratuity scheme was further extended to Rs300,000 from Rs200,000. The government has introduced a 2-percentage-point reduction in tax rate for Shariah-compliant companies — 30pc for tax year 2016, 29pc for tax year 2017 and 28pc for tax year 2018 and onwards. The reduced rate will be available if the company is Shariah-compliant as per criteria of the SBP, the Securities and Exchange Commission of Pakistan and the Federal Board of Revenue.

Source: Dawn: 38 amendments introduced to Finance Act

Property price to be fixed on market value for tax

Posted on July 4, 2016 - 12:20 pm by riaabgmanager

Amendment in tax laws to streamline real estate investments; implementation from July 1.

An important amendment has been made to Section 68 of the Income Tax Ordinance 2001 through the Finance Act 2016, which will be effective from July 1.

Under the amendment, the property evaluation rate set by the provincial governments will no longer remain relevant. After that, all investors will have to get their properties evaluated through the valuers of the State Bank of Pakistan (SBP) under a new mechanism. One or more valuers of the SBP will fix the real market value of the immovable property and refer it to the FBR Inland Revenue Department.

This amendment will do away with the informal economy or black economy in the real estate sector to a great extent. It will not only bring black money into the tax net but also put high penalties on tax evaders under Section 192-A. The penalties can amount to 100 percent of the evaded tax. These will be in addition to the additional tax imposed on the evaders.

Source: The News: Property price to be fixed on market value for tax

Senate body okays SECP, financial institutions bills

Posted on July 4, 2016 - 12:19 pm by riaabgmanager

The Senate Standing Committee on Finance approved the Securities and Exchange Commission of Pakistan (Amendment) Bill 2016 and the Financial Institutions (Recovery of Finances) (Amendment) Bill 2016 on Tuesday, besides approving an amendment to the Credit Bureaus (Amendment) Ordinance 2016. These bills, already approved by the National Assembly, will now be forwarded to the Senate and, if approved, will need the presidential assent to become a law. The SECP Bill 2016 covers all the deficiencies and shortcomings in the existing law. The commission succeeded the Corporate Law Authority (CLA) in 1999 as a unified regulator of the capital markets, and for the superintendence and control of corporate entities.

However, its mandate has continued to be enhanced through various amendments, such as floatation, management and regulation of modarabas (1999), insurance sector (2000), non-banking financial companies sector (2002), commodity futures market (2003), real estate investment trust (2008), etc. The new law will meet the local and international requirements for the corporate sector regulator, including the requirements of the International Organisation of Securities Commissions.

Among the major deficiencies in the existing SECP Act 1997 there is limited financial/administrative independence. Besides, the SECP has ineffective enforcement powers to call for information, lack of process for prosecution of cases, recovery of penalty, delay in decision of court cases, ex-parte stays and inadequate investigation powers. The act also has no statutory provision to seek international cooperation and extend assistance to a foreign regulatory authority in investigation and inquiries. Independent audit oversight framework is also needed to ensure quality of audit of public interest companies.

Furthermore, the Financial Institutions Bill 2016 was promulgated in 2001, primarily to deal with the recovery process of the bank loans. The Financial Institutions (Recovery of Finances) Ordinance (FIRO) 2001 provided a comprehensive legal framework on foreclosure, especially Section 15 which empowered the financial institutions to sell the mortgaged property. However, the Supreme Court in December 2013 declared the section as “ultra vires” (beyond legal power and authority) to the Constitution. The State Bank of Pakistan (SBP) initiated the process of consultation among the relevant stakeholders to frame the amendments in the FIRO in the light of the SC judgment and requirement of the financial institutions.

The new bill is meant to facilitate recovery of bank loans. The pecuniary limit of High Court cases is proposed to be enhanced to Rs 100 m to reduce the burden of cases on superior courts. The loans availed from Pakistani banks in other countries would also fall under the ordinance. The willful default would be an offence under the ordinance. Furthermore, provisions to sell mortgaged property without intervention of court have been revised. The proposed amendments are aimed at promoting healthy credit culture in the country, reduce risks of default and create additional funds for lending to new segments of borrowers. These measures taken together would stabilise the financial system and contribute to sustainable economic growth in the country. The bill was cleared by the National Assembly on March 17.

The Credit Bureaus Act, 2015 was enacted on Aug 19 last year to provide a comprehensive legal and regulatory framework for incorporation and functioning of private credit bureaus in the country. Under the act, credit bureaus are responsible for collecting credit information relating to debtors of banks, financial institutions, non-banking financial institutions, non-financial companies and other lenders or authorities and maintain data of such information and for provision of such information on request for specified purposes to facilitate efficient distribution of credit. However, an amendment has been made in the bill to delete the Section 15(4) of the act: “Any credit information report issued by a credit bureau shall be verified by the SBP and no credit information report shall be valid unless verified by the SBP.”

Source: Dawn

LNG-based power plants: Government flouts least cost generation policy

Posted on July 4, 2016 - 12:16 pm by riaabgmanager

The adverse impact of a ‘seller-favouring’ USD 16b deal with Qatar for import of liquefied natural gas (LNG) has started appearing, as the government has approved a new implementation agreement for three LNG-fired power plants, which violates the least cost generation policy. The implementation agreement has been prepared under compulsion of consistent LNG supply by Qatar. This will make it binding for the three public sector power plants to produce 3,600 megawatts of electricity around the clock, irrespective of being economically viable or not. The downside risk is that the cost of generation will double once crude oil prices start increasing in the international markets.

The Economic Coordination Committee (ECC) of the cabinet approved the implementation agreement on Tuesday for running the LNG-based power plants, two of them being set up by the federal government and the third by the Punjab government. These power plants will be located in Punjab at Bhikki, Balloki and Haveli Bahadur Shah. The ECC approved the draft implementation agreement for imported LNG-based power projects in the public sector, said the Ministry of Finance. The government has already amended the Private Power Infrastructure Board (PPIB) law to make it possible to administer these plants. The ECC also approved amendments to power purchase agreements of three independent power producers (IPPs) to bind them to make payments for LNG supply within 10 days – down from the current period of 55 days.

The implementation agreement of the three LNG power plants will bind the federal government to pick all the risks associated with supply of the imported gas.

According to the approved arrangement, these plants will have to be operated on “must-run basis owing to the peculiarity of the mechanism of importing LNG”, according to a summary of the Ministry of Water and Power. The must-run policy would violate the merit order that was aimed at ensuring that low-cost power generation plants are run first, said Shahid Sattar, former member energy of the Planning Commission.

Pakistan recently approved a 15-year (2016-2031) government-to-government deal with Qatar that requires Islamabad to buy the entire volume of LNG or pay the full price, if it does not lift the whole quantity.

The implementation agreement is also in contrast to such agreements signed with the IPPs. In this arrangement, the government is the producer and buyer of electricity. It has picked all financial obligations associated with LNG supplies.

This was very unusual and eventually the government would pass on the buck to the electricity consumers, officials said. According to the implementation agreement, in the absence of re-gasified LNG, these power plants will be run on high-speed diesel and the price differential on account of high cost of generation and payment for LNG supplies, which was not picked because of any reason, will be the responsibility of the federal government. The ECC also authorised the PPIB to make and approve any project-specific amendments to the implementation agreement required during negotiations. The PPIB board has also been authorised to make amendments, if required, to the agreements to comply with the National Electric Power Regulatory Authority’s tariff determinations. The ECC approved amendments to the agreement between the Central Power Purchasing Agency and three IPPs – Rousch, Fauji Kabirwala and Davis Energen – to bind them to make payments to LNG suppliers within 10 days. The arrangement is also aimed at ensuring that Qatar Gas is paid within 10 days of the delivery of gas.

Source: The Tribune: LG-based power plants: Government flouts least cost generation policy

Sindh raises stamp duty by 50per cent on bank loans

Posted on January 1, 2016 - 6:09 pm by riaabgmanager

The Sindh government has increased the rate of stamp duty by 50 per cent on bank loans in the budget 2016-17. Under new slabs which become effective from July 1, the duty will be 0.3 per cent on bank loans of up to Rs 500,000 against 0.2pc earlier. The levy will be Rs 1,000 on loans of up to Rs1 m, Rs 2,000 on Rs 2m, Rs 10,000 on Rs 50m and Rs 150,000 on loans of up to Rs 500m. The new finance bill has also raised stamp levy on bill of exchange, another banking document, to Rs 3 per thousand from Rs 1.5.

Stamp duty rate for bill of entry, another major customs document used for clearance of imports, has been doubled to Rs 1,000 per piece. The move is apparently aimed at compensating huge revenue losses being incurred on goods cleared through Web-Based One Customs (WeBOC), a software programme for customs clearance. At present, stamp duty is being collected on bills of entry (goods declaration) through the manual system managed by the Pakistan Revenue Automation Ltd. There is no arrangement at customs to collect stamp duty on goods cleared through WeBOC. According to an estimate, about Rs 250m is lost in revenue under this head every year.

A major change in stamp duty rates on property transactions has been made in the new finance bill. The value of property units listed in valuation table used to assess stamp duty has been increased by 20 per cent across the board from July 1. The values in the valuation table were last raised in 2010. The Board of Revenue (BoR), Sindh, has been trying for an increase in property values recorded in the table to bring them on a par with the property prices prevailing in the market.

Source: Dawn: Sindh raises stamp duty by 50per cent on bank loans

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