Business
FBR asked to up revenue to Rs15tr
ISLAMABAD:
Interim Finance Minister Dr Shamshad Akhtar, on Thursday, termed this year’s tax collection target of over Rs9.4 trillion as low and asked authorities to work on a plan to increase the collection to Rs15 trillion in the next fiscal year.
The minister’s remarks came during an internal meeting on the restructuring of the Pakistan Revenue Automation Limited (PRAL), a subsidiary of the tax machinery and its technology arm. Akhtar also expressed displeasure over the performance of the Federal Bureau of Revenue (FBR) members and requested a one-page report on their achievements during their stay at FBR headquarters.
Sources indicated that the finance minister mentioned in the meeting that the Rs9.415 trillion annual tax collection target was low for the FBR for this fiscal year, representing a 31% increase over the previous fiscal year’s actual collection, despite a prevailing average inflation rate of nearly 29% in the first four months.
However, the minister’s remarks may impact the International Monetary Fund (IMF), which began a 14-day review of Pakistan’s performance in the first quarter of this fiscal year on the same day.
The FBR exceeded its revenue target for the fourth consecutive month, collecting Rs2.75 trillion in July-October, exceeding the target by Rs68 billion and eliminating the need for a mini-budget. This year, the FBR obtained Rs591 billion more than the last fiscal year.
Sources say the finance minister urged the FBR to aim for a tax collection of Rs15 trillion in the next fiscal year, requiring an 84% growth over this year’s projected collection of Rs9.415 trillion.
Read Minister vows to adopt innovative tax policy
During the first review meeting on FBR matters, the IMF received a briefing on the FBR’s collection status and inquired about the prospects of taxing agriculture and real estate sectors.
A recent World Bank report suggested that Pakistan could collect additional taxes equal to 3% of the GDP by enhancing revenue collection from the real estate and agriculture sectors. However, due to constitutional constraints, agriculture is a provincial subject, and the federal government lacks the mandate to tax it.
design: Ibrahim Yahya
These developments coincided with the Sindh High Court’s decision to grant a stay order against deemed income tax on immovable assets, protecting individuals who pay 50% of their tax liability. Taxpayers had challenged section 7E of the income tax law for the tax year 2023 before the Sindh High Court (SHC).
The SHC disposed of the petitions with directions for the FBR not to take coercive measures against the petitioners regarding payment of the tax on deemed income for the Tax Year 2023, subject to the payment of 50% of the deemed income tax liability for the said tax year. The petitioners were represented by Abid Shaban, Barrister Asad Tola, and Amayed Tola, who is a tax consultant.
Section 7E was introduced through the Finance Act 2022, subjecting immovable properties with a fair market value exceeding Rs25 million held by resident individuals to a 20% tax on an amount equal to 5% of their fair market value, with certain exclusions. This imposition applied retrospectively and prospectively, covering tax year 2022 and onwards, but it faced legal challenges from taxpayers, leading to multiple cases filed in provincial High Courts across the country.
Due to these legal challenges, the FBR had collected less than Rs1 billion for deemed income tax, falling short of its annual target of Rs25 billion. The deadline for companies to file their returns is December 31, and collection is expected to increase by that time.
Sources indicated that the finance minister expressed dissatisfaction with the performance of FBR members in grades 21 and 22, the highest tier of the bureaucracy, and requested proposals from the FBR for the restructuring of PRAL, despite PRAL’s role as a technology tool. The FBR had established two committees for restructuring PRAL, with the aim of reducing at least 25% of its workforce. The minister had instructed specific proposals for the retrenchment, potentially leading to the termination of around 220 employees out of the nearly 900 currently employed.
For the retrenchment of PRAL employees, a human resource committee was established under Mukarram Jah, member legal customs of the FBR. This committee was tasked with assessing the existing PRAL workforce and the current workforce structure, including skill sets, roles, responsibilities, and identifying areas where workforce right-sizing is required and providing recommendations.
Published in The Express Tribune, November 3rd, 2023.
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Segregation of client assets is critical as brokers have been penalised for using client money illegally. PHOTO: AFP
KARACHI:
The Pakistan Stock Exchange (PSX) smoothly crossed the psychological barrier of 60,000 points during the early trading hours of Tuesday.
The gains came due to rich individuals and institutional investors making significant new investments in expectation of deep cuts in interest rates and the availability of stocks at low prices.
The PSX benchmark KSE-100 Index hit a new all-time high level of 60,745 points, rising by 1.56% or 934 points before mid-day from Monday’s close at 59,811 points. Penny stocks were the volume leader in the rally including textile, technology, food, bank and steel stocks.
Speaking to The Express Tribune, Arif Habib Limited Head of Research Tahir Abbas said: “The high expectation for a deep 7% cut in the key policy rate (interest rate) by the State Bank of Pakistan over the one-year agreed investors to take new possessions”.
“The central bank is expected to cut its key policy rate to 15% by December 2024 from record high 22% at present…ahead of a potential deceleration in inflation reading next year,” he added
Abbas mentioned that the interest rate cut expectations have made rich individuals and institutional investors relocate their investments to the stock market from fixed-income instruments these days.
Topline Securities CEO Muhammad Sohail said in a comment on X (formerly Twitter) that the PSX is breaking records and the development is “still not surprising.”
The market has gained 50% in only five months to over 60,000 points from 40,000 points. “This is the fastest 50% rise in a few months after 2004,” he wrote.
Read PSX hits fresh record, nears 60k milestone
“When you have an unbelievably low valuation, a price-to-earnings ratio of 3-4%, such recovery is not at all surprising,” Sohail further commented.
Abbas further said the listed companies have booked record high growth in profit of 46% in the first nine months ending September 2023 and added that “accordingly, dividend payments by them rose robustly by 42% in the same period. This is another factor that has attracted new investment at PSX”.
The market is expecting foreign currency inflows worth around $1.5-2 billion from multilateral creditors like the World Bank and Asian Development Bank soon after the IMF executive board approves the release of its second tranche of $700 million to Pakistan in December 2023.
This is another factor for the record-buying spree at PSX.
He anticipated the market reaching 75,000-80,000 points by the end of December 2024 considering all goes well including political stability in the country, economic growth, and global commodity prices remaining stable.
“The next six months seem stable at least”, he maintained.
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