By the week ending May 29, 2020, the liquid foreign exchange reserves of the country fell by $1.68 billion.

The total foreign exchange reserves of the country before this week were $18.559 billion which decreased to $16.92 billion.

The foreign exchange held by the central bank fell by $1.712 billion to $10.362 billion by week ended May 29, 2020, as compared with official reserves of $12.074 billion.

The decline is primarily due to the external debt repayments of $1.669 billion.

However, there is an increase of $34 million in the foreign exchange reserves held by the commercial banks. The reserves increased to $6.558 billion by the week ended May 29, 2020, as compared to the $6.524 billion for the last week.

11 June 2020

As per the analysis of some analysts at Arif Habib Limited, the government’s objectives for the budget for the year 2021 have been highlighted as the revival and stabilization of the economy after a huge fall of the economy due to COVID-19 pandemic. And the government may support the business community and masses by providing relief while maintaining the fiscal imbalances along with the fulfillment of IMF’s revenue collection target.

 Budget 2020/2021 is scheduled to be presented on June 12, 2020, by the Government.

Some of the expectations regarding measures in the budget are as follows:

1. Counter Coronavirus and ensure social security

2. Allocation of PKR 1.0 trillion to fight the ongoing COVID-19 contagion that might be allocated as follows:

   • Subsidized electricity for lifeline consumers
   • Higher allocation for health and food supplies,
   • Lowering down taxes on basic essential goods.
   • Daily wagers cash allocation,
   • Higher allocation to the Ehsaas program (for vulnerable families),
   • Enhanced allocation to Utility Stores Corporation (USC),
   • Lowering down taxes on basic essential goods.

3. To help mitigate the effects of COVID-19 pandemic, State Bank of Pakistan has already introduced the following measures:

   • announcement of a relief package for households, industries, and SMEs,
   • Relaxation in credit requirement for exports and imports
   • 525bps cut in interest rate,
   • Refinancing scheme to support employment and avert layoffs,
   • Facilitation of new investments via subsidized interest rates for BMR activities.

4. social expenditure might be higher allocated under Federal PSDP. 

   Revive Economic growth, increase PSDP allocation along with incentives for industries.

5. The government has set GDP target for FY21 at 2.3 percent (FY20 estimated at -0.38 percent primarily due to the coronavirus pandemic):

   • Reduction of custom and excise duty by 3 percent on imports of machinery for agriculture and power sector,
   • Allocation of PKR 630 billion under the Federal PSDP along with an additional PKR 200 billion under Public Private Partnership Authority (PPPA),
   • Removal of import duty on plant and machinery. Cascading duty structure on import of raw materials, intermediate goods, and finished goods
   • Removal of additional customs duty on different products to support local production and revive demand
6. Mobilize revenue measures to achieve the additional collection target for next year.

   The tall revenue target of the FBR at PKR 5.1 trillion with additional requirement amounting to Rs.575 billion (discussed ahead) could be generated by means of:

• Administrative and enforcement actions were undertaken by FBR.
• The imposition of import duty on 60 luxury imported items including cars, ceramics, and others,
• Amendment in the income tax treatment of bad debts, which could generate Rs.100 billion in revenue from the banking sector,
• The imposition of luxury tax on luxury houses, farmhouses, mansions, and bungalows,
• Higher petroleum development levy during FY21.

7. Certain expenditures (ex-social spending) to remain uncompromised.

The government has set an expenditure target for FY21 at Rs.10.4trn.

• Government is expected to allocate Rs.2.7 trillion for debt servicing in FY21,
• Defense expenditure likely to go up to Rs.1.4 trillion,
• Federal PSDP allocation will be targeted at Rs.630 billion.

8. Scope of documentation drive to be eased and relaxation expected to revive consumer spending:

• Reduction of 3 percent in further sales tax on supplies to undocumented individuals
• Withholding tax on remittances to be abolished,
• New sectors to be added to the tax net.
• Increase the limit of providing CNIC conditions from Rs 50,000 to Rs 100,000

Source:

https://pkrevenue.com/budget-2020-2021-to-focus-on-mitigating-covid-19-impact/

10 June 2020

Payment of income tax refunds has been started by the federal board of revenue Pakistan on Friday. Payment is directly made into the bank accounts of those taxpayers who have provided their IBAN.

As per the FBR sources, Finance division has provided the FBR with Rs.10 billion for the payment of income tax refunds. The cumulative amount of up to Rs.5 million has been issued to a taxpayer.

 The term cumulative has been explained by the FBR as the total amount of refund in respect of a taxpayer (for the tax year 2014 to 2019) duly processed and sanctioned under the law.

These refunds of income tax are under the relief package by Prime minister Imran Khan, and this done to reduce the impact of Coronavirus on businesses.

An amount of Rs.100 billion has been allocated for the payment of refunds claimed under sales tax, income tax, and duty drawbacks.

Rs.58 billion, including income tax refunds, had been disbursed to the claimants, said the FBR.

There were tensions in the business community due to the decision to restrict the disbursement of income tax refunds.

However, it is most unfortunate and disappointing to know that FBR has put a ceiling of Rs.5 million (cumulative of 5 years).

Due to this decision, the access to income tax refunds has been closed, even for those business entities having cumulative tax refunds of even one rupee more than Rs.5 million in the last 5 years (2014-2015 to 2018-2019).

Nisar said that the said ceiling instructions issued by FBR are discriminatory and strongly asked Finance Ministry to instruct for releasing of at least Rs.5 million income tax refunds to all businessmen regardless of the level of their income tax refunds accumulation in the last 5 years.

He said that the apex body is of the view that the Ministry of Finance should also consider releasing half of the accumulated income tax refunds to help in economic revival exercise undertaken by the government.

06 June 2020

A notification had been issued by the Federal Board of Revenue Pakistan on Thursday. In this notification, all chief commissioners of Large Taxpayers Units (LTUs), Regional Tax Offices (RTOs), and Corporate RTOs have been directed by the FBR to observe Saturday as normal working day till June 30, 2020.

With effect from 6^th June 2020, all the field offices shall remain open on Saturdays till 30^th June 2020. This is all done to enhance the efforts to meet the assigned revenue target of Rs.415.5 billion for the month of June 2020.

FBR resources confirmed the death of at least three tax officials due to coronavirus during the past two days.  Islah ud Din, Assistant Commissioner, RTO Quetta died on coronavirus on June 04, 2020, and two other officials of RTO Faisalabad lost their lives due to the pandemic.

As per the sources, there were more than the above-mentioned cases as many are tested positive and many are yet to go through tests.

It is to be noted here that cases have been increased rapidly in the country during the last 10-15 days.

The first corona case was reported in Pakistan during February 2020 and then the Sindh province was the first to impose lockdown on March 23, 2020. This resulted in the halt of business activities and subsequently affected the revenue collection efforts.

As compared to the revenue of Rs.330 billion for the month of May 2019, the revenue for May 2020 shows a decline of 31 percent with a total of Rs.227 billion.

As per the sources of FBR, the same collection position would prevail during June 2020 as most of the collection was to be received of May 2020. The entire month of May was also under lockdown besides long holidays for Eid-ul-Fitr.

The total revenue of Rs.518 billion was collected by the FBR in June 2019. Considering the 31 percent decline in the collection, total revenue collection for June 2020 may be Rs.358 billion.

The FBR collected Rs.3518 billion during July – May 2019/2020 as compared with Rs3266 billion collected in the corresponding period of the last fiscal year, showing a growth of 7.7 percent.

05 June 2020