Credit card information to help check sales at retail outlets: FBR

News Paper: Business Reorder

 

ISLAMABAD (July 27 2010): The Federal Board of Revenue would utilise information of credit cards to check the actual sales at large retail stores and outlets in posh areas across the country to document transactions/turnover of retail shops under 'broadening the tax base plan' for 2010-11.

Sources told Business Recorder here on Monday that the FBR top sales tax official and Member/Value Added Tax/Sales Tax Abrar Ahmed has made recommendations in the FBR board-in-council meeting to broaden the tax base and enhancing both the direct and indirect taxes collection for achieving quarterly revenue collection targets fixed for the field formations. FBR Member ST submitted detailed proposals for documentation of the economy taking into account highest level of non-compliance by the most potential sectors.

Abrar Ahmed Member Sales Tax apprised the board-in-council about the proposals for enhancing the revenue collection during 2010-2011. Firstly, it has been proposed to conduct desk-audit based on information provided by the taxpayers.

The detections made through the desk-audit would help in increasing revenue collection. Secondly, recovery proceedings would be initiated only after the finalisation of the demands on the basis of Inland Revenue Appellate tribunal (IRAT) decisions thereby enhancing the taxpayer's confidence. In this way, revenue would be increased without giving any negative message to the registered taxpayers. Thirdly, information of credit cards would be used for detecting and tracing actual sales of large retail stores.

The enforcement divisions in each Large Taxpayer Unit and Regional Tax Office may take action on the proposal to check transactions taking place through credit cards at the retail outlets. The use of credit cards is extensive in big retail shops in posh areas where such transactions have not been reported to the tax department for determining their actual turnover.

The credit cards data would not only unearth the potential purchasers at such shops, but also check the actual turnover of retailers. If the FBR succeeds in successfully implementing the plan, it would be a major move to document sales/purchases made by elite class and determining actual sales.

However, the proposal could only be implemented at retail outlets having such credit card facility as many retailers have already refused to install Electronic Cash Registers to document their sales. Despite the fact the FBR is ready to offer free of cost Electronic Cash Registers at federal capital, retailers are reluctant to install such machines at their retail outlets. Fourthly, the information retrieved from major data sources like property, vehicles manufacturers and electricity bills would be effectively utilised as a measure of enhancing tax revenues. In this connection, the FBR would specifically focus on the hotels, restaurants sectors where many restaurants are still not properly maintaining record for the tax department to avoid payment of sales tax.

Board-in-Council convened detailed discussion on the proposals of Abrar Ahmed and it was decided that Member Sales Tax would make a detailed presentation on all these proposals before the Tax Reform Group constituted and headed by Federal Finance and Revenue Minister, sources added.

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Punjab ups ST levy to 17 percent: taxpayers in two provinces rendering services in a fix

News Paper: Business Reorder

KARACHI (July 27 2010): The rate of sales tax on services, which has to be uniform in all provinces, has individually been increased in Punjab through Punjab Finance Act 2010, creating problems especially for banking, insurance, and telecom sectors in complying with the law.

In an exclusive talk with Business Recorder, Adnan Mufti, partner, Shekha & Mufti Chartered Accountants and member of Alternative Dispute Resolution Committee said the government of Punjab has increased the rate of sales tax from 16 percent to 17 percent through Punjab Finance Act 2010, creating problems especially for those taxpayers who are rendering services in two or more provinces.

Despite the rate of sales tax on services remaining unchanged in Sindh, the government of Punjab has amended the clause 5 (a) of Punjab Sales Tax Ordinance 2000 through Punjab Finance Act 2010. He said the government of Punjab would now charge sales tax at the rate of 17 percent on taxable services rendered in Punjab; however, the tax remains 16 percent in Sindh.

He regretted that the businesses operating and rendering services in Sindh and Punjab simultaneously might face problems in complying with the law, due to this change. Moreover, he said several services such as banking, insurance, shipping, telecommunication, brokerage houses and advertisement on cable TV are liable to Federal Excise Duty (FED) on a VAT mode meaning thereby, there is sales tax leviable on such services.

But, the Punjab government has again included the aforesaid services in its list through the amendment made to clause 5 of Punjab Finance Act 2010, Mufti added. Resultantly, these service providers are liable to pay double sales tax ie one under the FED Act (a federal legislation) and the other under the Punjab Sales Tax Ordinance 2000 (a provincial legislation), he said, adding that the said amendment would result in taxation to the tune of 33 percent and 36 percent in certain cases, which is extremely harsh and impossible to comply with.

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Revenue collection target not revised

News Paper: Business Reorder

ISLAMABAD (July 26 2010): Ministry of Finance has not revised the ambitious revenue collection target of Rs 1,667 billion for the Federal Board of Revenue (FBR), as the tax authorities have dispatched an annual collection plan (2010-2011) to the concerned FBR members for meeting the monthly and quarterly targets set for current fiscal under the new strategy to focus on priority areas including new registrations with the income tax and sales tax departments.

The annual revenue collection plan disclosed that 20 percent of the total revenue collection target has to be achieved during the first quarter (July-September) of 2010-2011. During the second quarter (October-December) of 2010-2011, the tax machinery would have to collect 22.9 percent of the total revenue collection target. The FBR has to collect 26.8 percent of total revenue collection target during third quarter (January-March) of current fiscal. Over and above 30.2 percent of the total tax projections has to be collected during the fourth quarter (April-June) of 2010-2011.

Sources told Business Recorder here on Sunday that the FBR has fixed Rs 335.9 billion as revenue collection target for first quarter (July-September) of 2010-2011. Out of Rs 335.9 billion, the monthly target for July 2010 has been fixed at Rs 90.1 billion; Rs 102.4 billion for August and Rs 143.4 billion has been set for September 2010.

The FBR has directed the field formations to collect Rs 381.5 billion during the second quarter (October-December) 2010-2011. Break-up revealed that target of Rs 104.3 billion has been set for October 2010; Rs 118.1 billion November and Rs 159.1 billion target has been set for December 2010.

The FBR annual revenue collection plan further revealed that the field formations have to collect Rs 446.1 billion in the third quarter (January-March) of the current financial year. The details of the target set for third quarter disclosed that the tax machinery has to collect Rs 129.7 billion in January 2011; Rs 137.7 billion February and Rs 178.7 billion during March 2011.

The FBR has fixed Rs 503.5 billion as revenue collection target for the fourth quarter (April-June) of 2010-2011.

Break-up revealed that target of Rs 137 billion has been fixed for April 2011; Rs 142.8 billion for May and Rs 223.7 billion has been set as revenue collection target for June 2011.

The quarter-wise tax projections set for 2010-2011 showed that the total amount of revenue collection target comes to Rs 1667 billion which is the original target set by the government for the FBR in budget (2010-2011). So far, the Finance Ministry has yet not revised downward the annual target of the FBR. The quarterly tax projections have been communicated to all FBR members including Members Domestic Operations (North/South).

Sources said that the revenue projections have been based on 16 percent estimated growth during current fiscal. The measures and actions planned for achieving the revenue collection target included effective audit, recovery of outstanding and current demands and arrears. The enforcement plan included registrations of new taxpayers with the income tax and sales tax departments. The reduction in the overall number of non-filers, stop-filers and short-filers of income tax and sales tax/federal excise returns would remain as one of the priority areas for meeting the revenue target, FBR added.

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Import of new cars: CCP seeks reduction in customs tariff

News Paper: Business Reorder

ISLAMABAD (July 25 2010): The Competition Commission of Pakistan (CCP) has recommended that the customs tariff on import of new cars must be reduced across the board to curtail protection to manufacturers, bringing it down to 5-10 percent as presently car importers are paying excessively high duties at the import stage.

A competition impact assessment study on automobile issued by the CCP on Saturday recommended that the atmosphere of competition could be improved significantly by allowing import of new cars at lower prices. This should be pursued along with the current investment policy to attract other car manufacturers in the country.

The scientific study recommended that the benefits of lowering tariffs on new cars will be manifold. One, it will make available greater options for the consumers who are currently stuck between a handful of models thereby increasing interbrand competition. Two, it will introduce new technology in Pakistan and improve safety standards.

Three, it will force the local manufacturers to compete in the local market, improving quality and decreasing price. Four, it will enable the car dealership and parts and after sales services market to develop to cater to the increasing variety of cars and technology.

These benefits will outweigh any other potential concerns regarding foreign exchange, loss of jobs and investment. In fact the local manufacturers are quick to point out that increasing prices are due to changes in exchange rate. Therefore there should not be any adverse affect on the foreign exchange reserves. If at all there is, it will be minimal.

The report made suggestions to increase both intra- and interbrand competition in the market and allow for greater market efficiency. It further recommended the change in market supply chain structure and terms applicable to purchasing vehicles:

The industry must move from a reactive demand-based model to a proactive supply based model in order to make it more competitive. As is the case with most manufacturers in developed countries, including Honda, Toyota, and Suzuki, customers place their orders directly with the manufacturers via Internet. This creates a direct linkage between the two, reducing the role of dealers, and helps the manufacturer in the inventory management and production planning process.

Consistent and long-term policies: The policy environment requires continuity, consistency and connectivity. Any change in the policies should be made giving due regard to the consumers and the prompt technology transfer rather than protecting the manufacturers/assemblers, the CCP added. The CCP observed that the absence of competition has let the local car industry to dictate the prices and Pakistani car market only has three major players, each of which dominates a different segment of the market based on the size of the car.

The assessment study on automobile further revealed that the concern vis-à-vis competition is the division of the market among the three players in the passenger car market, the steady market shares each of them enjoyed in the last decade, signifying a lack of competition. Clearly, any loss of competition in the market is bad news for the consumers, who have the same limited choices albeit at rising prices.

The absence of competition has let the local industry to dictate the prices. The continuous price increases of local automobiles since 2006 has put new cars out of range of middle-income groups. Statistics depict a fall in sales on year-on-year and on a month-on-month basis but the prices have shown an upward trend - Honda, Indus Motors and Pak Suzuki increased their prices thrice in 2008.

It seems that the local assemblers have adopted a strategy of increasing profits on limited production instead of increasing volumes. Most carmakers have been announcing plans to increase production volumes over the next few years but these plans have yet to come to fruition and the problem of late delivery of cars remains unchanged as a source of dissatisfaction among buyers.

It has not been uncommon for customers to pay additional money to ensure delivery of their vehicles within a short time period. Alternatively, customers pay the full price of the vehicles months in advance and the assemblers get benefits from their tied investment.

In the downstream market, dealers of the manufacturers/assemblers act as mere agents and have no real incentive to compete in the market. Study of the dealership agreements revealed, it is the company that controls the quantity to be sold and the price to be charged. These dealership agreements go on to eliminate intra-brand competition by disallowing discounts, the CCP study said.

It further said that faced with low volumes, under-utilisation of capacity, high prices, late deliveries, premiums, and slow transfer of technology, effective competition in the automobile sector is much more needed now than ever before to keep the industry afloat.

The CCP study said that the Automotive Mission Plan (AMP) 2006-2016 is a ten year plan that lays out its objectives in its vision quite clearly. The vision states "To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US $145 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016." The vision thus spells out clearly the goal that the Indian automotive sector wants to achieve by 2016. Below we discussion some of the main policy features of the AMP.

Tariff Rates: It has been globally acclaimed that appropriately designed tariff structures attract investors. High tariff structures usually restrict flow of trade but may attract investment if the domestic market is big enough and growing at a high rate.

The prevailing bound rates at the initial stages of this Plan for the Commercial vehicles (Trucks and Buses) and MUVs (Multi Utility Vehicles) is 40 % and the tariff being 12.5%. Compared to advanced countries, the tariff rates in India are set at a much lower level for example tariff on trucks in USA is 25% and countries in EU have a tariff rate set at 22%. Thus the Government would examine and set the tariff rates for commercial vehicles in the future in this perspective.

India has also undergone negotiations of foreign trade agreements (FTAs) and preferential trade agreements (PTAs) with several regions and countries like Asean/Thailand/Singapore/Malaysia/China/Korea/Japan/BIMSTEC/Bangkok agreement, SAFTA/Sri Lanka/Mauritius/Chile, SACU/ Egypt and Gulf co-operation council. In the negotiations, care will be taken in deciding which tariff lines should be included. For a clear definition of the PTAs and FTAs care should be taken in preventing pass through imports from non- participating economies and trade deflections which may result from differential duty structures.

An unrestricted import of vehicles is likely to have an adverse impact on local manufacturing, GDP and employment. The government will also discourage the imports of used/ remanufactured vehicles and auto components in this category will not be treated as new.

The government will also provide incentives to the automobile manufacturers who produce vehicles suitable to be driven by the physically handicapped persons, the CCP added. Referring to Indian industry, the CCP said that the growth in the Indian auto industry is attributed to rising per capita income. Demographics have also helped since 70% of the Indian population is under 35 years of age. This implies a presence of a young population eager to be mobile than its older generation.

Within the sector, the growth can be attributed to more specific reasons. Commercial vehicle segment has grown primarily due to an increase in road infrastructure investments in the country. Better and cheaper access to credit has helped consumers across the board in securing vehicles of their choice. Growth in the two wheeler market has increased due to urbanisation.

Similarly, the demand for two-wheelers has also increased in the semi-urban and rural areas due to increase in income levels and availability of cheaper financing options. Besides growth in vehicles market, the auto component industry has also registered high growth rates. This is primarily due to the direct link this particular industry has with the manufacturing industry. 65% of auto component industry's sales are to the OEM, the CCP added
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Rs 400 million FED liability raised against cellular firm challenged

News Paper: Business Reorder 

ISLAMABAD (July 25 2010): A huge amount of tax liability of Federal Excise Duty (FED) under Sales Tax mode, raised against a leading cellular company by Large Taxpayer Unit (LTU) Islamabad, has been challenged where provisions of section 36 of the Sales tax Act 1990 have been invoked to create a demand of over Rs 400 million against the company.

Sources told Business Recorder here on Saturday that the section 36 of the Sales Tax Act is related to assessment of tax in case any unusual thing has been detected during audit proceedings under Sales Tax Act 1990. In this case, the order passed by the LTU Islamabad under section 36 of the Sales Tax Act is time barred for over 100 days. The FBR has to explain as to how they can extend the limitation under section 74 of the Sales Tax Act when original limitation under section 36 has been expired.

Details revealed that in the case of leading cellular company, the LTU Islamabad has passed an order on a show cause notice issued in 2007 in sheer disregard to the limitations prescribed under section 36 (1) of the Sales Tax Act, 1990 (Act) and thereby creating a demand of over and above Rs 400 million.

It has been learnt from reliable sources that a show cause notice was issued in May 2007 by the then Additional Collector of Sales Tax of the Collectorate of Rawalpindi; however, no order was passed within the prescribed limitation u/s 36(3) of the Act ie, within 180 days from the date of issuance of the show cause notice.

The Large Tax Payers'' unit Islamabad reinitiated the proceedings on the cellular company in March 2010 after obtaining alleged condonation u/s 74 of the Act from the Federal Board of Revenue. It was argued by the cellular company that the proceedings were barred by limitation but the Additional Commissioner without adhering to the legal provisions passed the order on June 30, 2010 and created a demand against the company to be paid instantly.

The Order in Original was challenged in writ jurisdiction before the Lahore High Court, Rawalpindi bench on July 23, 2010. The petition was heard by Justice Asad Munir; who after hearing at length issued notice to the tax department for a date in August for filing the Para wise comments; however, in the meantime the operation of the order in original was suspended.

It was argued before the learned judge that no order u/s 36 (1) & (2) of the Sales Tax Act can be passed after the lapse of 90 days of the issuance of the show cause notice or within the extended time of 90 days by the Collector/Commissioner after giving reasons in writing. No such extension was allowed. It was further argued that the limitation is to be extended before the expiry of the statutory period of limitation and not after the expiry of the limitation as this had created a vested right with the petitioner to not to be assessed beyond the limitation.

The learned counsel further argued the power of condonation with the FBR u/s 74 of the Act can also not be exercised arbitrarily. The FBR has to record reasons for extension in time and that to well before the expiry of the original limitation period. The judge noted that no reason for extension in time of 1055 days after the expiration of original limitation was given, therefore, the FBR must explain the position to have exercised the powers u/s 74 of the Act, sources added

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RTO Karachi collects Rs 418.34 million on scrips trading during fiscal year 2009-10

News Paper: Business Reorder

 KARACHI (July 25 2010): The revenue collection, made on scrips' trading under section 233A of Income Tax Ordinance 2001, has witnessed 16 percent growth during fiscal year 2009-10. According to an official statistics made available to Business Recorder here on Saturday unveiled that the Regional Tax Office (RTO), Karachi has collected Rs 418.34 million during FY 2009-10 against the collection of Rs 359.32 million made in FY 2008-09.

The collection made on account of profit on debt from banks and other securities were stood at Rs 6.48 billion and Rs 878 million, respectively, depicting some 39 percent and 35 percent growth in FY 2009-10. Similarly, the department has accumulated Rs 1.467 billion during July 2009 to June 2010 period against dividend income, which was collected at the rate of 10 per cent under section 150 of the Income Tax Ordinance 2001, showing 112 percent growth comparatively to the collection of Rs 692.73 million made in FY 2008-09.

The statistic further said the Karachi RTO has witnessed 23 percent growth on account of direct taxes as Rs 125.12 billion was collected during FY 2009-10, surpassing the collection of FY-2008-09 by Rs 23.66billion. The phenomenal growth was witnessed in some other heads; 53 percent in rentals, 38 percent in prize bonds, 14 percent in withdrawal from banks, 127 percent in the commission on advertising agents, 27 percent in indenting commission in foreign exchange and 881 percent in miscellaneous.

Furthermore, the collection made from returns and advance tax has shown 19 percent and 52 percent decline respectively during last fiscal year. In the same way, the negative trend in revenue collection persists in several other accounts, including out of demand, arrear demand, current demand and minimum tax payments.

When contacted, official sources, said although the budgetary target of RTO was unrealistic, the department has managed to achieve it successfully because of effective monitoring. They further said the Karachi RTO has also surpassed the budgetary target of indirect taxes by collecting Rs 18.884 billion on account of sales tax and Rs 2.48 billion in the head of federal excise duty during FY 2009-10

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Government seeks to evolve consensus: meeting on reformed GST on July 27

News Paper: Business Recorder

ISLAMABAD (July 24 2010): The federal government has convened a high level meeting on July 27 taking all the political leadership on board to resolve the thorny issue of reformed general sales tax (GST) on services, necessary for broadening the tax base and generating ample resources to carry forward development agenda.

Sources told Business Recorder here on Friday that the meeting to be chaired by the Prime Minister, which will be attended by all four provincial chief ministers. The political leadership at the federal and provincial level would finally have to develop a broader consensus to settle the issue of reformed GST on both goods and services amicably, so as to save the IMF programme under which Pakistan has committed introduction of reformed GST from October 1, 2010, sources said.

Details revealed that a meeting of provincial finance secretaries held at Ministry of Finance with Secretary Finance Salman Siddique in the chair reviewed the overall fiscal position of the federal and provincial governments. The introduction of reformed GST also came under discussion. Finance Secretaries of Punjab, Khyber Pukhtunkhwa and representatives from Sindh and Balochistan participated in the meeting. The introduction of reformed GST emerged as a major issue due to the government commitment with the IMF to raise tax-to-GDP ratio by introducing integrated reformed GST on goods and services from October 1, 2010.

During the meeting, it was observed that any breakthrough on reformed GST on goods and services in integrated manner and collection rights with the FBR would greatly help in keeping the growth momentum intact. However, the province of Sindh is still reluctant to allow federal government to collect reformed GST on services and is still planning to collect reformed GST on services itself.

Sources said that Sindh has denied any agreement in principle with the federal government on introduction of integrated reformed GST. However, sources said that Sindh is also cognisant of the difficulties to be faced by the country on non-introduction of reformed GST in integrated manner on goods and services by the federal government.

According to an official, representative of Sindh has informed the meeting that entire situation would be brought to the notice of the political leadership of the province so as to take a final decision on reformed GST on services. During the meeting, it was informed to the provinces that they should maintain fiscal discipline to keep the expenditures within stipulated limits so that budget deficit could be kept at targeted level during the ongoing fiscal year. The meeting also stressed upon the provinces to help the federal government in its endeavours to increase tax-to-GDP ratio as the country needs domestic resources to reduce the reliance on foreign loans in the medium and long term.

During the meeting, Finance Secretaries of Punjab and Khyber-Pakhtoonkhwa have requested the Ministry of Finance and the Federal Board of Revenue (FBR) to resolve the issue of sales tax on services. The issue came to the light during a monthly meeting of Finance Secretaries chaired by Secretary Finance Salman Siddque held at the Ministry of Finance here on Friday. FBR Chairman Sohail Ahmed and his team of tax managers were also present in the meeting. Finance Secretaries of Punjab and Khyber-Pakhtoonkhwa represented their provinces whereas other senior officials of the provincial Finance Ministries of Sindh and Balochistan were also present.

Punjab and Khyber-Pakhtoonkhwa also pointed out that the FBR and the Finance Ministry should submit a resolution of the issue as telecom companies have started approaching the concerned authorities of Punjab and Khyber-Pakhtoonkhwa to obtain legal viewpoint on the applicability of sales tax on services.

Sources said that the representatives of the provinces would submit the update to their Chief Ministers for expected meeting on the reformed general sales tax (GST) on July 27, 2010. The Chief Finance Secretaries would take into account their political leadership into confidence on the issue of sales tax on services. So far, no decision has been taken as it was a preliminary meeting to discuss the issue of sales tax on services besides other financial issues. The provincial finance secretaries would also discuss the issue with their legal experts for submission of recommendations on the status of services on the reformed GST. The FBR officials informed the meetings about the necessity to introduce reformed GST from October 1, 2010, sources added

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Sales tax rate: service providers in Sindh in a fix

News Paper: Business Recorder

ISLAMABAD (July 24 2010): The service providers in Sindh province are in a fix, as the sales tax rate on services rendered in Punjab and Khyber-Pakhtoonkhwa is 17 percent as compared to 16 percent in Sindh, a clear anomaly of having different rates in different provinces. Sources told Business Recorder here on Friday that the provincial governments of Punjab and Khyber-Pakhtoonkhwa have levied 17 percent sales tax on services, whereas Sindh government charges 16 percent sales tax on services.

According to sources, Sindh provincial government itself wanted to collect sales tax on services and does not wanted to authorise the Federal Board of Revenue (FBR) to collect sales tax on services. Sindh has not increased the rate of sales tax on services in budget (2010-2011) as compared to Punjab and Khyber-Pakhtoonkhwa where rate of services has been enhanced from 16 to 17 percent.

Due to different rates of sales tax, the service providers will have difficulty and consumers in Punjab and Khyber-Pakhtoonkhwa will be paying more on these services. Sources said that the anomaly of different rates of sales tax has to be resolved, otherwise there would be confusion in application of sales tax on services. In case of federal government, the Federal Board of Revenue (FBR) has imposed federal excise duty in sales tax mode on services providers under Federal Excise Act.

When contacted, a senior FBR official told this scribe that the federation would continue to collect federal excise duty on services under the Federal Excise Act. The existing arrangement for collection of the FED under sales tax mode on services would remain intact as per legal position of June 30, 2010. The FBR would collect FED on these services as per Federal Excise Act till implementation of the reformed general sales tax (GST) in October 2010. The official further specified that so far provinces have no basic infrastructure for collection of sales tax on services. In case any agreement has been reached between the federation and provinces on services, the provincial laws would be subsequently amended.

Till implementation of the reformed GST, there would be no change in existing system of collection of excise duty in sales tax mode on telecommunication and other services, as the government cannot impose double taxation on the consumers, FBR official added.

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RCG formed to obtain experts' input to raise tax to GDP ratio

News Paper: Business Recorder

 

SLAMABAD (July 24 2010): The Federal Board of Revenue (FBR) has constituted a Reform Co-ordination Group (RCG) to obtain input of experts on modern tax reforms strategy and measures to raise tax to GDP ratio. In this connection, FBR has issued a notification here on Friday.

According to the notification, to achieve the objects and purposes of the FBR as envisaged in section-4 of the FBR Act 2007 a Reform Co-ordination Group has been constituted to assess the FBR performance on matters relating to adaptation of modern tax administration strategy and formulation of tax policy to broaden the tax base and to increase revenue and tax to GDP ratio.

Reform Co-ordination Group shall comprise members including Shahid Hafeez Kardar, M Abdullah Yousaf, Ahmad Waqar, Vakil Ahmad Khan, Chaudhry Muhammad Arshad, Shahid Abdullah, Arshad Zuberi, Syed Muhammad Shabbar Zaidi, Abid Hassan and Ali Jameel. The notification further said that the members of the Reform Co-ordination Group are honorary and are not liable to draw any salary. The Strategic Planning and Statistics Wing of the FBR will be the Secretariat of the Reform Co-ordination Group, notification added.

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FBS restructuring need of the hour: Hafeez

ISLAMABAD (July 24 2010): Minister for Finance, Dr Abdul Hafeez Sheikh has said that early restructuring of Federal Bureau of Statistics (FBS) is a need of the hour. Chairing a meeting to review the status of restructuring of the Federal Statistical System of Pakistan here on Friday, the minister affirmed that efforts are under way to get the draft bill passed from the Parliament shortly.

The minister also assured government's full support in provision of all financial and human resources required for the new entity ie he Pakistan Bureau of Statistics (PBS). During the meeting, Saeed Ahmad Khan, Secretary Statistics Division apprised the minister that the Restructuring Draft Bill, duly approved by the Cabinet, was tabled in the National Assembly on January 27, 2010 and passed on to the NA Standing Committee on Economic Affairs and Statistics for examination.

A meeting of the National Assembly Standing Committee on Economic Affairs and Statistics was held on July 15, 2010 wherein the Statistics Division made a detailed presentation on the draft bill. The Committee however, adjourned the meeting with the notion that its next meeting would be conclusive.

FBR admits PaCCS rolled out at all three container terminals without its evaluation

KARACHI (July 24 2010): Federal Board of Revenue (FBR) has admitted that the Pakistan Automated Customs Clearance System (PaCCS) was rolled out at all three containers terminals without evaluation of its success and shortcomings.

In response to a letter sent by All Pakistan Customs Agents Association (APCAA), the tax collecting authority has said that the PaCCS, which was launched at Karachi International Containers Terminal (KICT) in a pilot mode in March 2005, had been outspread at Pakistan International Containers Terminal (PICT) and Qasim International Containers Terminal (QICT) without its closure and proper assessment of its success and faults.

The FBR further replied that the then management of board had also bypassed the transparent procedure of open bidding to roll out PaCCS at PICT and QICT, causing to raise enormous complaints from both internal and external users of the system.

The revenue body also informed that the replacement of software is a makeshift arrangement, which would be followed by implementation of a suitable automated customs clearance system in a transparent way through open bidding. Pakistan customs is committed to implement best international practices relating to a paperless and automated customs clearance system in line with international obligations, it added. In view of audit findings of PaCCS and feedback received from internal and external stakeholders, the government of Pakistan has decided not to further rollout the automated customs clearance system through agility.

On the other hand, APCAA has claimed that the management of FBR had followed all legal formalities including tenders, bids, proposal draft, etc to launch PaCCS as a pilot project at KICT, which was later expanded to all other containers terminals. The association dispelled the explanation of board related to PaCCS's shutdown, saying that the expansion of PaCCS project to the other containers terminals was proved that the system is a successful project.

Despite having several ambiguities, the PaCCS collects more revenue than the other Collectorates in Karachi. The association further said that the replacement of automated customs clearance system would disturb huge volume of import and export containers, which would lead to provide severe financial shocks to the business fraternity in terms of delays, demurrages, detections, etc. Therefore, the APCAA has strongly appealed to the concerned authorities to take positive measures to restrain the PaCCS falling through their hands.

Workshop on Integrated Tax Management system concludes

News Paper: Business Recorder 

LAHORE (July 24 2010): Director General of Directorate General of Training and Research (Inland Revenue) Abdul Wadood Khan has said that the Integrated Tax Management system has proved to be an excellent portal for facilitating both taxpayers and tax collectors. E-filing of all important documents like tax returns and monthly and quarterly statements, has made life very easy for the taxpayers.

The tax collectors on the other hand can also readily access all sorts of data regarding a specific taxpayer for cross matching and audit purposes. Additionally, encouraging the documentation of the economy is a very important dimension of the process of automation.

These views were expressed by him while speaking at the concluding session of five-day orientation workshop of 'Integrated Tax Management' system arranged by the Directorate General of training and research (Inland Revenue) for a batch of officers from Afghan revenue department.

Wadood Khan while addressing participants from Afghanistan Revenue Department stated that our Afghan guests found the contents of the workshop very useful and informative. The Integrated Tax Management system has proved to be an excellent portal for facilitating both taxpayers and tax collectors.

He hoped that Afghan officers enjoyed their visit to Pakistan and found it useful, productive and memorable. 'We have a lot to share with each other. Mutuality and communication happen to be the touchstones of development and progress in every field. We should all work together to mobilise our 'collective intelligence' in order to cope with the peculiar challenges facing our two countries,' he added.

He also conveyed his thanked Mohsin Akhtar former Director General (DOT) for gracing the occasion with his presence. Two officers of the Afghan Revenue Department also spoke on this occasion and shared their experience of the workshop and the visit to Lahore with the participants.

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Heavy documentation, double taxation: FBR forms body to resolve issues

News Paper: Business Recorder

ISLAMABAD (July 24 2010): The Federal Board of Revenue (FBR) has constituted a committee comprising Chief Income Tax Policy, representatives of All Pakistan Oil Tankers Contractors Association (APOCA) and All Pakistan Oil Tankers Owners Association (APOTOA) to resolve the issue of heavy documentation and double tax being charged from the service providers in the transport sector.

On the conclusion of the meeting between these associations and FBR Chairman Sohail Ahmed here on Friday, Ainullah Agha Chairman of contractors association told Business Recorder that the tax authorities have assured them to resolve the issue of avoid double taxation on the industry.

During the meeting, FBR Member Direct Tax Policy Israr Rauf was also present to discuss the issue with the relevant associations. It has been agreed that the committee would convene series of meetings in future to come up with some viable solution for documentation of these associations, which is practically possible.

Referring to the FBR Chairman, he said that the FBR wanted to expand the tax base by bringing un-registered suppliers of different items like tyres, spare parts etc into the tax net. The priority of the government is to bring the potential taxpayers into the tax net for which withholding agents can provide vital information. Being withholding tax, contracts can play an important role in providing information about their supplies. The FBR would ensure that the transporters owners/contractors should not be liable to double taxation. The technical and legal issues of the associations would be resolved, he said while referring to the FBR chairman.

The tax authorities acknowledged that the transporters and contractors have been engaged in paying 2 percent withholding tax on gross turnover, which is final discharge of tax liability. The representatives of the association raised the issue that the contractors are not legally bound to pay any other tax apart from final tax liability. The 2 percent withholding tax has been declared as 'minimum tax' on the transport services, which has restricted the contractors to maintain documentation and regularly file their income tax returns and ensure deduction of withholding tax on making payments for purchase of tyres, spare parts and other items.

The representatives of the associations also informed the tax authorities about their practical difficulties to ensure heavy documentation like book keeping, return filing etc under the Finance Act 2010. Heavy documentation for the contractors included maintaining cash books, bank books, ledgers, names and particulars of the parties dealing with the contractors and ID card copies of all persons involved in business.

Practically they can not operate as withholding agent despite the fact that they are covered under the category of individual taxpayer with annual turnover of Rs 50 million. The new tax is an addition to various federal and provincial taxes paid by them and the new tax is causing financial damage to the oil transport sector, they told the FBR officials.

Through Finance Act, in line with the provisions regarding withholding liability in case of companies and AOPs, an individual with turnover of Rs 50 million or above is also to be designated as "prescribed person" under sub-section (9) of section 153. Such individual shall be responsible to act as withholding agent.

An individual with turnover of Rs 50 million or above has been added in the list of "prescribed person" under sub-section (9) of section 153. Beside senior tax officials, Afzal Masood of the APOCA and Sadat Manzoor Butt, General Secretary of the contractors association, were also present in the meeting.

-www.brecorder.com

Telecom, banking and insurance services: FBR has to address anomaly after Punjab, Khyber-Pakhtoonkhwah levy 17 percent sales tax

News Paper: Business Recorder

ISLAMABAD (July 23 2010): The Federal Board of Revenue has to resolve a major controversy on collection of taxes on telecommunication, banking and insurance services as Punjab and Khyber-Pakhtoonkhwah have imposed 17 percent sales tax on these services whereas Federal Excise Act continues to empower the FBR to collect Federal Excise Duty on the said services at the prescribed rates.

It is learnt here on Thursday that the Punjab and KP have imposed 17 percent sales tax on telecom services including services provided by mobile phone companies. Other services liable to 17 percent sales tax included banking and insurance services. These taxes have been imposed through their respective Finance Acts passed recently for 2010-11. The responsibility to recover/collect this levy has been passed on to FBR.

These provinces have authorised the FBR to collect the levy under their respective laws. However, the FBR has not issued any instructions so far for charging/collection of sales tax on these services despite the fact that the said services have been notified by the provinces through their respective laws. The Federal Excise Act had imposed 19 percent FED on telecom services and 17 percent on banking and insurance services.

The present status of law could not be termed as double taxation as both the Federation and the province (Punjab and KP) are well within there constitutional domain to levy and collect the respective taxes on the telecommunication, banking and insurance services. However, if the provinces start collecting sales tax on these services, it would be heavy taxation on telecom, banking and insurance services; which will in return make these services unaffordable for already overburdened common man.

So far, the said provinces have not started proper collection of the levy as the FBR is already charging FED on these services under the Federal Excise Act. In case Punjab/KP started collecting 17 percent sales tax on telecom services, the accumulated effect of taxes would come to 36 percent in case of telecom services after incorporating 19 percent FED under the Federal Excise Act. If 17 percent sales tax was collected on banking and insurance services, the total impact of taxes would come to 33 percent. The 33 percent taxes would include 16 percent FED on banking and insurance companies.

When contacted, senior tax experts said that the Federal government had decided to transfer the levy and collection services to the provinces under reformed GST/VAT for which the provincial levy was made effective under the provincial Finance Acts for the year 2010, however, it is not understandable as to why the FED has not been abolished.

Under the present circumstances if either one is not removed it would clearly mean that the non-collection will result into default on the part of the telecom; banking and insurance companies. In short this levy as it stands today seems to be validly enforceable. It was stated that in order to resolve the issue some sort of a notification should have to be passed to hold the levy and collection of one by the FBR; in short either to abolish sales tax on services or exempt FED under the Federal Excise Act. In case this is not done the subscribers of telecom services would have to pay 36 percent sales tax/FED and services of banking and insurance would be subjected to 33 percent FED/Sales tax.

The tax/legal experts are also of the view that the levy will sustained if challenged before high courts for reason that the provinces have the mandate under the constitution to levy sales tax on services; whereas the Federal government has the authority to levy FED on services. The two levies may be harsh and termed as heavy taxation of one industry by both provinces and Federation but would by no means be ultra vires to the constitution.

It has also been learnt by this scribe that the telecom companies and the Pakistan Banks Association have taken up the matter seriously and have decided to approach the relevant provincial and federal authorities for the effective resolution of this anomaly so as to save themselves from the default. It has been further learnt that FBR has also taken cognisance of the issue and are looking for a way to have the same resolved without disturbing the current collection and the affordability of these services for the end consumer; who has to bear the burnt
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Proceedings under repealed IT Ordinance: SHC tells RTO Karachi to explain rationale

News Paper: Business Recorder

ISLAMABAD (July 23 2010): Sindh High Court has issued notice to the Regional Tax Office, Karachi to explain the rationale behind initiating income tax proceedings in a time barred case under the repealed Income Tax Ordinance 1979. Sources told Business Recorder here on Thursday that Syed Naved Andrabi Advocate Supreme Court has filed a petition in the SHC in this regard.

The case mainly related to the issue that how the income tax department can initiate proceedings in time barred cases under the repealed Income Tax Ordinance 1979. Details of the case revealed that the Regional Tax Office, Karachi has initiated proceedings u/s 66A of the repealed Income Tax Ordinance, 1979 on the ground that the Supreme Court in its judgement on the issue of application of section 122 (5A) of the Income Tax Ordinance, 2001 has held that the orders passed before June 30, 2002 are to be dealt under the Repealed Ordinance as if the Ordinance has not come into force (CIT Vs. Eli Lilly Pakistan Limited & others).

One such notice issued u/s 66A of the repealed Ordinance has been challenged in Constitutional Petition before the Sindh High Court at Karachi. The petition was listed for hearing on July 20, 2010 before the division bench of Acting Chief Justice, Justice Musheer Alam. The learned Division Bench, after hearing the arguments was pleased to issue notice to the Respondents. The issues raised in the petition are that the judgement of the Supreme Court has decided the appeals on the legal issues and have held that the assessments passed before June 30, 2002 are to be perused and finalised under the repealed ordinance; however, nowhere has it been directed that the proceedings be initiated specially when the limitation under the repealed ordinance has lapsed/expired.

It has also been argued that the Additional Commissioner Inland revenue has no jurisdiction to initiate the proceedings under the Repealed Ordinance has there exists no such authority. It has also been argued that the provisions of section 66 of the repealed ordinance are also not applicable on the proceedings that may be initiated u/s 66A of the Ordinance as the limitation given there is independent of what has been suggested u/s 66 of the repealed Income Tax Ordinance.

It was argued that the proceedings under the repealed ordinance cannot be re-opened especially when the assessments are passed and closed transactions on the issue of limitation; especially when no such direction was specifically given by the Supreme Court of Pakistan, sources added.
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Pakistan Customs Computerised System: FBR to seek two-month extension of contract

News Paper: Business Recorder

KARACHI (July 23 2010): The Federal Board of Revenue (FBR) would seek an extension of two months in the contract of Pakistan Customs Computerised System (PaCCS) - an automated Customs clearance system, said the Chairman FBR Sohail Ahmed on Thursday. Addressing members of the Karachi Chamber of Commerce and Industry (KCCI), he said the FBR would soon approach the Agility Company - authorised to extend the contract, to get an extension of the PaCCS which would expire on July 31 2010.

The chairman FBR also said the authorities, in its recent review of the PaCCS, concluded that the software has developed some problems and could be bugged from anywhere in the world without leaving a trace behind. The control of the system is not fully known to the authorities in Pakistan and there are some serious complaints against the US-based Agility Company, however he said, all these facts have been forwarded to the federal finance minister who would take a decision whether to continue with the PaCCS or not.

On the establishment of an audit desk at the Regional Tax office in Karachi, Ahmed said the FBR is contemplating on the introduction of an audit and scrutiny desk. He asked the business community to suggest ways to better the move. "We want to do away with the random audit which is a time wasting process", he said.

The chairman FBR assured the business community that an Anomaly Committee would soon be formed. Member Customs Munir Qureshi would head the Anomaly Committee on Customs, while Israr Rauf would head the Anomaly Committee on Revenue said Ahmed.

He suggested the formation of another committee comprising the members of the KCCI and the FBR to resolve the problems of the business community. Regarding the reformed General Sales Tax (GST)/ Value Added Tax (VAT), Ahmed said that negotiations are underway between provinces and the federation, but nothing has been finalised so far in this regard. "We have to take a decision and finalise the issues by mid August this year," he added.

He hoped the issue of imposition and collection of taxes on services would be resolved amicably between the province and the centre. He also dismissed all the rumours regarding a secret plan of the FBR for the imposition of the reformed GST.

Highlighting FBR's collections, Ahmed said the FBR has collected Rs 1,330 billion as revenue during the last fiscal year as compared to the target of Rs, 1,380 billion. The figure may further increase after the finalisation of the collection figure, he added. He also said despite promises by the retailers sector, it is not contributing in the revenue. It is a very big service sector, the chairman FBR said and added that only 40 retailers, in the entire Peshawar region, are paying taxes.
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Secretariat of FTO to set up eight facilitation centres

News Paper: Business Recorder

KARACHI (July 23 2010): The Secretariat of Federal Tax Ombudsman (FTO) will set up eight facilitation centres across the country to expand its outreach to the aggrieved taxpayers. In response to a letter of the Karachi Sales Tax Bar (KSTB), the FTO secretariat has informed that the office is planning to establish eight facilitation centres at various cities including Islamabad, Lahore, Karachi, Quetta, Peshawar, Faisalabad, etc to flush out cases immediately.

The secretariat further said that the section 33(1) of FTO ordinance and FTO Regulation No 11 (1) and (2) have enabled the secretariat to entertain emergent cases instantly without following normal procedures. It said the FTO office is making all out efforts to avoid cumbersome and lengthy formal procedures for seeking justice by the taxpayers besides adopting unbiased and professional approaches to decide matters.

Therefore, the department is taking bold steps to improve and modify the performance to achieve the highest standards in terms of number and quality of recommendations to the Federal Board of Revenue (FBR). The decision to establish eight facilitation centres across the country is one the measures to idealise the vision and mission of FTO office.

Moreover, it said the core purpose of FTO is to diagnose, investigate, redress and rectify any injustice done to a person through maladministration by functionaries administering tax laws and termed it as mandatory for good governance.

It said that an advisory committee is also being set up for soliciting ideas to make the complaint redressal system more efficient, effective and taxpayers' friendly. It also said that the department is striving to launch a web-based online complaints system by end of current year.

-www.brecorder.com

APTTA: new customs protocol drafted

News Paper: Business Recorder

ISLAMABAD (July 22 2010): Customs authorities of Pakistan and Afghanistan have jointly drafted a new customs-protocol under the Afghanistan Pakistan Transit Trade Agreement (APTTA) for the regulation of transit traffic through two countries, ensuring submission of financial securities of transit goods to check cross border smuggling.

Sources told Business Recorder here on Wednesday that the customs control and transit regime of Pakistan and Afghanistan has been specified in Protocol-III of the new APTTA. The proposed procedure would ensure security of transit goods destined for Afghanistan and the monitoring of the consignments to check their inflow back into Pakistan.

The Customs-Protocol has elaborated the procedure for submission of the customs Security ie encashable financial guarantee acceptable to customs, submitted by the traders or through their authorised brokers, on transit goods, for an amount equivalent to the import levies of Pakistan and Afghanistan.

Under the agreement agreed between customs departments of Pakistan and Afghanistan, the customs authorities shall notify each other of any serious inaccuracy in a goods declaration or of any other serious irregularity discovered during customs transit operation for collection of duties and taxes, if necessary. The new Customs-Protocol has also laid down minimum requirements of seals to be used for trucks to be used for transportation of consignments under the transit facility to Afghanistan.

Customs officials of both the countries would jointly prescribe the goods declaration (GD) forms to be used for customs transit operations under the proposed APTTA. The GD requirement has been specified in the new Customs-Protocol under the APTTA.

Pakistan and Afghanistan will use and accept as Customs security for ensuring the fulfilment of any obligation arising under a Customs transit operation between Pakistan and Afghanistan. The amount of Customs security for transit operation shall be determined by the customs so that it covers any import levies chargeable on goods so carried. Following is the text of the new customs protocol under the new APTTA:

Protocol Three

Customs Control and Transit Regime

Article 1: Application Pursuant to Sections VII and VIII of the Afghanistan Pakistan Transit Trade Agreement (APTTA), the Contracting Parties agree with the following Customs documentation and processing procedures with the objective of limiting the number of documents, simplifying the procedures and ensuring that obligations to the Customs are fulfilled.

Article 2: Content of the Protocol This Protocol governs the Customs control of traffic in transit between Pakistan and Afghanistan. It contains in one section general provisions, setting forth rules regarding duties and taxes, Customs security, sealing of transport unit, and specifying transit routes and Customs offices of each Contracting Party (Pakistan and Afghanistan). Other sections describe the formalities to be fulfilled at the Customs offices, and lay down rules for mutual administrative assistance.

SECTION 1: GENERAL PROVISIONS

Article 3: Definitions For the purpose of this Protocol, and in addition to the definition included in Section 1 of Afghanistan Pakistan Transit Trade Agreement (APTTA), the following expressions shall have the meaning hereby assigned to them:

Customs Security means encashable financial guarantee acceptable to customs, submitted by the traders or through their authorised brokers, on transit goods, for an amount equivalent to the import levies of Contracting Parties. Customs Transit Operation means the transport of goods from an office of departure to an office of destination under Customs transit;

Declarant means person who signs a Goods Declaration (GD) or on whose behalf an authorised person signs;

Goods Declaration (GD) for Customs transit means statement made in a prescribed form by which the person interested declares goods for Customs transit and furnish the particulars which the Customs require to be declared for the application of a Customs transit operation;

Office of departure means any Customs office at which a Customs transit operation commences;

Office en route means any Customs office through which goods in transit pass in the course of a Customs transit operation;

Office of destination means any Customs office at which a Customs transit operation is terminated;

Article 4: Scope of Protocol The provisions of this Protocol shall cover the transportation of transit traffic in transport units:

i. Consigned from the territory of a third country and destined to a place in the territory of one Contracting Party through the territory of the other Contracting Party;

ii. Goods originating from one Contracting Party, destined to a place in the territory of third country and transiting through the territory of the other Contracting Party;

iii. Goods passing through the territories of the Contracting parties that are originating from and are consigned to a third country.

Article 5: Duties and Taxes, Temporary Admission The Contracting Parties agree not to subject goods which are shipped through one Contracting Party with final destination to the other Contracting Party or a third country and which are carried under the Customs transit, to the payment of import or export duties and taxes, provided that the conditions laid down in this Protocol are complied with.

Article 6: Customs Offices for Customs Transit The Contracting Parties may designated additional Customs offices on need basis and under intimation to the other Contracting Party for the purpose of this Protocol and in accordance with spirit of this agreement to act as Office of Departure, Office en Route or office of Destination.

Article 7: Business Hours and Competence of Customs Offices for Custom Transit

1. For the purpose of this Protocol, the corresponding Customs offices which are located on the common frontier shall also be open on holidays as mutually to be agreed.

2. Contracting Parties authorise their corresponding frontier Customs offices to clear all goods carried under Customs transit in accordance with the provisions of this Protocol.

Article 8: Goods Declaration for Customs Transit Contracting Parties may jointly prescribe the goods declaration forms to be used for Customs transit operations in accordance with this Protocol.

Article 9: Customs Security

1. The Contracting Parties shall undertake to use and accept as Customs security for ensuring the fulfilment of any obligation arising under a Customs transit operation between Pakistan and Afghanistan.

2. The amount of Customs security for transit operation shall be determined by the customs so that it covers any import levies chargeable on goods so carried.

3. Persons who regularly carry out Customs transit operations shall be entitled to lodge a revolving guarantee, acceptable to customs, which shall be valid for at least one year.

4. Where persons have lodged a revolving guarantee, the Customs authorities shall require proof that original copy of the guarantee document issued by the guaranteeing institution had already been furnished for a Customs transit operations unless they have doubts as to the validity of the details concerning the guarantee.

Article 10: Exemption from Physical Customs Inspection and Escort En Route

(a) Exemption from physical Inspection The Customs authorities shall refrain from routine physical inspection of the vehicle and cargo en route unless an irregularity is suspected in view of explicit tampering of seals or locks of the transport unit or some reliable specific intelligence.

(b) Exceptional Physical Customs Inspection Customs Authorities may by way of exception and in particular when they suspect irregularities, subject the cargo to physical inspection en route.

Article 11: Customs Seals and Fastenings

1. Customs seals and fastenings to be used in the application of Customs seal shall comply with the minimum requirements laid down in Annex to this Protocol.

2. Customs seals and fastenings affixed by Customs authorities of the other Contracting Parties or of a third country and which comply with the requirements laid down in the Annex, may be accepted for the purposes of this Protocol. However each contracting party is at liberty to affix its own seal

3. The Contracting parties shall provide each other with specimens of the Customs seals and fastenings they use for the purpose of Customs transit.

Article 12: Sealing the Vehicle

(a) The vehicle's cargo compartment shall be sealed by the Customs Office of Departure.

(b) The Host Country Customs Authorities shall accept the seals affixed by the other Contracting Country's Customs Authorities, provided they are intact, but if required for control purposes, they are entitled to affix an additional seal of their own on entry into their territory.

(c) If Customs Authorities have to break the seals in order to perform a physical inspection of the cargo en route, they shall affix new seals and record this action in the Transit and Inland Customs Clearance Documents.

(d) Oversize and/or bulky cargoes, which because of their weight, size, or nature normally not carried in a closed motor vehicle, may be carried by non-sealed vehicles, provided those goods can easily be identified by reference to the description (in packing lists, photographs, drawings, etc) given, so as to prevent any substitution or removal of the goods.

Article 13: Transit and Inland Customs Clearance Document

(a) Vehicle operators shall carry a Transit and Inland Customs Clearance Document (containing the particulars set out in the attachment), issued by the issuing organisation and guaranteeing the payment of customs duties and taxes, fines, and interests.

(b) The document shall be issued for each transport unit.

(c) The document shall be valid for one journey only and shall specify their period and geographic scope of validity.

(d) The document shall consist of the following number of original copies:

1. one for the issuing/guaranteeing organisation;

2. one for the transport operator;

3. one for the Country of Departure Inland Customs Authorities' office;

4. one for each Country of Transit Customs Administration through the territory of which the carriage is to be performed; and,

5. one for the Inland Customs Authorities' office of the Country of Destination

6. One copy for audit

SECTION 2: FORMALITIES TO BE FULFILLED AT THE OFFICE OF DEPARTURE

Article 14: Documentary Formalities

1. The Declarant shall file the Customs Transit Carnet at the office of departure for the goods to be transported under Customs transit, together with the necessary commercial or transport documents to the Customs authorities.

2. A copy of the GD shall be kept at the office of departure, pending the return of the copy mentioned in Article 16 in paragraph 1 of this Protocol, confirming that the goods have left the Customs territory.

3. The Customs authorities at the Office of Departure shall satisfy themselves that:

(i) the GD is duly completed.

(ii) the goods declared for Customs transit are those specified in GD.

(iii) a Customs security is in order.

Article 15: Formalities relating to the Use of Customs Seals

1. Where the goods are transported, meeting the requirements set out in Article 11 of this Protocol, the Customs authorities shall seal the container or take necessary precaution in case of heavy, bulk and over size cargo.

2. Details of the Customs seals affixed and of the date of affixing shall be duly recorded on the Goods Declaration (GD) for transit goods to enable the Office of destination to identify the consignment and to detect any unauthorised interference.

3. When the goods bulk, over sized which cannot be effectively sealed, identification shall be assured and unauthorised interference rendered readily detectable, either by affixing Customs seals to individual packages, or by affixing identification marks, by describing the goods and recording the results thereof on the GD.

Article 16: Additional Control Measures

The Customs authorities may:

i. Require goods consigned from or destined to the territory of the other Contracting Party to be transported under Customs escort while in the territory of the Contracting Party in very exceptional cases, where goods are precious and highly susceptible to diversion en route.

ii. Prescribe a time limit for the presentation of the goods at a specified Customs office in their territory.

SECTION 3: FORMALITIES TO BE FULFILLED AT OFFICES EN ROUTE AND AT OFFICE AT DESTINATION

Article 17: Formalities at Offices en Route

1. At office where goods leave the Customs territory, the Customs authorities shall satisfy themselves that any Customs seals and fastening or identification mark are intact. They shall then endorse the Goods Declaration accordingly, retain one copy and pass one copy on to the office en route where the goods enter the subsequent transit country. Upon receipt of the latter copy, in accordance with paragraph 2 below, they shall return that copy to the Office of Departure, or - in transit countries - to the Office en route where the goods entered the Customs territory.

2. At offices where goods are imported into the Customs territory, the Customs authorities shall satisfy themselves that the GD is in order, that any customs seal and fastening or identification mark previously affixed are intact. They shall then endorse the Goods declaration accordingly, retain one copy and pass one copy onto the Office en route in the Customs territory from which the goods were imported.

3. When an office en route removes a Customs seal or identification mark, for example, when they are no longer considered to be secure, it shall record details of the new Customs seals or identification marks on the goods declaration accompanying the goods.

Article 18: Formalities at the Office of Destination

1. At the Office of Destination, the Customs administration shall satisfy itself that the GD is in order, that any customs seal and fastening or identification mark is intact and verify that the transport unit is otherwise secure. They may carry out a summary or detailed examination of the goods themselves.

2. After having satisfied themselves that all obligations relating to the Customs transit operation have been fulfilled, the Customs administration at the Office of Destination shall endorse the GD accordingly.

3. The Customs administration at the Office of Destination shall send a copy of the GD back to the appropriate Customs office of departure along with a copy of its goods declaration of the Office of Destination duly completed and which shall bear the cross reference of goods declaration issued by the office of departure, which shall be considered as cross border certificate so as to allow the authorities of the latter to take any action, documentary or otherwise, necessary for the completion of the Customs transit operation.

4. The customs security shall be discharged on production of cross border certificate.

Article 19: Exclusion of Offenders

(a) Each Contracting Party shall have the right to exclude temporarily or permanently from the application of this Protocol any person guilty of a serious offence under the Customs Law or Regulations applicable to international transport of goods.

(b) This exclusion shall be notified immediately by the Country of Departure, Destination, or Transit Customs Authorities to the Home Country Customs Authorities and to the Home Country Issuing and Guaranteeing Organisation.

SECTION 4: MUTUAL ADMINISTRATIVE ASSISTANCE

Article 20: Communication of Information

1. The Customs authorities of the Contracting Parties shall, on request, communicate to each other as promptly as possible:

i. Any available information relating to GD completed or accepted in their territory, which is suspected of being false;

ii. Any available information enabling the authenticity of seals claimed to have been affixed in their territory to be verified.

2. The customs administrations of Contracting Parties shall ensure customs to customs co-operation by information sharing through setting up the facility of electronic interface.

3. The customs administrations of the both Contracting Parties at the point of entry shall make arrangements of communication through hotline.

4. The customs administrations of the both Contracting Parties shall make arrangements for joint customs control at entry and exit points with mutual consent.

Article 21: Notification of Inaccuracies The Customs authorities of the Contracting Parties shall, spontaneously and without delay, notify each other of any serious inaccuracy in a GD or of any other serious irregularity discovered in connection with a Customs transit operation carried out under the provisions of this Protocol, in order that the matter may be investigated, any duties and taxes chargeable may be collected and any repetition of the circumstances may be prevented.

Article 22: Discharge of the Transit and Inland Customs Clearance Documents

(a) Upon (re-) exportation of transit goods from the territory of a Country, the Country's Customs Authorities shall enter an exit stamp in the Transit and Inland Customs Clearance Documents and thus discharge the documents.

(b) Upon arrival of the cargo at the inland Customs office of destination, provided the goods are placed under another Customs regime or are cleared for domestic use via payment of the duties and taxes due by the owner, the Transit and Inland Customs Clearance Document shall be discharged. To be discussed in detail because it refers to those cases which are allowed in Kyoto convention to change the designation of goods for transit to clear the goods in that country by paying the Customs duties and other charges.

Article 23: Liability of the Issuing/Guaranteeing Organisation

(a) The guaranteeing institution shall be jointly and severally liable with the person from whom the sums are directly due, to pay the import and export duties, taxes, fines, and interests, under the customs laws and regulations in the Country of Departure, Destination, and Transit in respect of the lack of timely discharge of the documents or in case of an irregularity in connection with a transit or inland customs clearance operation under this Protocol.

(b) The liability of the guaranteeing institutions shall not only cover the goods that are listed in the Transit and Inland Customs Clearance Documents, but also any goods that, although not listed therein, may be contained in the sealed section of the road vehicle.

(c) If it so prefers, the Country of Departure, Destination, and Transit Customs Authorities may also claim the duties, taxes, fines, and interests from the person who is directly liable for them.

(d) Upon presentation by the Country of Departure, Destination, and Transit Customs Authorities of expired and non-discharged Transit and Inland Clearance Documents or in case of established irregularity, the Home Country guaranteeing organisation is to deposit with or pay to the Country of Departure, Destination, or Transit Customs Authorities immediately the duties, taxes, fines, and interests due.

(e) The guaranteeing institutions may later claim the refund of the duties and taxes upon the establishment of evidence to the satisfaction of the Country of Departure, Destination, or Transit Customs Authorities that allows the discharge of the Transit and Inland Clearance Documents or proves that no irregularity was committed.

(f) The Home Country guaranteeing institutions is entitled to take recourse and claim the reimbursement of the export or import duties and taxes advanced from the person from whom they are due.

SECTION 5: MISCELLANEOUS

Article 24: Auction of un-cleared goods

1. If a request for transit and Customs clearance is not filed for the goods imported for transit within 30 days of its arrival at the port of entry, a notice shall be sent to the importer or its agent on the address given in the shipping documents for clearance of the goods from the port. If the goods still remain on the port after sixty days of their arrival, a final notice shall be sent to the importer or his agent for clearing the same, otherwise the goods shall then be auctioned after 90 days of the first notice, unless the delay is attributable to the port authorities.

2. The sale proceed shall be paid to the trader after deducting the expenses on account of auction expenses, freight, the charges due to the custodian of the goods and duty and taxes payable in respect of such goods.

Article 25: Priority to Certain Consignments The Contracting Parties shall grant, at any Customs office during a Customs transit operation, priority to consignments consisting of live animals, perishable goods and of other urgently needed goods for which rapid transport is essential.

Article 26: Dangerous goods For transport of dangerous goods under customs transit, special permission shall be obtained from the relevant authorities of the concerned Contracting Party.

Article 27: Accidents Accidents and other unforeseen events en route effecting affecting the Customs transit operation shall be reported to, and verified by the Customs and other competent authorities closest to the scene of the accident or other unforeseen event.

Article 28: Loss, Destruction, or Shortage of the Cargo En Route When it is established to the satisfaction of the Customs Authorities that goods specified in the Transit documents/GD have been destroyed or have been irretrievably lost by accident or other unforeseen events en route or that they are short by reason of their nature, payment of duties and taxes normally due, shall be waived.

Article 29: Mutual Administrative Assistance The Customs authorities of the Contracting Parties shall notify each other of any serious inaccuracy in a goods declaration or of any other serious irregularity discovered in connection with a Customs transit operation, in order that the matter may be investigated, any duties and charges may be collected and any repetition of the circumstances may be prevented.

Article 30: Review of the Implementation of the Provisions of this Protocol Representatives of the Customs Administration of the Contracting Parties shall meet to monitor the implementation of the provisions of this Protocol at least once upon a year or upon request of a Contracting Party.

Article 31: Provisions regarding Situation of Force-majeure Measures Where the conveyance of goods from port of entry to port of destination is interrupted by accident or force majeure, the carrier shall be required to take reasonable precautions to prevent the goods from entering into unauthorised circulation and to report to the nearest Customs office or other competent authority immediately of nature of accident or other circumstances which have interrupted the journey.

Annex to Protocol No 3

MINIMUM REQUIREMENTS TO BE MET BY CUSTOMS SEALS AND FASTENINGS

A. General requirements in respect of seals and fastenings:

The seals and fastenings, together, shall:

i. Be strong and durable;

ii. Be capable of being affixed easily and quickly;

iii. Be capable of being readily checked and identified;

iv. Not permit removal or undoing without breaking or tampering without leaving traces;

v. Not permit use more than once;

vi. Be made as difficult as possible to copy or counterfeit;

B. Physical specification of seals:

-- The shape and size of the seal shall be such that any identifying marks are readily legible;

-- Each eyelet in a seal shall be of a size corresponding to that of the fastening used, and shall be positioned so that the fastening will be held firmly in place when the seal is closed;

-- The material used shall be sufficiently strong to prevent accidental breakage, early deterioration (due to weather conditions, chemical action, etc) or undetectable tampering;

C. Identification Marks: The seal or fastenings, as appropriate, shall be marked;

-- to show that it is a customs seal, by application of the words "Customs"

-- to enable the customs office by which the seal was affixed, or under whose authority it was affixed, to be identified, for example, by means of code letters or numbers, text of the customs protocol under the new APTTA added

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Forex remittances information-sharing: FBR asks SBP to devise mechanism

News Paper: Business Recorder

ISLAMABAD (July 22 2010): The Federal Board of Revenue has urged the State Bank of Pakistan to chalk out an effective mechanism for sharing forex remittance information among the customs department and the banks through electronic data interchange system. Sources told Business Recorder here on Wednesday that the actual values of import/exports could be checked on the basis of information pertaining to foreign exchange remittances coming through legal banking channels.

The remittances received from board in Pakistan in the form of foreign exchange and any foreign exchange send to other countries by a particular exporter could be checked. The specific value of the import commodity could be checked with the help of this information.

The foreign exchange details of importers and exporters would help in determining the actual value of imports based on foreign invoices and other relevant documents involved in the business transaction. The information is also beneficial during exchange of information between trading countries.

The remittance information would also be helpful in checking the details of the actual contract of the importer signed with his supplier for actual valuation of the imported goods. Sources said that the FBR is taking effective anti-smuggling measures and curbing underinvoicing, improving valuation and Afghan Transit Trade.

The Pakistan Customs Valuation, Gateway (PCVaG), (a customs valuation website) has been launched and is operational since March 2010. The international reliable data on prices of goods is now available in PCVaG as a reference tool to check under invoicing. A Customs General Order (CGO) has been issued to assign roles and responsibilities in order to ensure that valuation data available in PCVaG is effectively utilised and regularly updated.

The mechanism for sharing forex remittance information with Customs and establishing an Electronic Data interchange is being discussed with SBP and Pakistan Banking Association. On the recommendation of Revenue Advisory Council (RAC) a study regarding the cost and benefits to local industry and the government as a result of duty-free imports will be done by former and current experienced customs officers through a committee comprising Collectors of Customs.

The FBR is consulting Ministry of Commerce regarding restriction on imports without LCs or sales contract. The mechanism of valuation is expected to be publicised in the media to create awareness among the business and trade for accurate assessment of duties and taxes on the imported goods

-www.brecorder.com