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PROFESSIONAL ACCOUNTANTS FORUM

A Forum of all Business Professionals including CA, CMA, MBA,M.Com, ACCA, CIMA, CPA, CFA, CIA , CISA, PIPFA, PGD in IB

MEMON PROFESSIONAL FORUM We aim to stand high with all Professional Bodies .

Prestigious body of Memon Professionals from various disciplines i ncludingAccountants, Architects, Bankers, Doctors, Engineers, Lawyers, MBAs et c.

PRESS RELEASE

More than 32% amendments turn down by the Parliament

No proper work done by the Finance Ministry

KARACHI A successful Seminar on Finance Act vis--vis Finance Bill was jointly organised by theProfessional Accountants Forum (PAFO) and Memon Professionals Forum at the ICMAP City Campuswhere Abdul Qadir Memon - President Pakistan Tax Bar Association, Asif Kasbati FCA, FCMA & LLb,Director Tax Services of A. F. Ferguson & Co, and Mr Mahmood A Razzaq, Partner, Baker Tilly MehmoodIdress Qamar gave a very informative and lively presentations before several professionals includingFCMA, FCA, FCCA, MBA, Finance Directors and CFOs.

During the course of the seminar it was emphasised by the learned speakers that whilst presenting thebudget, proper preparation was not done which lead to more than 32 % amendment whilst convertingthe Bill into the Act. Even the important amendments relating to tax on capital gains and tax collection

by banks on transactions against cash & vice versa still require clarifications.

Memon identified several issues which require clarifications from the FBR or amendment in the SecondSchedule to the Income Tax Ordinance including those relating to Capital gains, transfer of shares tolegal heirs, transfer of shares from subsidiary to holding company, tax on Mutual funds - being a passthrough entity, Profit on debt earned by non-resident Pakistanis, Audit reasoning in the StandardOperating Procedures.

Kasbati enlightened the participants that Tax credit @ 10% of the amount invested on purchase of Plant& Machinery (P&M) for Balancing, Modernization & Replacement in an industrial undertaking set up inPakistan. The Tax credit is admissible (on the aforesaid P&M purchased and installed between July 1,2010 to June 30, 2015) against tax payable for the year in which the investment is made. Any unadjustedtax credit can be carried forward for adjustment in the next two tax years, following the tax year inwhich such plant and machinery were installed. Any tax credit erroneously allowed will be subject torecoupment.

He explained the through the Bill, tax deducted from Profit on debt on Debt Instruments, Governmentsecurities including Treasury Bills and Pakistan Investment Bonds was proposed to be final tax forCompanies. The proposal has not been enacted in the Act.

Clarifying the newly introduced withholding tax provisions of section 231AA read with 2 nd Revised

Circular 7 dated June 30, 2010, he stated that it will be actually applied by Banks as well as NBFI,

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exchange companies and the authorised dealers of foreign exchange on certain cash transactions aboveRs 25,000. It will be applied at the time of sale of above or any other instrument of bearer nature (a)against cash or (b) on receipt of cash on cancellation of any of these instruments. It will also apply on allmodes of electronic transfer against cash. It will not apply for (a) inter-bank transfer (b) intra-banktransfer (c) where payment is made through a crossed cheque for purchase of a financial instrument.

Kasbati stated whilst presenting the budget the govt gives a rosy picture and whilst Act comes thesituation is different. In this regard he cited that example of collection of income tax with Electricity bills,where the amount of electricity bill exceeds Rs 20,000, the rate of collection of advance tax wasannounced for all consumers to be reduced from 10% to 5 %. However, as per the Act, this reduction isapplicable for industrial consumer only. Commercial consumer will continue to pay tax at 10%.

Elaborating the newly introduced tax on Capital gains on disposal of Securities, he stated that Capitalgains from sale of listed shares, PTC vouchers, Modaraba Certificates or any instrument of redeemablecapital were exempt from tax upto June 30, 2010, however, now only Capital gains from the saidsecurities and Derivate products, held for > 12 months, are exempt. If held for < 12 months by persons(other than a banking company and Insurance company) are taxable at progressive tax rates on disposalof all the above securities from July 1, 2010 ranging from 7.5% to 17.5%

This Capital gain will be taxed as a separate block of income. Advance tax on capital gains from sale of allsuch securities be payable, except for individual investors. Holding period of security shall be reckonedfrom acquisition date (whether before, on or after June 30, 2010) to disposal date after June 30.2010. Any loss incurred by on disposal of securities in a tax year, shall be set off only against the gainfrom disposal of other securities chargeable to tax. No loss can be carried forward. Mutual funds orCollective Investment Scheme are required to deduct tax on redemption of securities.

Highlighting the level of compliance, he shared that out of 2.75M NTN holders, 2M have filed theirreturns. Out of over 50,000 companies, only 20,000 have been filing their returns. Against theCommercial users of Gas and Electricity of 2.7M, only 600K have been filing their returns. Regarding theCancer of Corruption he quoted that Pakistan can save at least 30% Rs 360 billion (over $4 billion),which is the direct cost in Pakistan of corruption in procurement only as per TransparencyInternational Pakistan Chapter Chairman - Adil Gilani. He further added that the Auditor General of Pakistan's reported corruption in the fiscal year 2008 of Rs 323 billion.

Speakers emphasized that instead of introducing new taxes, Goods Governance and Broadening thebase through Rule of Law and Proper Enforcement are important, and Control on Cancer of Corruption

is very important for our beloved country Pakistan. Mahmood highlighted the introduction of new sections through Finance Act, whereby the FederalGovernment has been empowered to appoint Special Judges to take cognizance of any offencepunishable under this Act. Consequently, sections with regard to jurisdiction of Special Judge, Code of Criminal Procedure, Transfer of cases and appeal to the High Court against his order have also beenadded. He clarified that tax on services falling within the ambit of 4 provinces and Federal Capital Salestax Ordinances remained unchanged at 16% though the GST rate has been enhanced to 17%.

The Presidents of PAFO and MPF, Iqbal Surmawala and Pervaiz Abubakar also spoke on the occasion.