Wednesday, 4 April, 2018
ToBACCo InDuSTRY FAIlS To meeT Revenue TARgeT WHO CONVENTION BINDS GOVT TO INCREASE TAXES ON CIGARETTES TO REDUCE TOBACCO CONSUMPTION ISLAMABAD
ESPITE the introduction of a third slab on cigarette prices, the Federal Board of Revenue (FBR) has been losing revenue and is most likely not to achieve the revenue target of Rs126 billion during this year, it was learnt. Well informed sources in the cigarette industry disclosed to Pakistan Today, that the FBR is lagging far behind in achieving the revenue target of Rs126 billion from the cigarette sector during this year. They disclosed that FBR is expected to achieve only about Rs100 billion instead of Rs126 billion by the end of current fiscal year. They also said that although a third slab was introduced on cigarette prices during the last year, FBR has so far not received what it got back in revenues from the cigarette industry when two tiers of taxation were in place. The sources informed that the introduction of a third tier of taxation on cigarette prices has so far resulted in an increase in the revenue of Multinational Companies (MNCs) as the consumption of their brands of cigarette increased while almost 10 local cigarette factories closed down. Illicit trade of
smuggled/non-duty paid cigarettes has also increased due to the closure of the local industry, said sources. “The MNCs are wiping out local producers from the market due to the current policies implemented by FBR,” said sources. As per available data, the revenue target of tobacco sector for the year 2013-14 was Rs88.4 billion, Rs102.88 bln for 2014-15, Rs114.19bn for 2015-16, Rs83.69b for 2016-17, and Rs126bn for 2017-18, despite introduction of tier-III taxation on cigarette price. Sources in the tobacco industry have informed that since there is no federal excise duty imposed on cigarette brands of MNCs operating in the country, the FBR blatantly favours these companies and their executives. Similarly, sale of smuggled cigarettes belonging to global MNCs has continued in the open market without any pictorial warnings. They said that all over the world, domestic and local investors are protected by their respective governments. Even President Trump has also capitalised on that and promised his voters of moving from a free economy to protectionism. However, in Pakistan a complete opposite of international practices has been happening for a very long time, and because of current policies by the FBR, multina-
Pak holds 10th round phase-II of China Pakistan Free Trade Agreement ISLAMABAD STAFF REPORT
The 10th Round of Phase II ChinaPakistan Free Trade Agreement (CPFTA) was held in Islamabad on 2nd April, 2018. The session was co-chaired by Ministry of Commerce of China Vice Minister, Wang Shouwen, and Ministry of Commerce of Pakistan Secretary Mohammad Younus Dagha, with the objective to negotiate the tariff reduction modalities before concluding the Phase II of CPFTA. Both sides exchanged their offer and request lists in a candid and cooperative manner and reached consensus on many issues. Moreover, in a bid to curb misdeclaration of goods and under invoicing, both sides agreed to implement the Electronic Data Exchange (EDE) system by 30th April, 2018. Both sides further agreed to consider establishing mutually agreed mechanism to effectively address discrepancies found in exchange information. In the end, Pakistan and China vowed to continue negotiations in future to address each other’s concern before concluding Phase II of CPFTA.
Sindh sales tax collection up 44pc KArAchI STAFF REPORT
The collection of sales tax in Sindh was recorded at Rs9.29 billion in March, up 44 per cent compared to Rs6.69 billion in the same period of last year, reported a private news outlet. Sales tax collection for the first nine month of 2017-2018 was recorded at Rs63.93 billion, up 19.85 per cent, compared to Rs53.34 billion in the same period of 2016-2017. Sales tax in Sindh is being charged at a rate of 13 per cent by the Sindh Revenue Board (SRB) on 89 services, with major contributors being, ports and terminals operators, telecommunication sector, banks and insurance. SRB has set a revenue target of Rs100 billion for the current fiscal year, up 28 per cent from the Rs87 billion target of last fiscal year, which it hopes to achieve by launching an effective recovery drive and assisting and facilitating the taxpayers.
tionals are wiping out local producers, said sources. It is relevant to mention here that the Ministry of National Health Services (NHS) is keen to end the third slab introduced by FBR as it increased tobacco consumption after prices of cigarettes were lowered. The ministry (NHS) has now proposed to the finance division to eliminate the third slab of cigarette category before the upcoming budget as the country is stepping towards adopting a tobacco-free generation policy. The ministry, in connection to this, has clearly asked the finance division to end the third tier from cigarettes in the upcoming budget. The prices of cigarette were increased in 2013-16 in two slabs. However, in May, the FBR introduced the third slab after multinational companies reported a decline in their production and the government collected less rev-
enue from the industry. Also, the rate of federal excise duty on the first tier of cigarettes is Rs3705 per 1,000 cigarettes while Rs1,649 per 1,000 cigarettes in the 2nd tier. Reportedly, every year, over 160,100 of the people in the country are killed by tobacco-caused diseases. Still, more than 125,000 children (10-14 years old) and 14.73 million adults (15+ years old) continue using tobacco each day. Currently as per reports from a summit in Cape Town (South Africa), deaths from cigarettes in Pakistan have amounted to 1,60,000. It is worth mentioning here that Pakistan was a signatory of the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC). And, under the treaty, the government is bound to increase taxes to reduce tobacco consumption in the country.
KSE 100 crosses 46,000pts, amid downward regional trend LAhOrE STAFF REPORT
The KSE100 Index traded higher on Tuesday, despite a weak open as it ignored regional markets which traded lower amid sharp overnight declines on Wall Street following a drop in tech stocks and trade-related worries. Investor interest in Materials (mainly cement and fertiliser) came to the rescue and pushed the 100 Index higher as it touched 46,000 in the first session. However, bouts of profit-taking kept the 100 Index volatile and after testing the 46,000 mark multiple times the benchmark index closed up 271.91 points (+0.59 per cent) at 46,013.34 – just shy of its intraday high of 46,057.53. Banks came back into the lime light after posting sharp losses in the previous session. Market volume and turnover remained flattish – up 5.3 per cent and 5.1 per cent respectively on d/d basis. Energy (17.53 per cent of total turnover – up 80.8 per cent on d/d basis) saw renewed investor interest despite overnight losses in crude oil prices as POL (6 per cent of total turnover – up 230.6 per cent on d/d basis) touched fresh all-time highs amid market rumors of new discoveries. Turnover in Materials staged a breather (down 7.26 per cent on d/d basis) despite FFC (4.15 per cent of
total turnover – up 538.8 per cent on d/d basis) taking centre stage following the release of material information at the local bourse. Major contribution to index gains came from Industrials (+1.51 per cent), Energy (+1.06 per cent) and Materials (+0.94 per cent), thanks to MTL (+5 per cent), POL (+5 per cent), APL (+3.21 per cent), PSO (+0.72 per cent), SHEL (+3.06 per cent), FFC (+3.58 per cent), ISL (+3.43 per cent), FCCL (+2.64 per cent), FFBL (+4.20 per cent) and MLCF (+2.49 per cent). HASCOL (-0.71 per cent) announced 4QCY17 NPAT of PKR 237 million, down 21 per cent YoY. In market related news, FFC (+3.58 per cent) intends to invest up to $121 million in Thar Energy as it plans to make $39 million equity investment and $82 million under sponsor support commitments in Thar Energy. Market participation for the 100 Index increased to 135.74 million shares (+5.9 per cent on d/d basis).
Major contributions to total market volume came from LOTCHEM (+3.69 per cent), KEL (+1.16 per cent) and WTL (-3.11 per cent) churning 74.59 million shares out of the All Share volume of 282.55 million shares. Daily traded value for the 100 Index increased to $81.22 million from $78.11 million in the previous session (+3.79 per cent on d/d basis); ISL ($5.93 million), PSO ($5.26 million) and BAFL ($4.99 million) were among top contributors from traded value perspective. Major contribution to the 100 Index upside came from POL (+5 per cent), FFC (+3.58 per cent), MTL (+5 per cent), BAHL (+1.91 per cent) and THALL (+4.46 per cent) adding 190 points. On the flip side, HBL (-0.55 per cent) and COLG (-5 per cent) took away 33 points. The 100 index is 22 per cent above its 52-week low of 37,736.73 reached on December 12, 2017 and 13 per cent below its 52-week high of 53,127.24 touched on May 25, 2017.
FBR urged to reactivate Alternative Dispute Resolution Committee KArAchI ONLINE
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its pre-budget proposals, has urged the government to reactivate the Alternate Dispute Resolution Committee (ADRC) and provide the taxpayers an easy and efficient mechanism for resolution of tax related disputes, outside the court of law and liquidate huge amounts of tax arrears. The FPCCI Pre-Budget proposals are being prepared by the FPCCI Advisory Council under the Chairmanship of FPCCI's Vice President Syed Mazhar Ali Nasir. The proposals argued that a huge amount of tax arrears is lying pending for liquidation and payment to both the stakeholders, taxpayers and FBR, due to inordinate delays in completion of litigation process. It added that active and prominent members should be selected from the legal fraternity, public, FBR, and private sectors (FPCCI and Chambers) and their proper rules must be framed for the formation of the committee, scope of work, conduction of ADRC proceedings, stay of matter/demand, disposal of application by the ADRC Committee, retention of records, remuneration for members of ADRC etc. The FPCCI elaborated that being an independent, unbiased and trustworthy body because of the nature of its composition (FBR officials and other experts from public and private sectors) ADRC will have a very strong element of credibility and hoped that the efficient use of ADRC will have a solitary effect on generation of more taxes to the government exchequer, quick disposal of longstanding pending cases in court of law, and reductions in litigation, as well as court cases.
Hascol’s profit after tax rises 10.8pc YoY LAhOrE MUHAMMAD FARAN
In a notification to the Pakistan Stock Exchange (PSX) on Tuesday, Hascol Petroleum Limited declared its financial results for the year ended December 31, 2017, announcing a Net Profit After Tax (NPAT) of Rs1.33 billion, compared to Rs1.20 billion in 2016, up 10.8 per cent Year on Year (YoY). The company also announced a 35 per cent final cash dividend of Rs3.50 per share. “Together with the interim cash dividend of Rs3.5 per share i.e. 35 per cent already paid, the total dividend for the year 2017 will amount to 70 per cent cash dividend,” the notification read. Net revenue for the year amounted to Rs174.2 billion up 74.7 per cent Year on Year (YoY), compared to Rs99.7 billion in 2016. Earnings Per Share (EPS) also increased to Rs10.7 in 2017, from Rs9.41 in 2016, up 13.7 per cent YoY. On the other hand, expenses also saw an increase to Rs1.87 billion in 2017, compared to Rs1.11 billion in 2016 up 68.5 per cent YoY. Hascol Petroleum Limited, incorporated in 2001, operates a network of approximately 400 retail fuel stations in Pakistan. It engages in the procurement, storage, and marketing of petroleum and related products that include fuel oils, diesel, gasoline, jet fuel, and liquefied petroleum gas. Under its FUCHS brand name, the company also produces and markets a range of lubricants and greases. At the time of the filing of this report on Tuesday, Hascol Petroleum was trading at Rs264.10 on the PSX, down Rs1.90 or 0.71 per cent from the start of the day.
FFC recommends $121m investment in Thar energy LAhOrE STAFF REPORT
In a notification to the Pakistan Stock Exchange (PSX) Fauji Fertiliser Company (FFC) Limited informed that it has recommended approval of company’s members for an equity investment of up to $39 million and sponsor support commitments of to $82 million in Thar Energy Limited (TEL). “On April 3, 2018, the board of di-
rectors of FFC recommended for approval by the company’s members in terms of Section 199 of the Companies Act, 2017 at an Extraordinary General Meeting of the Company, equity investment of up to $39 million (or its rupee equivalent) and sponsor support commitments of up to an additional $82 million in Thar Energy Limited (TEL),” the notification read. The decision has been taken by FFC further to its decision to invest equity in
TEL amounting to $10 million, taken on January 30, 2018, as a result of which TEL will become an associated company of FFC. “Hence the approval of FFC’s shareholders is being sought for the investments to be made in TEL after it becomes an associated company of FFCL, comprising equity investment of up to $39 million, inclusive of the said equity investment of up to $10 million to be made prior to the date of
the EGM, and sponsor support commitments of up to an additional $82 million, thereby resulting in total investment of to $121 million,” the notification further read. FFC, incorporated in 1978 manufactures, purchases, and markets fertilisers and chemicals in Pakistan and Morocco. FFC’s share price stood at Rs96.4, up Rs3.35 or 3.58 per cent by the end of trading on Tuesday at the PSX.