FBR's Clarification regarding Payment of surcharge at 15% under section 4A of the Income Tax Ordinance 2011—levied vide Income Tax (Amendment) Ordinance 2011

The Federal Board of Revenue has announced that the 15@ surcharge under section 4A of the Income Tax Ordinance 2011 is payable by all tax payers of their tax liability for the Tax year 2011, irrespective of whether their tax year ends on 31st December 2010 or 30th June 2011 or any other date.

In a circular issued here today, the FBR has made certain clarifications to the 15% Surcharge under section 4A of the ordinance in view to address the queries being received by the Board suggesting multiple interpretations of this Section and to streamline the implementation of this time bound provision.The circular further clarifies that the Tax Liability for the entire Tax Year 2011 may not be subjected to the imposition of surcharge and the same be levied on the proportionate liability for a period of three and a half month.It may hence be noted again that the surcharge is to be computed @ 15% of the Income Tax payable for three months and a half on pro-rata basis and the tax liability inclusive of 15% surcharge so calculated is to be set off against the taxes withheld or collected in the tax year.

Experts compare notes on developing corporate sector at SECP Forum

At the first meeting of the SECP Financial Markets and Corporate Sector Development Forum on Thursday in Karachi key market experts, industrialists and policymakers shared their ideas on developing fair, transparent and efficient financial markets and a vibrant corporate sector.

The forum was a gathering a select group of best minds in the market. It was aimed at seeking guidance from the rich and diversified experience of key stakeholders from various sectors and professions, including Mr Shoukat Tareen, Mr Hussain Dawood, Mr Iqbal Ali Lakhani, Dr Ishrat Hussain, Mr Zakir Mahmood, Mr Shahid Ghaffar, Mr Mahmood Mandiviwala, Mr Shabbar Zaidi, and Mr. Omer Moershed.

While opening the session, Mr Mohammad Ali, the SECP Chairman, remarked that the SECP recognizes the need for developing vibrant markets, sectors and market players as well as for improving their capabilities and processes. That’s why it has engaged the external stakeholders in a consultative process both at policy level of the SECP Forum and working level of sector-specific committees. The ideas and suggestions shared at the forum will steer the SECP to be an effective regulator of the markets and contribute to the capital formation leading to the growth of the economy, he said. He stated that the guidance taken from the policy level of the SECP Forum will be implemented at the working level and would reflect in the SECP’s actions in the near future.

The forum discussed various issues that hampered the growth and development of the markets and corporate sector in the country and have resulted in fragmentation in the markets. The issues identified range from the access to capital for the SME sector and the outreach expansion of non-bank financial sector to the SME and rural areas of the country, development of second tier of financial institution after the banking sector, enhancing the investor base in the capital markets, implementation of an effective legal framework covering corporate rehabilitation, de-mutualization of stock exchanges and future trading etc. The participants also highlighted the immediate need for implementing Corporate Rehabilitation Act and De-Mutualization Act and urged the SECP to push forward the process in this regard.

The need to work on corporate governance and restructuring of SOEs, implementation of the national warehousing project to improve functioning of commodities exchanges and the need to clearly define DFIs role for infrastructure and industrial development of the country was also emphasized by the participants. Mr Tahir Mahmood, Commissioner, SECP, apprised participants of the improvements in the legal framework of the takeover and the corporate law that are under consideration at the Corporate Law Review Commission that has been reactivated by the SECP.

The forum in Karachi was the first event as part of the SECP’s monthly programme which will alternate between Karachi, Lahore and Islamabad inviting stakeholders from industry, regulators, academia, media, sector associations, multilateral agencies, market participants, and other important players. The second meeting of the forum will take place in Lahore

SECP tells holding companies to enhance public disclosure

ISLAMABAD: Group Companies Registration Regulations, 2008, were issued by the Securities and Exchange Commission of Pakistan in 2008 to provide a regulatory framework for the formation of group companies, comprising a holding company and its subsidiaries and to streamline the group ownership structures.

The Regulations provided a registration mechanism of holding companies along with their subsidiaries as a group with the SECP, and also provided an enabling framework for the group companies intending to avail themselves of tax relief from the FBR.

In order to further enhance the public disclosure of intra-group shareholding and financial position of the group companies, it has now been required that all the holding companies registered under the Regulations shall maintain their websites and place thereon the annual audited financial statements of their group along with their directors’ report and the auditors’ report. SRO No. 640(I)/2011 was issued on June 22, 2011, mandating the aforesaid requirement, and the holding companies have been required to report the compliance by intimating the SECP of their website address within 15 days of the issuance of the notification.

Arshad Ali to head FPCCI’s committee on Labour Manpower Export and Overseas Pakistanis

Syed Arshad Ali, a prominent name in the hospitality industry and a former chairman of the Pakistan Hotel Association, has been appointed as the Chairman of the FPCCI’s Standing Committee on Labour Manpower Export and Overseas Pakistanis.

Arshad Ali, Managing Director, Integrated Facilitators (Pvt) Ltd, has been assigned the responsibility by Senator Haji Ghulam Ali, President, Federation of Pakistan Chamber of Commerce & Industry (FPCCI), for the year 2011.

SECP proposes changes in NBFC Regulations, 2008

The Securities and Exchange Commission of Pakistan (SECP), vide S.R.O. 350 (I)/2011 dated May 5, 2011, has proposed certain amendments to the NBFC & Notified Entities Regulations, 2008 (the “Regulations”) and have also placed these amendments on its website to solicit comments from the public and concerned quarters.

While allowing operational flexibility to fund managers, measures have also been introduced to ensure investor protection. It is a step forward by the regulator for a more conducive regulatory framework to help the industry participants to benefit from growth opportunities.

The significant amendments encompass:

1. Replacement of seed capital requirements with minimum fund size to offer flexibility to fund managers in launching new mutual funds;

2. Restricting annual equity brokerage paid by a mutual fund to a single broker to 10% of its total brokerage expense, for promoting competitive brokerage services. Besides minimizing concentration risk posed to mutual funds, such measures are also aimed at encouraging other financial market participants to benefit from the diversified brokerage services rather than routing bulk transactions through single or a few brokers.

3. Empowerment of unit holders for decisions on material aspects of a mutual fund including transfer of its management rights;

4. Enhancement of role of trustees of mutual funds to ensure better safeguarding of unit holder interests and prohibiting them from investing in mutual funds for which they act as trustee.

5. Imposition of 5% cap on investment by a single unit holder in a mutual fund with the objective to contribute towards broadening the investor base.

6. Removal of minimum lease period for any lease to provide operational flexibility to leasing companies;

The SECP, as part of its continuous efforts for development of the capital markets has proposed the amendments in accordance with the best international practices and are aimed at encouraging the growth of mutual funds.

Any suggestions or comments on the proposed amendments may be submitted by May 21, 2011 at NBFC.Comments@secp.gov.pk

Press Statement: Karachi Chamber of Commerce and Industry

SECP nominate Aftab Ahmad Khan, Mumtaz Hussain Syed, Asif Kamal and Bushra Naz Malik as LSE directors

The Securities and Exchange Commission of Pakistan (SECP) has nominated high profile and experienced professionals from the financial and capital markets as directors on the Board of Lahore Stock Exchange (LSE) for 2011.

They are Mr. Aftab Ahmad Khan, Group Director (Finance & Accounts), Nishat Group; Mr. Mumtaz Hussain Syed, Chief Executive, Crosby Capital Pakistan (Private) Limited; Mr. Asif Kamal, Chairman, Trust Investment Bank Limited; and Ms. Bushra Naz Malik, former Group Director, Finance and Chief Financial Officer, Kohinoor Maple Leaf Group.

They come from the fields of project finance, accounts and investment banking have valuable capital market and corporate sector experience and can be seen as a fair mix of the requisite qualification and skills on the LSE Board.

Mr.. Aftab Ahmad Khan, Fellow Member of the Institute of Chartered Accountants of Pakistan, has over 40 years of diverse professional experience. Presently, he is the Group Director (Finance & Accounts) of the Nishat Group, in which capacity he looks after financial and strategic planning and investment appraisal for the Group. Additionally, he is serving as Director on the Boards of the MCB Bank Limited and various other companies in the textile, paper, energy and hotel/ tourism sectors. He also served in the public sector organizations including Punjab Industrial Development Board dealing with Ghee, Sugar and Rice Milling and has been Director at the National Investment Trust Limited, Karachi from 2008 to 2010.

Mr. Mumtaz Hussain Syed, an investment banker by profession, has more than 22 years of extensive experience in the fields of project finance, investment management and analysis, business development and general management and has several high profile transactions in energy, telecommunications, banking, financial services industry and other sectors to his credit. Presently, he is the Chief Executive of the Crosby Capital Pakistan (Private) Limited which is providing financial advisory, business restructuring and management consulting services to various clients. Holding an MBA degree from the Lahore University of Management Sciences, he possesses extensive capital market experience covering privatizations, acquisitions, divestitures, debt arrangement, equity placement and joint ventures. He has also served on the Board of Directors of a number of listed companies as well as advisory positions with the government of Pakistan.

Mr. Asif Kamal, a graduate in Finance from the Business School of the University of South Florida, is presently the Chairman of Trust Investment Bank Limited: one of the leading investment banks in Pakistan. He is also the Chief Executive of Tricon Developers Limited, a real estate development company. He has also served as the Chief Executive of Genesis Securities Private Limited from 1994 to 2006, which is a financial advisory company. His professional and capital market experience accumulating up to more than 16 years, Mr. Kamal is also a member of the Federal Board of Investment since 2008 and a member of the Board of the Privatization Commission since 2010.

Ms. Bushra Naz Malik, Fellow Member of the Institute of Chartered Accountants of Pakistan, has over 16 years of professional and financial market experience which includes her 12-year tenure as the Group Chief Financial Officer of the Nafees Group of Industries, Lahore and a 4-year term as the Group Director, Finance and Chief Financial Officer of the Kohinoor Maple Leaf Group. She did her MBA at Kellogg Business School in the US and the Schulich Business School, Canada. She also has an LLB degree from the Punjab College and Advanced Management Program certification from the Harvard Business School.

It is expected that the LSE Board of Directors, in particular, and the capital markets in general, will greatly benefit from the mix of extensive knowledge, experience and diverse expertise the above professionals will be offering, and that the said individuals will be contributing positively towards promoting principles of good governance and transparency.

Mufti Munib ur Rehman appoints as Memeber of Modarba religious board

ISLAMABAD, March 11: The federal government has appointed the renowned religious scholar Professor Mufti Munib ur Rehman as a member of the Religious Board for Modarabas (Islamic financial institutions) with immediate effect. The appointment has been made in pursuance of Section 9 of the 1980 Modaraba Companies and Modaraba (Floatation and Control) Ordinance.

This position fell vacant with Mr. Imran Ahsan Nyazee’s resignation. Mufti Munib ur Rehman will serve out the remaining term.

The board considers applications for floatation of modaraba in light of Shariah. It provides guidance, based on the teachings of Islam, to the Registrar (Modarabas) of the Securities and Exchange Commission of Pakistan.

Consensus needed to tackle economic challenges: Ebad

Dr Ishrat Ul Ebad Khan, Governor Sindh has said that political consensus amongst all parties a pre-requisite to face challenges faced by the country.

Addressing the Annual Dinner 2010 of Korangi Association of Trade and Industry (KATI), the Dr Ebad said that the country and nation is facing various challenges particularly law and order and declining economy and all the stakeholders should sit together as the government could not face the challenges alone and without the help of all parties and the people. He said that MQM has already rejected the recent increase in POL prices announced by government. He said that MQM had rejected the POL price increase in the past as it was a big burden on the general masses. Governor said that though condition of economy is not good but still some indicators such as building up foreign exchange reserves and increase in exports are showing that the situation is not that bad either. He said that industry in Karachi has been exempted from load-shedding and the gas shortage has also been resolved with the consultation of KESC and SSGC's managements and the stakeholders. He mentioned that KATI has become a distinctive trade and industrial body through its efforts for the betterment of trade and industry. While paying tributes to Patron In-chief KATI, S M Muneer and his team he advised other trade bodies to follow his footsteps.

S M Muneer while expressing his dismay over 10 per cent increase in POL prices, said that the economy is already reaching on the verge of collapse the government has once again increased the prices of petroleum which would be extremely detrimental to the national economy and the break the backbone of general masses. He said that due to anti-people decisions would result in unrest among the people. He pointed out that one day strike in Pakistan causes Rs5 billion revenue loss to the national exchequer and government should also realize this factor and instead of increasing POL and utilities prices should try to avoid greater losses in the shape of strikes, industry's shut down and export shipments' failures. He once again demanded of the government to hand over the management of loss making public organizations such as PIA, Railways, Pakistan Steel, PEPCO, etc. to the some honest and professional stakeholders in private sector in order to bring them out of red and save Rs500 billion subsidies given to these organizations annually. The Chairman, KATI, Syed Johar Ali Qandhari in his welcome address pointed out the grim situation of the economy and asked the governor to give priority to the ongoing crisis of utilities shortage such as power load-shedding, water and gas shortage in the country's industrial and commercial hub - Karachi."Government should have to address the economy on first priority as the industries are closing down, exports declining, raw materials are getting expensive frequently and the Pak rupee has been devalued by 40 per cent in the last three years", Qandhari said.

The outgoing Chairman, KATI, Razzak Hashim Paracha said that Pakistan's industry is in really bad shape and the government should have act positively to save the industrial base to avoid mass scale unemployment in the country.

Former Chairman, Mian Zahid Husain pointed out that Karachi's industry has been exempted from load-shedding only due to the efforts by the Governor Sindh. Senior Minister, Sindh, Agha Siraj Durrani, Provincial Minister for Industries, Rauf Siddiqi, Vice President, FPCCI, Khalid Tawab and Senator Abdul Haseeb Khan also spoke on the occasion.

After discussion among coalition partners: Petroleum prices increase reduced by 50 percent

The government has agreed to reduce by 50 percent the recent increase in the petroleum prices in the country.An announcement to this effect was made by Federal Finance Minister, Dr. Abdul Hafeez Shaikh, while briefing media at the Governor House here late Thursday night.He said "after discussion among coalition partners which was held in a very cordial atmosphere, we have decided that the increase in the petroleum prices which was about 10 percent, be reduced by half, that is, five percent".Hafeez Shaikh said that because of this the government would have to bear an additional burden.

He said that in case of any reduction in the petroleum prices in the international market, the benefit of the same would also be transferred to the public.

Finance Minister said that there would also be 25 percent reduction in the allocation of petrol for government officials.Hafeez Shaikh said that a decision has been taken in principle to reduce the recent increase in the petroleum prices by 50 percent.

He said that a formal approval would be sought from the Prime minister and a notification would subsequently be issued.

Sindh Governor, Dr. Ishrat Ul Ebad Khan, said that after the increase in petroleum prices in the wake of enhancement in the price of the commodity at international level, the chief of the Muttahida Qaumi Movement (MQM), Altaf Hussain, talked to President Asif Ali Zardari, and it was considered as to how the impact of the enhancement could be minimised for the masses.

He said that President Zardari sent Finance Minister, Dr. Hafeez Shaikh, and Interior Minister, Rehman Malik, for talks with the MQM team, on how the impact of increase in petroleum prices could be minimised to provide relief to the masses.

Dr. Hafeez Shaikh said that in the past three months there was almost 26 percent increase in petroleum prices at the international level but the Government of Pakistan decided to enhance only 10 percent and had to absorb an impact of Rs five billion per month.

He stated that MQM Chief Altaf Hussain and President Asif Ali Zardari initiated a contact to try and further minimise the impact of increase of petroleum prices on the people.

Federal Finance Minister said “we decided to reduce this increase by 50 percent, that is, from 10 percent to five percent.

MQM leader Dr. Farooq Sattar, who was also present on the occasion, congratulated the people on the announcement regarding reduction in petroleum prices.

He thanked President Asif Ali Zardari, Prime Minister Syed Yousuf Raza Gilani, Finance Minister Dr. Hafeez Shaikh, and the MQM chief Altaf Hussain.

Dr. Farooq Sattar was of the view that attention be paid towards broadening the tax base.

Interior Minister, Rehman Malik, thanked the MQM leadership and Finance Minister, Dr. Abdul Hafeez Shaikh.

He said that Pakistan Peoples Party (PPP) and MQM always think for the betterment of the people and poverty alleviation.

Rehman malik also appealed to the transporters that in view of reduction in petroleum prices they should withdraw their strike call immediately.

MQM leaders Babar Ghauri, Syed Sardar Ahmed and Abbas Haider Rizvi were also present on the occasion.

SECP registered 323 companies in January

The Securities and Exchange Commission of Pakistan (SECP) registered 323 companies in January.

The highest share in new incorporations was of private companies totaling 290. Other companies include 20 single-member companies, 2 public unlisted companies, 6 non-profit associations, 4 foreign companies and one trade organization.

Of 323 companies, the highest incorporation of 53 companies each was witnessed in the services and trading sector, followed by 18 in Hajj and Umrah services, 17 in I.T., 16 in construction, 12 each in textile and communications, 11 in engineering, 10 in pharmaceuticals, 9 each in chemical, education, transport, and food and beverages, 8 each in power generation and fuel and energy, and 7 each in auto and allied, and corporate agricultural farming.

During January the Company Registration Office (CRO), Lahore, registered highest new incorporation of 108 companies followed by the CRO in Islamabad and Karachi registering 93 and 75 companies, respectively. The CROs of Peshawar, Multan and Faisalabad registered 17, 14 and 12 companies each while CROs in Quetta and Sukkur registered 3 and 1 company respectively.

The authorized capital and paid-up capital of 323 companies, is Rs1,774 million and Rs 712.08 million respectively. During the month, 51 companies increased their authorized capital with the aggregate authorized capital increment of Rs8.46 billion and 74 companies raised their paid-up capital with the total paid-up capital increment amounting to Rs13.6 billion.

SECP holds seminar on corporatization and e-Services

The Securities and Exchange Commission of Pakistan (SECP) held a seminar on corporatization and e-Services project of the SECP in Karachi in collaboration with Management Association of Pakistan.

This seminar was organized as part of the SECP initiative to encourage corporatization and create awareness about the eServices project. After e-Services launch in September 2008, such seminars have already been held in various cities of the country including Karachi, Lahore, Islamabad, Faisalabad, Multan, Rawalpindi and Sialkot.

This seminar was attended by participants from various companies as well as corporate consultants.

Mr Ibtesam Moatisim Khan, Director, Management Information System, delivered a presentation on the “e-Services Project of SECP” and also provided solutions to the difficulties faced by the users of eServices. The significance of eServices as an easy and cost-effective mode of filing of documents with SECP and new developments in e-Services were shared.

Mr. Sidney Custodio Pereira, in charge, CRO Karachi, apprised the participants of “corporatization and the role of SECP”.

The participants greatly appreciated the questions and answers session. They complimented the SECP on successful implementation of e-Services.

Famous cricket commentator, Mr Chishty Mujahid, now the Executive Director, MAP, expressed his gratitude to the SECP saying that MAP would continue to arrange such informative and interactive sessions with the SECP.

Karachi Income Tax Bar rejects proposed Rule 81B Active Taxpayers List

Mr Ali Rahim
President Income Tax Bar Association
Karachi.

Income Tax Bar Association, Karachi rejected proposed insertion of Rule 81B relating to Active Taxpayers List as it will affect every tax payer in the country.

In a communication to Federal Board of Revenue, it said FBR SRO 09(I)/2011, on January 6, 2011, after discussion by its members was rejected as functions and powers delegated under it negated available provisions contained in Income Tax Ordinance,2001. FBR record and data is not updated properly, web portal of PRAL faces numerous technical problems and unwarranted use of this law will be disastrous having negative impact on business activities of existing taxpayers.

Bar says taxpayer once suspended will have to run from pillar to post and their request will only be accepted when gratification is used. SRO will be considered a great tool to discourage existing taxpayers as harassment, highhandedness cannot be ruled out while exercising powers available in proposed Rule.

The Department, FBR failed to achieve task of broadening tax base and requested to shelve this SRO for time being, in the interest of country which is facing economic and geo-political challenges in the region, said Bar President Ali A. Rahim.

SECP takes Eastern Capital Limited to court, warrants issued

ISLAMABAD – January 12: The Securities and Exchange Commission of Pakistan (SECP) has filed a criminal complaint in a court against Eastern Capital Limited, ex-member of the Karachi Stock Exchange (KSE) and all those, including its director, involved in non-transfer of shares/funds and unauthorized pledges of client’s shares and other prohibited activities under Section 24(2) of the Central Depositories Act 1997 as well as offences under relevant provisions of the Pakistan Penal Code (PPC). The warrants for all the accused have been issued.

The SECP received numerous complaints/claims against five KSE brokers mainly pertaining to the alleged non-transfer of shares and non-payment of funds. The SECP directed the brokers to expedite resolution of complaints/claims and issued instructions for the immediate transfer of shares/funds to the claimants. The brokers failed to remedy the situation, obliging the SECP to suspend registration of Eastern Capital Limited and four other brokers.

Moreover, the SECP initiated enquiries against five brokers and appointed enquiry committees comprising officers from the SECP, KSE and CDC.

It emerged that the shares of the clients which were in control of Eastern Capital Limited for trading purposes only were moved, pledged and transferred to other accounts, without any authorization. . The shares were pledged with banks to obtain financing which were mostly used to liquidate liabilities of the brokerage house resulting in total loss to the investors.

Consequently, the SECP filed a criminal complaint in the court of Session Judge Karachi South against the Eastern Capital Limited and others. This is the third criminal complaint against the brokerage houses involved in illegal pledging of shares. The earlier two criminal complaints were filed against Capital One Equities Limited and Cliktrade Limited.

The SECP has also moved a reference under Section 18(b)(i) of the NAB Ordinance, 1999 with a request to investigate the affairs of Capital One Equities Limited and Cliktrade Limited to punish the culprits who have cheated innocent investors and to recover the investors’ savings which have been misappropriated/transferred for the personal benefits of the sponsors, directors and their associated concerns.

In addition, the SECP took steps to curb such market abuse by improving regulatory framework to facilitate the market participants. In this connection the SECP has recently approved a project of “Automation of Securities Settlement” which has jointly been implemented by NCCPL and CDC to facilitate the market participants to automate the mechanism for settlement of book-entry securities by eliminating the need for any manual intervention. The new system not only improves efficiency but also help in preventing mishandling of book entry securities of clients.

The copies of enquiry report on Eastern Capital Limited and criminal complaint are available on the SECP website. The SECP has also finalized the enquiry reports on the other two expelled KSE members and legal action is being taken against all those who were involved in prohibited practices.

Iftikhar Malik, Tariq Saeed and Jamil Magon visit Guard Auto Zone