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Miftah agrees to rationalise taxes

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KARACHI:

Finance Minister Miftah Ismail has agreed, in principle, to change some of the existing rules and rationalise taxes on stocks to encourage individuals and institutions to invest in productive sectors and document the economy at the Pakistan Stock Exchange (PSX).

After hosting a meeting between the finance minister and capital market stakeholders, PSX Managing Director Farrukh Khan told The Express Tribune on Wednesday that the minister had agreed to encourage state-owned enterprises (SOEs) to pay maximum dividend to shareholders, encourage state-run institutions to invest in stock market and remove discrepancies in the capital gains tax (CGT) on stocks and real estate.

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“Existing rules and taxes discourage investment in documented sectors at the Pakistan Stock Exchange and encourage investment in undocumented sectors like real estate, national savings schemes and gold,” Khan pointed out.

“The emergence of issues and challenges…including in the macro economy has caused a slump in market capitalisation to just over Rs7 trillion compared to over Rs10 trillion in the past and volumes have also dropped to low levels.”

At present, while some of the SOEs are extremely profitable, their payout ratio is a meagre 18%. Meeting participants stressed that the ratio should be raised to 50%.

Given the imminent board meetings, there was urgency for guidance to the SOEs to declare healthy dividends, which would result in dividend income and 15% taxation revenue for the government, giving it fiscal space for reducing circular debt.

Minister Ismail gave directives for immediately calling a meeting with the authorities concerned (including the Ministry of Petroleum) to look into the matter.

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“Let’s make a strategy. It (increased dividend) is a win-win situation for everyone including the government,” Khan cited Ismail as saying at a meeting held at the PSX on Friday (August 5).

Meeting participants pointed out that the market valuations presented compelling opportunities for companies like State Life Insurance Corporation (SLIC) and Employees Old-age Benefits Institution (EOBI) to invest in listed equities for the benefit of their policyholders and pensioners.

Khan said the minister directed the Federal Board of Revenue (FBR) “to immediately remove distortion and discrepancies in the capital gains tax on stocks and real estate”.

The PSX MD said the government had given tax (CGT) incentives on only those stocks that were bought on or after July 1, 2022 while the investors were forced to pay a higher CGT on shares bought earlier.

Compared to this, equal CGT incentives are offered to all sellers of plots in the real estate sector whether the property was bought on July 1, 2022, before or after that.

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He recalled that the government had agreed to equally treat the CGT on stocks and immoveable properties in the budget “but the discrepancies are still there”.

“The minister noted this (CGT discrimination)…and asked the department concerned to remove the discrepancies,” Khan quoting the minister as saying at the meeting.

“Right now you have both KYC (know your customers) and tax-driven distortion between asset classes,” Khan said, adding when people come to invest in “documented” and “productive sectors” at PSX they are asked tens of questions, while they are asked no questions on making such an investment in undocumented sectors including real-estate, national saving schemes and gold.

“How does it make sense that if you are encouraging productive sectors to document the economy, but the policies you devise work in the opposite direction.”

In terms of the macroeconomic situation prevailing in the country, the participants emphasised that movements in the rupee-dollar exchange rate have been too volatile and changes to this effect should be gradual. With regard to the central bank’s key policy rate, it was pointed out that interest rates in almost all countries of the world are negative and that this must be taken into account in the context of interest rates in Pakistan.

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On his part, the Finance Minister clarified that “Macroeconomic stability was forthcoming with the IMF programme resuming before end of August as all conditionalities have been met. Furthermore, the balance of payments position is now well under control. With increased hydel power, lower energy demand, and lower oil prices, Pakistan may even have a balance of payments surplus in coming months”. Regarding tax measures, the minister stated, “Fiscal discipline will be strictly followed and all additional expenditures will be fully funded by tax measures.”

Published in The Express Tribune, August 11th, 2022.

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Oil import, consumption rise

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ISLAMABAD:

Pakistan’s import and consumption of petroleum products have increased significantly, according to an industry report, indicating a rise in economic activities and consumer demand across the country.

In the “State of the Regulated Petroleum Industry” report for fiscal year 2020-21, the Oil and Gas Regulatory Authority (Ogra) provided data that showed a growth in the midstream and downstream petroleum sector, which included oil, gas, liquefied natural gas (LNG), liquefied petroleum gas (LPG) and compressed natural gas (CNG).

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In FY21, the import of crude oil surged 27.82% as it reached 8.66 million tons compared to 6.77 million tons in FY20. Similarly, the import of finished petroleum products rose 23.70% to 10.02 million tons in FY21 from 8.10 million tons in previous year.

However, the import of aviation fuel dived 72% from 0.17 million tons to 0.05 million tons.

Refineries in Pakistan also stepped up production at their plants during FY21 as their output of petroleum products increased 14.48% and touched 10.66 million tons as opposed to 9.31 million tons in FY20.

In the year under review, the consumption of petroleum products in the country rose 12.95% to 19.92 million tons as compared to 17.63 million tons in previous year.

Pakistan State Oil (PSO) increased its market share by three percentage points from 44% in FY20 to 47% in FY21.

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Besides, oil marketing companies set up infrastructure facilities like oil storages with capacity of 0.58 million tons for petrol and 0.88 million tons for high-speed diesel at various depots across the country by the end of FY21.

In the year under review, Pakistan’s gas production, however, dropped over 6% to 2,006 million cubic feet per day (mmcfd) from 2,138 mmcfd in FY20, whereas gas consumption grew over 5%, reaching 3,884 mmcfd from 3,683 mmcfd.

The country had a network of 13,768 km of gas transmission pipelines and 191,478 km of distribution pipelines, thus ensuring natural gas supplies to domestic, industrial, commercial and transport sectors.

Gas utilities expanded their transmission and distribution network to cater to the demand from new consumers.

Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) extended their transmission networks by 37 km and 17 km respectively during FY21. In the meantime, SNGPL extended its distribution network by 7,141 km and SSGC by 929 km.

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The Ogra report revealed that a significant number of new subscriptions had been added as SNGPL connected 371,618 new consumers during FY21, taking total consumers to 7.41 million on its network. Similarly, SSGC added 95,436 new connections, taking the total to 3.21 million consumers on its network.

In terms of sectors, the main consumer of natural gas was the power sector, consuming over 30% (1,305 mmcfd), followed by the domestic sector with 20% (862 mmcfd), fertiliser 19% (829 mmcfd), general industry 8% (365 mmcfd) and captive power 5% (203 mmcfd).

Among provinces, Punjab’s consumption came in at 52% (1,426 mmcfd), Sindh 39% (1,052 mmcfd), Khyber-Pakhtunkhwa 7% (190 mmcfd) and Balochistan 2% (64 mmcfd).

Province-wise gas supply showed that Sindh’s share in total gas supply declined 11% from 1,344 mmcfd in FY20 to 1,192 mmcfd in FY21, Punjab’s share dropped 9% from 91 mmcfd to 83 mmcfd and Balochistan’s share fell 1% from 335 mmcfd to 333 mmcfd.

In contrast, Khyber-Pakhtunkhwa’s share increased 8% from 368 mmcfd to 398 mmcfd. The share of LNG increased 13% from 857 mmcfd to 969 mmcfd.

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During the year, Ogra formulated the Pakistan Gas Network Code, which provides a uniform contractual framework for third-party access arrangements for the use of gas pipeline transportation systems and accommodates project-specific arrangements.

Under the third-party access regime, Ogra, in addition to granting licences for the construction of LNG terminals by Energas and Tabeer Energy, issued licences for the transmission and sale of natural gas/ re-gasified LNG to a number of applicants including K-Electric, Energas, Tabeer Energy and Shell.

Under the relevant provisions of Third-Party Access Rules 2018 and Pakistan Gas Network Code, Ogra has been ensuring the allocation of pipeline capacity by transporters – SNGPL and SSGC – for the interested shippers.

The report stated that LNG imports increased 13% from 857 mmcfd to 969 mmcfd during FY21 whereas its share in overall natural gas supplies rose to 33% from 29% a earlier year.

Published in The Express Tribune, September 24th, 2022.

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UAE seeks investment for ramping up exports

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ISLAMABAD:

The United Arab Emirates (UAE) is an emerging hub of trade and investment activities and is striving to attract $150 billion in foreign investment by 2030, which provides Pakistani investors an avenue for trade and business, said UAE Ambassador Hamad Obaid Ibrahim Salem Al-Zaabi.

Speaking as chief guest at the “Explore UAE” event, organised at the Islamabad Chamber of Commerce and Industry (ICCI) in collaboration with the UAE embassy, the ambassador said that in 2022 the UAE and Pakistan were celebrating 50 years of their unique brotherly ties, which should be transformed into growing trade and economic partnership.

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The UAE was connected to over 250 cities around the world and investing in the Gulf emirate would enable Pakistani investors to promote exports to many parts of the world, he pointed out.

At the event, UAE’s Ministry of Foreign Affairs and International Cooperation Economic Adviser Ahmed Mohammad Aljneibi gave a detailed presentation to the business community on the topic of “Invest Emirates”.

“The UAE is an ideal destination for investment as it has a low tax environment and offers new opportunities for pouring capital across both mainland and free zones,” he said.

He highlighted transportation, storage and construction, agriculture, industrial manufacturing, renewable energy, hospitality, information and communication technology, professional, scientific and technical activities, administrative and support services, educational activities, healthcare and arts and entertainment as potential areas of investment in the UAE.

Speaking on the occasion, ICCI President Muhammad Shakeel Munir said “the UAE has emerged as one of the major trading partners of Pakistan and we would like to further strengthen ties with it.”

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He cited that bilateral trade between Pakistan and the UAE had crossed the $10 billion mark in 2021-22, which could be further enhanced with strong efforts from both sides.

Pakistan’s exports to the UAE included garments, meat, cereals, other food items, agricultural products, fruits and vegetables. “There is a great potential for exports of many other Pakistani products as well which include financial and software-related products, mangoes, oranges, kinnows and rice.”

Published in The Express Tribune, September 24th, 2022.

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US bitcoin emissions as dirty as 6 million cars: report

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LOS ANGELES:

The carbon footprint of the US bitcoin industry is rising at breakneck speed, a report from environmental groups found on Friday, now rivalling the emissions of 6 million cars each year.

The groups urged US states to consider bans on new mining operations to help protect the planet.

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Emissions from the energy-hungry sector could undermine goals to tackle climate change, said Jeremy Fisher, an energy analyst with the non-profit Sierra Club and a co-author of the report.

“We’re at an inflection point,” he said. “We’re trying to rapidly decarbonise… Bitcoin mining has the potential to undo some of that progress.” The industry’s carbon footprint, the groups said, was 27.4 million tonnes from mid-2021 through 2022 – three times that of the largest US coal plant – or close to the annual emissions of 6 million cars, according to a calculator from the Environmental Protection Agency.

Bitcoin mining involves a network of energy-intensive computers that verify bitcoin transactions, and compete among themselves for new coins. Only 3.5% of global bitcoin mining was located in the United States in 2020 – now it’s approaching 38%, according to a recent study from the White House.

The groups urged US states to consider blocking new mining operations. This year, the New York legislature passed a law to pause any new operations in the state that run on fossil fuel.

Bitcoin industry groups say the cryptocurrency sector is greener than other heavy industries and uses a relatively small amount of electricity – between 0.09% and 1.7% of total US power, according to the White House report. The Bitcoin Mining Council, which represents some major players in the sector, has released data showing that more than half the power used by its miners comes from renewable sources. (Thomson Reuters Foundation)

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Published in The Express Tribune, September 24th, 2022.

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