Taxman in India ready to swoop on Adnan Sami

Adnan Sami. PHOTO: FILE

NEW DELHI: 

Singer and musician Adnan Sami’s woes in India seem to have worsened in recent days. After being slapped with a notice for overstaying in India in violation of his visa, this artist of Pakistani origin has now been asked why he has not paid the service tax for the money he has earned in that country.

Sources in the Service Tax Department on Saturday said they booked a case against the musician on October 15 for allegedly evading service tax on assignments and projects he had undertaken.

“We have not been able to consolidate the exact figure of evasion. Sami will be grilled on Monday and then only we will be able to ascertain the amount,” a service tax official was quoted by agencies as saying in Mumbai.

Tax officials have also directed the 44-year-old to bring all the records pertaining to his work on Monday. In the meantime, Sami has managed to get a visa extension for three months from October 17.

Sami is a service provider and has to collect the tax for the people he provides his services to and pay it onwards to the government.

The current rate of service tax is 12.36% on gross value of the service. Service tax is only liable to be paid in case the total value of the service provided during the financial year is more than Rs1 million.

If the value of services provided during a financial year is less than this, paying it is optional. Currently, the government of India is on a drive to collect all outstanding taxes.

The tax department believes Sami did not pay tax in 2012.

Banking the unbanked: Microfinance market in Pakistan keeps bankers optimistic

Kashf Bank eyes growth amid favourable regulations and untapped market. DESIGN: FAIZAN DAWOOD

KARACHI: 

With foreign direct investment in decline for many years in a row, the recent acquisition of Kashf Microfinance Bank by a foreign entity seems like a clean break with the past.

After all, it is not usual for a global leader in microfinance to inject equity of Rs824.7 million into a Pakistani microfinance bank, bringing its foreign holding to 82.8%.

“The State Bank of Pakistan (SBP) has been increasing the minimum capital requirement for microfinance banks. We needed additional equity in order to meet the new minimum capital requirement of Rs1 billion, and that’s when FINCA came in,” said Mohammad Mudassar Aqil, CEO of Kashf Microfinance Bank, while speaking to The Express Tribune in an interview.

Kashf Miucrofinance Bank was founded in 2008 by Roshaneh Zafar, a graduate from Wharton Business School of the University of Pennsylvania. The acquirer, according to its website, is based in Washington DC and currently reaches over 950,000 clients through a worldwide network of 21 affiliate programmes in Africa, Eurasia, the Greater Middle East, and Latin America.

Aqil said the deal with FINCA was finalised after a long search of potential partners by the bank’s previous sponsors. “We felt that the fit was just right because there was harmony in the missions of both organisations. It was made sure that the majority ownership was given up only on the condition that the acquirer would keep the mission and take it to the next level,” he added.

While noting that Kashf Microfinance Bank is one of the major players in microfinance in terms of the number of borrowers, he said his bank was set up long after the establishment of Khushhali Bank, Tameer Microfinance Bank, First Microfinance Bank and the National Rural Support Programme, which currently hold the largest market shares in terms of gross loan portfolio. “Still, going by the annual growth rate, Kashf Microfinance Bank has been one of the fastest growing banks in 2012 – fastest in terms of percentage growth in the number of borrowers as well as the increase recorded in deposits,” he noted.

According to latest data released by the regulator, Kashf Microfinance Bank had 310,258 active borrowers at the end of fiscal 2013. This translates into a market share of 11.8%, making it the third largest player in terms of active borrowers. However, it is not among the top five players in terms of gross loan portfolio.

According to Anne Folan, an independent consultant who has worked with FINCA since 2000, Pakistan is an exceptionally attractive market for microfinance business with almost 86% of the adult population currently being unbanked or under-banked.

“Pakistan has such an entrepreneurial spirit. People are very resourceful. They just figure it out and do what they have to do, and that’s exactly how FINCA likes to work,” Folan said in an exclusive interview with The Express Tribune. “Many other countries where FINCA works make Pakistan looks like Switzerland,” she observed while referring to the regulatory framework that the State Bank of Pakistan has put in place for microfinance providers in the country.

She said a FINCA team conducted due diligence for almost a year before finally making the decision to acquire the majority stake in Kashf Microfinance Bank. “FINCA people of all departments X− from product and services side to operations, legal and internal audit − did a thorough job, moving back and forth for an entire year,” she said.

“Pakistan has a huge addressable market,” she added, referring to the microfinance market penetration rate of only 9.6%.

Book review: The Karachi Deception - Indian spies, Karachi lies

A former Indian journalist brings Dawood Ibrahim to life in a work of fiction.

Journalists sometimes make the best novelists. Shatrujeet Nath may be a case in point. The former assistant editor of business newspaper, The Economic Times, has written a spy thriller for his debut novel, The Karachi Deception. The plot concerns infamous underground don Arshad Dilawar, which I understand is a fictitious name for none other than Dawood Ibrahim. It was because of this choice that I felt it was hard to ignore the political baggage this comes with. India has long accused Pakistan of sheltering Ibrahim, who is believed to be living in Karachi. The Indian government has demanded Pakistan hand him over despite the fact that Pakistan has repeatedly denied his presence in the country. With this work of fiction, though, it appears that Nath is laying a similar claim to plead the same case.

The story begins with an assassination plot, set in Pakistan and India, but takes readers to other countries as well. The plot is codenamed ‘Abhimanyu’ and is hatched by the Research and Analysis Wing (R&AW) and the Indian Army intelligence to kill Mumbai-based Dilawar. The main characters are three Indian commandos Major Imtiaz, Captain Shamsheer and Lieutenant Rafiq. They are picked by top intelligence officials to get into Karachi and take Dilawar out. He is portrayed as a guest of the Pakistan government and Inter-Services Intelligence.

One of the stronger characters is Major Imtiaz, who is bold, courageous and well-focused. Nath could have perhaps paid similar attention to Dilawar, who is central to the story but given short shrift. At many places the reader would like to know what makes him tick, or how he feels and thinks while being taken from one place to another — this would have balanced out the political overtones. And after all, we are always more interested in the villains and attracted to them forensically. We want to know how one becomes an underworld don, and how they hold on to such power.

The novel is set against the backdrop of global terrorism as Dilawar is helping Pakistan’s intelligence agencies in its proxy war against India. Although Dilawar escapes the assassination attempt by the skin of his teeth, the readers are then taken to a secret meeting between the heads of the Indian intelligence and R&AW.

The suspense builds as there are plots within plots, as is the case with espionage in this neck of the woods. The characters are caught up in a deadly game. At one point it becomes clear that one mission has been compromised, a rather formulaic twist, which we were expecting. Major Imtiaz starts realising that his men are being lured into a deadly trap.

Fortunately, the book isn’t all about bloodletting and violence as Nath has worked it more as a spy thriller. This required strong detailed writing and Nath seems to have done extensive research as evidenced by the close descriptions of places in Karachi and Islamabad. People this side of the border and that will probably enjoy it for different reasons best left to their own political and literary leanings. Perhaps some filmmaker will come along and decide to give the novel another dimension. Either way, it is an interesting addition to the growing corpus of spy and crime fiction coming from this part of the world.

Don’t look over your shoulder: three picks for espionage thrillers

The Spy who came in from the Cold

by John le Carré

This slim little book is known as the best spy novel of all time. Le Carré wrote it at the height of the Cold War tensions and its success lies in its examination of how the West condoned the type of espionage that went against democratic values. A British spy working in East Berlin is asked to go back into the cold for one last mission.

Gorky Park by Martin Cruz Smith

Three bodies are discovered in Moscow’s famous Gorky Park but they can’t be identified as their faces and fingertips have been removed. Arkady Renko, a chief detective for the Militsiya, is assigned to the case. This 1981 crime novel was turned into a film with William Hurt. Aside from being a best-seller, this book was a daring American novel with a Russian hero.

The Alientist  by Caleb Carr

This 1994 best-seller is a crime novel set in the New York of 1896 and follows the police commissioner as he investigates some gruesome murders of immigrants. Carr’s ability to work as a historian and novelist bring an entire world alive in this spine-tingling page turner. It is set at a time when the idea of serial killers had just emerged in the study of crime.

Transit trade: Pakistan’s perishable goods export to Central Asia to get a boost

Kabul agrees to remove requirement of financial guarantee from exporters. PHOTO: FILE

KARACHI: 

Accepting a longstanding demand by Pakistani exporters, Afghanistan has assured Pakistan that it will soon stop collecting financial security from Pakistani exporters crossing Afghanistan to reach Central Asian markets.

Pakistani exporters say that the development will increase Pakistani exports to Central Asia, especially exports of dry fruits, vegetables and fresh fruits owing to low duty structure on such items.

Pakistan and Afghanistan agreed in September 2011 that both sides will waive the condition of financial security for export of Afghan cargo transiting through Pakistani territory and exports of Pakistan to Commonwealth of Independent States (CIS countries) through Afghanistan.

Pakistan had implemented the said waiver with effect from 14th September 2011 but the Afghan side was still charging a guarantee fee of 110% (according to the duty slab on products) from Pakistani exporters.

“We were demanding this facility for over two years. But we still welcome this development as it will immediately increase Pakistani exports to Central Asia which is a big development,” said Daru Khan, Former Chairman of Chaman Chamber of Commerce and Industry.

According to Khan, this development will increase the exports of kinnow, potato and other perishable items to Central Asia.

The Afghan government has recently launched a new transit system at the Torkham border, under which Afghan officials act to facilitate formal trade between the two countries. The Afghan government has stopped collecting guarantee fee from exporters at the Torkham border and has assured Pakistan that it is going to stop collecting guarantee at the Chaman border as well from the outgoing week.

Pakistani exporters say that the Afghan government deducts up to 25% of the security fee that it takes from Pakistani trucks using Afghan territory to reach Central Asian markets. Moreover, the Afghan authorities also charge $100 per truck or container, which discourages Pakistani exports to Central Asia.

However, Pakistani exporters hope that the situation is going to improve considerably in the coming months. To help Afghanistan economically, Canada has recently installed state of the art online system at all major Afghan borders after which Afghanistan can record all the vehicular traffic coming in and going out of the country.

In 2010, Pakistan and Afghanistan signed the Afghanistan-Pakistan Transit Trade Agreement, replacing Afghan Transit Trade agreement, to increase bilateral trade. The two countries expect to increase bilateral trade to $5 billion by 2015.

Pakistan and Afghanistan recently shared each other’s concerns in the recently held 4th annual meeting of Afghanistan-Pakistan Transit Trade Coordination Authority in the second week of this month in Kabul.

According to estimates by the Pakistani government, the size of annual smuggling at the Pakistan-Afghan border is over $2.5 billion, this is badly hurting legal trade. The private sectors of both countries want to push their governments to remove trade barriers to discourage rampant smuggling at across the border.

Leading businesspersons of Pakistan and Afghanistan, who are active in bringing Pakistan and Afghanistan closer, say that an improvement in formal trade is necessary in reducing smuggling at the Pakitan-Afghan border and creating new jobs in both countries especially in war-torn Afghanistan.

Although Pakistan and Afghanistan has done much in last three years to ease trade barriers, leading businesspersons say that the progress is still very slow, largely because of political tension

Cellphone usage: Telecom sector welcomes business friendly govt moves

Operators believe favourable relations are necessary for upcoming 3G auction. PHOTO: FILE

KARACHI: 

The telecom sector, which is in the process of finalising the 3G auction in Pakistan, welcomed steps by the government to facilitate the industry, the most recent of which was not suspending cellphone activity during the Eid holidays; a practice commonly adopted by the previous government and one which lead to substantial losses. The move is likely to regain the telecom sector’s confidence in Islamabad’s regulatory policy.

This stance by the government may prove to be a positive step towards an investment-friendly environment and boost confidence among the country’s telecom operators ahead of the auction for next-generation mobile spectrum – which is likely to add over $1 billion to the cash-strapped economy.

The telecom sector has had a bumpy ride during the past few years. The previous government’s regulatory policies also dented the sector’s confidence to a great extent, according to industry sources.

The previous government would regularly suspend the country’s mobile phone services on every special occasion to counter potential threats of terrorism – causing industry-wide revenue losses between Rs500 million to Rs1 billion on some occasions, according to industry estimates.

According to industry officials, the telecom sector has invested over $10 billion in the country – a bulk of which came in the last 10 years. It is the highest tax-paying sector, contributing Rs133 billion in fiscal 2012 alone. By contrast, the industry is faced with saturation in terms of subscriber growth. The earnings, too, have suffered because of intense competition and low average revenue per user (ARPU) – Pakistan has the lowest ARPU in the region.

The decision to not suspend cellular services this time around, according to sources, was therefore welcomed by the industry, especially when seen in the context of a recent statement by Minister for Information and Broadcasting, Pervaiz Rashid, who proposed that the CEO of the telecom firm whose [unverified] SIM was involved in any terrorist activity should be apprehended.

Rashid argued that it was the service providers’ fault to issue SIMs without proper verification of customers.

Rashid’s statement, according to telecom sources, irked the leadership of mobile operators who later raised the issue in a meeting with Anusha Rehman, Minister of State for Information Technology and Telecommunication.

Industry efficiencies: Agri policy changes, a big reason for declining agriculture productivity

The resulting trade regime has thus become highly discretionary and uncertain, leading to input-price distortions and highly variable output prices: PHOTO: FILE

LAHORE: 

Policy Changes in agriculture since 2006 have steadily eroded the effects of trade liberalisation that Pakistan implemented over the 1996-2003 period. International and domestic trade is critical for improving agriculture productivity, but the local industry is facing challenges in the shape of unpredictable and discretionary instruments like Statutory Regulatory Order (SRO), tariffs and export taxes. This was said in a recent World Bank report on the agricultural industry in Pakistan.

Pakistan’s gross domestic product (GDP) has grown over the past decade at an average of 4.9% a year, growth in agriculture has been lower at 3.3% a year. The sector, which accounts for more than 40% of employment and more than 11% of total direct exports, will remain a socioeconomically and politically important sector of Pakistan even as its share in the overall economy continues to fall, having come down from its peak at 46% in 1960 to 21% in 2010, the report said.

Before 2006, the then government simplified the tariff structure and abolished the state’s trading monopoly for agriculture products. But it introduced exceptions in 2006 and reversed several of the more important liberalising reforms in agriculture, particularly for wheat, sugar and fertiliser.

The new regulatory duties and SROs have been used to provide exemptions to normal tariffs in some cases and to raise tariffs in others. The resulting trade regime has thus become highly discretionary and uncertain, leading to input-price distortions and highly variable output prices. The expanded ad-hoc use of SROs also has fiscal implications, as preferential provisions provide the beneficiaries of the orders with special tax and duty concessions and exemptions, leading to a loss of potential tax revenue, the report said.

In most years, major crops like wheat, rice, sugar and cotton are implicitly taxed by the various price distortions introduced by policies. The policy-induced implicit tax on crop production serves to depress production, despite implicit net input subsidies. For example in case of sugar, the surge in the world price of refined sugar raised the parity price, but the increase in the sales tax applied to sugar offset higher border prices. Sugar’s parity prices are roughly twice the observed farm-gate prices, with this price wedge discouraging production, the report said.

The benefits of some domestic trade policies have also been unclear, as illustrated by the public procurement of wheat. Governments procurement of wheat is extensive, involving federal, provincial and district agencies. The government sets procurement prices with targets which all departments are responsible for meeting. Provincial governments and Pakistan Agricultural Storage and Services Corporation procure about 20% of total wheat.

Federal and provincial procurement is absorbing the price transmission that would have otherwise prevailed in the markets, contributing to price stabilisation effect. This perhaps is one reason for the recent rise in wheat stocks, which has led to exports at subsidised prices in years of high wheat production.

The World Bank report recommends the removal of distortions in domestic markets of commodities like wheat. The simplest set of reforms would be to reduce the wheat procurement volume while designing and implementing complementary social safety net programs.  The bank also recommends trade regime to be simplified in order to improve international trade in agriculture, which will require removing unpredictable and discretionary instruments like SROs, shifting to a lower set of uniform tariffs and simplifying the trade regime by removing alternative trade policy instruments like export taxes. These three measures would reduce uncertainty, volatility, and the policy bias against agricultural products like rice and sugar

Aisam, Bopanna to reunite next season

Bopanna and Aisam, better known as the ‘Indo-Pak Express’, will team up again in the doubles circuit next year. PHOTO: AFP

KARACHI: 

Pakistan tennis ace Aisamul Haq Qureshi is aiming to win at least three major tournaments this year – including the men’s doubles final at the Stockholm Open that will be played today – before parting ways with his current Dutch partner Jean-Julien Rojer.

Aisam confirmed yesterday that he will reunite with India’s Rohan Bopanna in January with whom he parted ways two years ago. However, he first wants to finish the current year on a high note by playing at the London Masters among the top eight doubles teams in the world.

Aisam said that winning the Stockholm Open title will help the him to perform better in the Basil Open and then in Paris in the coming weeks.

“At this point, every match is important and I’m very excited about our final in Stockholm,” Aisam told The Express Tribune. “We are ranked seventh in the ATP doubles team standings and I’m on the 15th position in individual rankings so I have a good shot at improving and playing at the London Masters.

“It’s an important tournament because Rojer and I have a good record here. Originally I had planned to take a break this week and wanted to spend time at home. However, I felt it wouldn’t have been fair to my partner and our coach. We work together throughout the year to improve and we wouldn’t want to miss out on any opportunity.”

The Pak-Dutch pair will play the final as the top seeds in Stockholm after receiving a walkover in the semi-final against the Spanish duo of Fernando Verdasco and David Marrero.

Meanwhile, Aisam said that the decision to play with Bopanna was only taken after a detailed discussion.

“Bopanna had told me that he wanted to play with me earlier this year, but since that wasn’t possible for me at the time, we’ve decided to play next year. It’s going to be interesting as both of us have matured as players in the last two years even though we played separately.