Latest news with #TolaAssociates
Business Recorder
4 days ago
- Business
- Business Recorder
CA balance incorporated: PKR kept artificially undervalued at 282.2 vs $1: Tola
LAHORE: The value of the rupee (PKR) is 249.2/USD after incorporating the Current Account balance of the Jul-April period of FY25, said Tola Associates in its latest economic outlook. The report has pointed out that the PKR value has been kept artificially undervalued at PKR 282.2/USD as the present value of PKR is 249.9/USD. Tola Associates have also drawn a graph depicting four scenarios: (a) First scenario provides PKR valuation as of June 30, 2024; (b) Second scenario illustrates the valuation of PKR valuation based on the actual CAD, ie, $665 million in FY24; (c) The third scenario provides PKR value based on the government's CAD projection of 0.9% of GDP; (d) and the last scenario is calculating the PKR value based on the adjusted CA projection of the government adjusted for the Jul-April FY25). Fitch forecasts Pakistan rupee at 285 against US dollar by June, 295 by FY26 end It further said that a 10-rupee depreciation results in a 2% increase in inflation, and vice versa. In the inter-bank market, the value of the national currency stands at PKR 282.2/USD as of 29th May 2025. Over the past week, the USD to PKR parity rate has shown a slight declining trend, whereby the PKR has devalued. It said the export-led growth has three vectors including the agricultural sector, the manufacturing sector and the IT industry. Along with this, public financial management has an important role to play which involves expenditure control and revenue enhancement. Pakistan's economic outlook reflects cautious optimism as inflation experienced a remarkable decline, dropping to 0.3% in Apri12025. Over the past year, inflation fell dramatically from 29.7% in November 2023 to 11.2% by May 2024 and reached just 0.7% in March 2025, a record drop within a single year. However, the inflation outlook remains vulnerable to several risks, including additional fiscal measures to address revenue shortfalls, a potential resurgence in food inflation, and rising global commodity prices. Despite these challenges and the anticipated phasing out of the favorable base effect, the Monetary Policy Committee assessed that the current monetary policy stance is appropriate for stabilizing inflation within the target range. Copyright Business Recorder, 2025
Express Tribune
24-05-2025
- Business
- Express Tribune
After Tajir Dost flop, 1% levy proposed
Listen to article After the spectacular failure of the Tajir Dost scheme, which fetched a meagre Rs3 million against Rs437 billion paid by the salaried class so far, a tax advisory firm has recommended imposing a 1% income tax on all traders to ensure decent revenue collection. Tola Associates has also proposed limiting cash transactions to only Rs10,000 to discourage the informal economy, which has enabled traders to remain largely outside the tax net. These proposals were submitted this week to Deputy Prime Minister Ishaq Dar and Finance Minister Muhammad Aurangzeb. The firm also recommended that the government avoid further currency devaluation in the next fiscal year, challenging official projections that estimate the rupee falling to Rs290 to a dollar by June next year. The advisory firm has proposed that the government abolish the Tajir Dost scheme. Launched in June last year with the aim of collecting at least Rs50 billion, the International Monetary Fund (IMF)'s staff-level report disclosed this month that the scheme generated only Rs4 million. In contrast, the salaried class paid Rs437 billion in taxes during the first 10 months of this fiscal year, Rs150 billion higher than the same period last year. The firm recommended a 1% minimum income tax on all retailers, in addition to taxes already collected from wholesalers and retailers. It proposed that the tax be collected based on revenues generated under withholding tax clauses 236G and 236H. However, it is unlikely that the government will accept this recommendation. To enhance transparency and curb tax evasion, Tola Associates urged the government to ban cash transactions beyond Rs5,000 to Rs10,000 at retail and food outlets, mandating electronic payments. However, the Federal Board of Revenue (FBR) lacks the enforcement capacity to ensure compliance or to prevent businesses from discouraging digital payments. In a key recommendation, the firm stated that the upcoming budget should discourage currency devaluation by reducing non-essential imports, boosting local manufacturing and energy independence, promoting domestic value addition, and generating employment. It noted that economic stability requires a stable currency, targeted inflation, and no further devaluation. "Based on our estimates for FY26, if the current account deficit stands at 0.5% of GDP, the exchange rate should ideally stabilise around Rs276," said the report presented to the finance minister. However, the report noted that with the average exchange rate hovering around Rs280 this year, a potential depreciation of Rs10 to Rs15 could occur in FY26, bringing the rate to Rs290295 per dollar. Such devaluation could push inflation up by an estimated 3%, it warned. The government has already finalised the next budget based on an exchange rate of Rs290 per dollar. The firm also advocated export-led growth by implementing policies such as rationalising interest rates for industries, maintaining a balanced tariff policy on raw materials, and developing export-oriented industrial clusters. It added that promoting import substitution and offering result-based subsidies in key sectors like textiles, pharmaceuticals, and engineering goods is crucial for long-term sustainability. According to the firm, the 2025-2026 budget presents a critical opportunity for course correction and to reset the direction of the economy. It pointed out that the current policy rate of 11% remains a major barrier to industrial borrowing and investment. It urged the government to further reduce the real interest rate to the lower single digits to stimulate industrial expansion, particularly for capital-intensive manufacturing. To revive idle capacity and encourage new investment, the government should introduce a zero-markup loan scheme for priority manufacturing sectors. These concessional loans would reduce financial barriers and support import substitution, job creation, and export competitiveness. Tola Associates also expressed doubt over the FBR's ability to meet the next fiscal year's tax collection target of Rs14.1 trillion. The firm estimated that tax collection might reach Rs13.5 trillionfalling short of the IMF's target. It added that based on current trends, the FBR is likely to collect Rs11.9 trillion this fiscal yearRs1 trillion short of its original target. However, if the outcome of the super tax cases is in the government's favour, the FBR could potentially achieve Rs12.1 trillion. The firm reiterated its recommendation to impose an advance tax on undistributed reserves of companies that have not issued dividends for the past three years. It proposed a tax rate of 7.5% for unlisted and 5% for listed companies. This tax could be adjusted against future dividend taxes. It has also proposed changing the definition of resident Pakistani for the taxation purposes. "Pakistan is recommended to modernize its residency criteria to reflect actual economic presence and intent". Under its suggested framework, an individual would be considered a resident if they spend 182 days or more in Pakistan in a financial year. Those staying between 120 and 181 days would be assessed based on citizenship and income. For instance, a Pakistani citizen under the Pakistan Citizenship Act, 1951, or someone holding a Pakistan Origin Card (POC) with income above a certain threshold and no tax liability elsewhere, should be treated as a Resident but Not Ordinarily Resident (RNOR). Individuals not meeting these conditions and spending less than 120 days in Pakistan should be classified as Non-Residents, regardless of income or nationality, the firm added.
Business Recorder
24-05-2025
- Business
- Business Recorder
Pakistan budget 2025-26: Rs2.8 trillion defence budget proposed citing ‘war-like situation' with India
With Pakistan scheduled to unveil its federal government budget for fiscal year 2025-26, Tola Associates, a tax advisory and consultancy firm, has proposed to raise the defence budget to Rs2.8 trillion, reflecting a 32% increase as compared to the last fiscal, owing to a 'war-like situation' with neighbouring India. The tax advisory firm gave the proposal in its report 'Budget 2025-26 a rare catalyst for course correction', released on Saturday. 'The budgeted defence expenditure stood at Rs2,122 billion for FY25 while the actual expenditure till March 2025 was Rs1,424 billion. [However], due to the ongoing war situation with the neighbouring country, defence spending may increase by up to 50% in the Q4FY25,' read the report. The firms noted that in the previous three years, defence expenditure in the last quarter accounted for 36% of the annual total defence expenditure made throughout the fiscal year. Pakistan budget 2025-26: expenditure likely to fall by massive Rs2 trillion, says report 'Given the current regional tensions and the need to ensure Pakistan's defence preparedness, we estimate total defense spending to reach Rs2.4 trillion by June 2025.' Moreover, it also proposed to enhance the defence budget to Rs2.8 trillion in FY26, reflecting a 32% increase when compared with the outgoing FY's budget, 'due to the war situation with the neighbouring country and the new recruitment of army personnel'. In its report, Tola said that the upcoming budget serves as a great opportunity for course correction. 'It is a rare catalyst to realign the direction of our economy.' It said that the upcoming budget theme should focus on creating a balance between stability and economic growth. 'Therefore, economic and fiscal reforms should be framed in a manner that puts the economy on a path of steady growth.' Tola estimate the budget expenditure for FY26 to be around Rs17.2 trillion, lower than the Rs18.9 trillion budgeted by the government in FY25. The decline in expenditure comes amid an expected reduction in markup payments, which are likely to reduce to Rs7.5 trillion in FY26, compared to Rs9.8 trillion originally budgeted for FY25. IMF, govt to continue FY26 budget discussions 'over the coming days' The tax advisory estimated the federal development budget (PSDP/public sector development programme) at Rs950 billion for FY26, far lower than the Rs1.4 trillion budgeted in FY25. The report estimated the FBR revenue collection at Rs13.5 trillion for FY26. 'As per our estimates, if the FBR collects around 11.9 trillion in FY25, given our inflation estimates at 10.0% and estimated GDP growth at 3% in the upcoming FY26, then the FBR might collect only Rs13.5 trillion worth of tax revenue.
