DAWN - Letters; 15 September, 2004

Published September 15, 2004

Taxes on stock exchange transactions

The budget for 2004-2005 has imposed the following taxes on stock exchange transactions:

1. CVT at 0.01 per cent on purchase.

2. Withholding tax on sale of shares at 0.005 per cent.

3. Withholding tax on commission income purchase of shares at 0.005 per cent; sale of shares at 0.005 per cent.

4. Withholding tax on carry-over trades mark-up at 10 per cent.

While the withholding tax of 0.005 per cent on purchase and sale each is the responsibility of members of all stock exchanges and is a full and final tax liability, the remaining taxes, namely, CVT at 0.01 per cent and the tax on sale of shares at 0.005 per cent, are to be passed on to investors.

The assumption of a daily turnover of 400 million shares at an average price of Rs40 per share for 240 working days was taken to estimate collection of taxes. However, ever since the imposition of new taxes, the volume has come down to an average of 120 million shares per day and is likely to go down further.

Therefore, the entire estimate of tax collection will see a shortfall of about 70 per cent and government efforts will not only be defeated but will have a negative impact on its plans to privatize public sector organizations.

This will also upset budgeted incomes of stock exchanges and the Securities and Exchange Commission and will therefore retard development plans of both the exchanges and the SECP.

The remedy lies in the government doing away with CVT of 0.01 per cent right away. This will be more than made up in increased volumes and increased income not only for the government but also for the exchanges and the SECP.

The tax on day trading of 0.005 per cent purchase and 0.005 per cent sale totalling 0.01 per cent is also to be made full and final liability of the investor so that the volumes increase; hence a greater income for the government, exchanges and the Securities and Exchange Commission.

Any positive action on the above lines will not only create greater confidence but also prove to be a real boost to attract investment in the most organized, documented sector, i.e., the capital market.

If the government aim is to document other areas of investment and collect massive sums, it should also consider taxing open plots where speculation has reached astronomical proportion.

The price of land is beyond the reach of people belonging to middle or lower middle-income group, and the valuation is such that almost 75 per cent of tax-evaded funds are parked in open plots. This not only provides a great haven to tax evaders but also defeats the government plans of providing housing for all.



Sharing the water scarcity

In your editorial "Sharing the scarcity" (Sept 2), you have rightly warned that a shortage caused by changing weather patterns is likely to continue.

The country's agriculture sector has been affected by many factors such as salinity, water logging, loss of nutrient elements from farmland on account of water and air erosion, impoverishment of the texture and structure of the farmland soil and lakes due to sea intrusion in Thatta and Badin.

There is need to evolve a strategy to cope with these problems. One way is to establish as many agricultural institutions with research facilities as possible. In the prevailing circumstances, I would like to put emphasis on research in dry (arid) areas of Sindh, Balochistan and Cholistan for meeting requirements when and if water cannot be acquired ordinarily in sufficient quantities.

In addition to physio-chemical changes to be brought about in the soil to create conducive conditions for agricultural activities in dry areas, there is need to introduce biofertilizer technology.

Nature has provided soil-borne symbiotic fungi called mycorrhizas which provide a greater absorptive surface than root hairs which help crop plants in the uptake of relatively immobile ions in soil, such as phosphate, copper and zinc.

It is a proven fact that mycorrhizal plants have greater tolerance for toxic metals, high soil temperature and adverse soil pH, inhibit root rot micro-organisms (bio control) and resist stress caused by droughts.

We need institutions on the pattern of the International Centre for Agricultural Research in dry areas for bringing about on-farm-water-use efficiency in Pakistan.

Such a step can be a giant leap forward in promoting sustainable agriculture to alleviate poverty and hunger. The World Consultative Group on International Agriculture Research System, with a secretariat in Washington DC, can come forward to help.



Loopholes in devolution plan

Khairpur district Nazim Nafisa Shah in her article "Fighting a weak system" (Sept 4 and 5) has eloquently written an obituary of the local government system.

This sorry state of affairs is mainly because of the imposition of officials of the centralized bureaucracy on local government institutions, which has greatly marginalized the stake and role of citizens in governance and promoted a culture of corruption and secrecy. The following examples illustrate the state of the 'stillborn' devolution plan:

On September 1, I was dismayed to see how the District Bar Association, Abbottabad, had made the district coordination officer (DCO) their chief guest of honour. In Multan some police officials allegedly raped a minor girl. A private TV channel arranged a discussion in which the Multan district nazim was openly defending the police personnel.

In fact, the present colonial system of administration and police is an albatross around the neck of the entire polity of Pakistan. Black holes of accountability still remain between the citizens and all tiers of government.

The remedy is democratic local governments as they have evolved in other democratic countries, where the administration and the police are decentralized under the relevant committees of elected members.

For a truly democratic dispensation, decentralization is a must. Whereas we in Pakistan have only four provincial police forces under a centralized cadre, in the US there are 17,000 police forces manned either by elected sheriffs or appointed and controlled by police committees and mayors.

Similarly, elected local governments themselves employ managers and other officials for administration. So long as we have DCOs and DPOs coming from the colonial style centralized cadres being imposed on the local governments, we cannot build a democratic social and economic network so vital for stability and progress.



Then and now

At the time of independence there were only five ministers - I. I. Chundrigar, Sardar Abdul Rab Nishtar, Raja Ghazanfar Ali, A. S. Pirzada and Jogendra NathMandal from East Pakistan. The ministers were allotted more than one portfolio and did well.

Later Zafrullah Khan was included to plead the case of Kashmir in the UN. Subsequent additions were Khwaja Shahabuddin and Fazlur Rahman from East Pakistan and Ghulam Mohammed (who was given the finance portfolio).

Everything went on fine until Ghulam Mohammad, who later became governor-general, dismissed Khwaja Nazimuddin who had vacated the post of governor-general and become prime minister after the assassination of Liaquat Ali Khan. This was the beginning of our miseries.

The Muslim League is not the same that the Quaid-i-Azam had nurtured. If he returned, he would be flabbergasted to see some 60-odd ministers and their deputies in the federal cabinet.

They will cost the exchequer a fortune. Common people will be hard pressed to pay for their salary and perks. They will also be provided with personal staff, free transport and housing.

When we came to Pakistan, there were a small number of ministers who would spend from their own pocket if their salary - Rs5,000 a month - ran short. I knew of a minister who had nothing left in his bank account and was out of pocket after the 20th of each month. Since he had to use his own car, to save petrol, for which he had to pay, its use was carefully monitored. There was only one staff car in his ministry.

Will the government let the public know how expenditure on the new set-up will be met and what relief will the common man get from these appointments galore?



A familiar path?

The fresh appointment of Mr Sharifuddin Pirzada as senior adviser for foreign affairs, law, justice and human rights evokes memories of the late General Ziaul Haq. Mr Pirzada successfully carried the likes of Ghulam Ishaq Khan and General Zia through constitutional mazes for over two decades.

On May 29, 1988, when General Zia had dismissed prime minister Junejo and didn't quite know how to go about it in view of his own colleagues having gone 'icy' on him, his chief of staff Lt-Gen Syed Rafaqat asked him to announce an elections date within the stipulated 90 days according to the Constitution.

General Zia, according to K.M. Arif's book "Working with Zia", shook his head saying: "A way can be found to overcome the hurdle. Pirzada (Sharifuddin) key paas kuchh masala hai" (Pirzada has a trick or two up his sleeves).

Zia's answer to the query by the then ISI DG, Lt-Gen Hamid Gul, about the next elections was curt and crisp: "Dekhain gey" (We will see). Zia then asked Hamid Gul to frame a suitable question for a referendum (K.M. Arif's book "Working with Zia").

Once again Mr Pirzada may be in action to discover loopholes in the Constitution as D-Day approaches.



Cut in NSS profits

In the past five years, profits on national savings schemes (NSS) have been reduced by over 50 per cent. This has badly affected investors, especially widows, pensioners and other senior citizens.

Taking cognizance of the matter, the government introduced two schemes, namely, Pensioners Benefit Account (PBA) and Behbood Certificates. The PBA scheme is meant for government retirees and the Behbood Certificates' scheme is meant for widows and the elderly.

Advertisements for the schemes indicated only beneficiaries but did not mention documents required to be produced for availing them. Also, no mention was made that production of the pension book was necessary.

This was not done because beneficiaries as notified were not all getting pensions. It is not necessary for the government to bestow the benefit of pension on all persons on their induction into government service. Furthermore, there are many organizations in the public sector which do not have pension schemes.

The national savings directorate also seems to think that deductions are made from the salaries of employees for making payment of pensions to them later. This is untrue. If any deductions are made, these are made for provident fund schemes.

The national savings directorate apprehends that inclusion of non-pensioners in this scheme will open floodgates for early retirees and for those who leave service under golden handshake schemes.

It is indeed surprising that with the roadblocks being raised by the national savings directorate in the path of non-pensioner retirees, massive investments are being made in the two schemes.

It is understood that during the first nine months of the year 2003-2004, investments in both schemes amounted to Rs24.5 billion. Behbood certificates netted Rs13.3 billion and the pensioners benefit scheme fetched Rs11.2 billion.

For the whole year of 2003-2004, the government estimated that investment in the two schemes would amount to Rs29.1 billion. A sum of Rs15.1 billion would be parked in Behbood certificates and Rs14 billion would be attracted by the pensioners benefit scheme.



Job quota for physically impaired

The Sindh government is to issue a notification to give a two per cent job quota to physically and mentally impaired people. The education department - the biggest employer - should for its own protection take into consideration WHO's change of definition of the term "disability", and distinguishing features of the terms "impairment, disability and handicap".

The quota has been misused before and is bound to fall prey to manipulations. Also, the government would be well advised to get a comprehensive report on the 20 institutes of special education in the province. Some have been shut down, others have teaching staff with no skills and outdated machines and equipment.

The physically and mentally impaired need our full attention and support. The Sindh Education Foundation is compiling a manual for the teachers of government schools to sensitize them to difficulties of slow learners, dyslexics and children with special needs.


Managing Director, Sindh Education Foundation, Karachi

Role of maths

I fully concur with Mr Q. Isa Daudpota regarding the need to teach maths to all university students (Sept 5). Mathematical concepts are the highest form of abstract language and interestingly have the same location in the brain, i.e. the left hemisphere, in an overwhelming majority of humans.

One reason that our students have difficulty in understanding mathematical concepts is that they are not taught in their mother tongue, be it Urdu, Sindhi, Punjabi, Pushto, Balochi or any other language. Policymakers have put wrong emphasis on imposing Urdu and English upon all students regardless of their mother tongue.

English as a language in itself does not impart intelligence, knowledge, wisdom or skills. In fact, teaching English without a firm foundation in the child's mother tongue may actually adversely affect the child's learning and may blunt his or her innate abilities. If any language had magical power, then all English speakers would be Shakespeare and all German speakers would be Einstein.

Providing a firm foundation in the child's mother tongue enhances his or her ability to comprehend other languages and mathematical and scientific concepts.


Worcester, USA

Power meters

Nowadays kesc employees are seen replacing electricity meters at every house, commercial establishment and industry in Karachi. I fail to understand why this is being done.

When existing meters are functioning normally, there is no point in replacing them. In view of the fact that the KESC has been facing a financial loss for the last so many years, the replacement cannot be justified. It is nothing but an extra burden on the white elephant.

The new meters run 25 per cent faster. This is another blow to consumers. Moreover, the new meters are being installed outside the premises without any shed, whereas the old meters were covered with steel boxes.

Every agency is bent upon fleecing the citizens of Karachi. Life has become very troublesome in every respect. The entire system of government seems to be deteriorating day by day. The prime minister is requested to direct the KESC to stop the replacement of electricity meters forthwith.



Japanese consulate

We would like to bring to your attention the problems which a large number of people are facing due to the construction of a new building for the Japanese consulate on Karachi's Abdullah Haroon Road.

The piece of land given for the construction of the consulate is in an extremely busy area where banks, hotels, a library, a public park and various business offices are located. Since the construction of the building began, it has become very difficult to approach any of the buildings that are located in that area.



Blemish on good work

I would like to draw the attention of the Karachi city government towards the piles of garbage everywhere, posing serious health hazards to the residents and defacing many parts of the city.

The good work being undertaken by the CDGK is marred by mountains of debris and leftover construction material at work sites such as roads, roundabouts, flyovers or culverts. It appears that contractors are paid to leave the debris behind as if it were a stipulation in their contracts.

Similarly, upon the cleaning of a nullah or a sewerage, the garbage is stacked on the edges to pollute the air and often to slip back into the drain. The face-lifting of Sharea Faisal is a glaring example of this careless attitude of the contractors. So is the case on drive-in-Stadium Road (under construction).

Moreover, heaps of debris and garbage are seen lying underneath all flyovers, including Llaquatabad, Drigh Road, FTC (under construction). Is there any supervisory authority to check this, or is Karachi destined to be a city of garbage?



The Beslan tragedy

I was very sorry to read your editorial (September 5) about the school siege tragedy in Beslan, Russia. Instead of outrightly condemning the terrorists, you have advised the Russian government to abide by their demands. These terrorists deserve no sympathy. They made innocent school children a shield for their crimes.

Put yourself in the shoes of the parents of those children who died in the ordeal. Will you forgive those responsible who say they did it for the noble cause of freedom? These terrorists have lost the sympathy of the people. They have put the lives of Muslims in danger all over the world. Militarism and brutality in any form should be condemned.



A mother's appeal

My son, Abdur Rauf, has been working in the Navy as HSG-I in the S/M planning department for the last eight years. He is a hardworking and honest civil servant. That's why the Pakistan Navy selected him for a course in France, which he completed successfully.

It is some time back that the naval intelligence took him away without giving any reason, saying only that he would return soon. My son has not returned and is still in custody. I appeal to the president to intervene and help us out of this agonized situation.


Ph # 6988704, Office # 2401416, House # A-546 sector 11-K, North Karachi


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