Opinion

Businessmen and the legal fraternity dealing with taxation matters are pleased with the change in the attitude of the Federal Board of Revenue for creating more transparency and clarity for better tax compliance. Circular No.13 of 2008 dealing with Workers Welfare Fund can be quoted as an example.

Islamic banking is based on Sharia that prohibits ‘riba’. According to religious scholars it means both usury and interest, and ‘gharar’, that signifies ambiguity, uncertainty, or lack of specificity in terms of a financial contract.

The importance of venture capital (VC) for business growth is critical, as the VC funding is available to nascent companies with little financial wherewithal and no track record but strong products or services and innovative business models. Such funding helps these early-stage companies to grow beyond a certain level and also bring in innovation into the overall business landscape.

Islamic banking remained least affected by the global financial crisis. It experienced some problems only after this crisis had snowballed into a recession in developed economies affecting growth prospects of Pakistan and other developing countries.

Whilst the global economy is slowing down under the impact of the US subprime crisis, Pakistan has not remained immune from the suffering of the global turmoil. Pakistan's economic growth is declining sharply and according to International Monetary Fund, the economic growth is anticipated to be 2.5%. Currently, Pakistans economy is facing the threat of a prolonged recession.

Withholding is an act of deduction or collection of tax at source and is in the nature of an advance tax payment. Historically, the contribution of Withholding Tax was 41 percent of total direct tax revenues but now it is contributing more than 90% of the Regional Tax Offices.

Islamic banking has achieved growth rates that tremendously outpace conventional banking. While there are banking norms common to both Islamic and western financial systems, certain norms are exclusive to Islam. Some of the Islamic restrictions render certain western banking practices and transactions void.

During economic downturns, company bosses search for as many ways as possible to cut business costs and bring in cash. As the possibility of a global recession gets stronger every day, companies are aiming to generate cash and hold on to it. The sticky economy does raise other issues, which, admittedly, are also valid to address when times are good.

One wonders about the news item appearing in the newspapers in which World Bank issued a report stating the fact that corruption has increased in last eight years. I reiterate my earlier year’s submission whereby I suggested that Government should be bound to present Financial Statements in line with International Public Sector Accounting Standard Board’s exposure draft 27 – Presentation of Budget Information in Financial Statements.

There is consensus among Islamic scholars that to replace interest, the ideal mode of financing under Islamic banking system is financing on profit and loss sharing (PLS) basis. It therefore, follows that in case an entrepreneur availing finance from an Islamic bank earns profit, it must be shared between the bank and the entrepreneur.