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Senators upset over Chinese company’s tax and duty exemptions

Iftikhar A. KhanJanuary 27, 2018

ISLAMABAD: The controversial duty and tax exemption given to M/s China State Construction Engineering Corporation Limited set off alarm bells in the Senate on Friday, with members warning that it could severely affect the local industry.

The company has been exempted from paying federal excise duty and sales tax on imported construction material and goods which will be used for the Karachi-Peshawar Motorway (Sukkur-Multan section).

Speaking on a calling-attention notice, the senators asked why the exemption had been given to a particular company.

Senator Murtaza Wahab of the Pakistan Peoples Party (PPP) said that an exemption could only be given across the board. “I wonder what prompted the Federal Board of Revenue (FBR) to give an exemption to the tune of Rs10.98 billion to the Chinese firm,” he said.


Awami National Party (ANP) Senator Ilyas Bilour claimed that the issuance of a statutory regulatory order (SRO) to grant the exemption on import duty after completion of 37 per cent work on the project was incomprehensible.

“It means that you have opened the door for other Chinese companies and will dole out these favours to them in the future as well,” he said.

According to Pakistan Tehreek-i-Insaf’s Nauman Wazir, initially the cost of the project was Rs240bn which went up to Rs440bn after re-tendering then was brought down to Rs296bn.

He asked if this was the standard policy and if the government would give exemptions like this on all China-Pakistan Economic Corridor (CPEC) projects.

Speaking in defence of the SRO, the minister of state for finance said that the ministry of communications had moved a summary to the Economic Coordination Committee (ECC), which considered and approved it.

“We were advised [to issue the SRO] and we did it,” added Rana Muhammad Afzal.

He said communication ministry would be in a better position to explain intricacy of the matter.

This led to another argument, with members of the Senate asking that if a project was based on loans — would it increase the loan if the company was charged federal excise duty and sales tax.

Senate Chairman Raza Rabbani then proceeded to ask how a summary could be moved against the law. He referred to a judgement on the definition of the government and made it clear that the ECC was not the federal cabinet.

Minister for Planning and Development Ahsan Iqbal responded to this and said that the Supreme Court judgement was being followed in letter and spirit. He claimed that the federal cabinet had endorsed the ECC’s decision and added that every detail should not be scandalised.

“The loan will go up if we impose taxes. This is concessional financing. Increasing tax revenues by loans would not be wise,” he explained.

At this, Mr Rabbani said that according to the SC judgement, the prime minister alone was not the federal government and decision-making power authority as well as financial matters rested with the federal cabinet.

He rejected the argument that the ECC’s decision had been endorsed by the cabinet and said that the SRO explained that the exemption had been granted by the ECC of the cabinet.

The Senate chairman referred the matter to the standing committee on finance with a directive to report to the house in its first session of February.

Responding to question about CPEC’s special committee reports, Mr Iqbal said that the broad consensus among the federating units had provided an opportunity to expedite CPEC projects and ensure its successful completion.

He said that no unusual concessions were being given to China and also ruled out the possibility of Pakistan falling victim to an East India Company-like situation.

The minister said that the CPEC — a project of inclusive development in Pakistan — offered huge dividends for the provinces and opened new avenues of opportunities for the people of the country.

The CPEC’s transport infrastructure projects, he said, would give a boost to economic activities in far-flung areas of Khyber Pakhtunkhwa, Balochistan and Sindh.

Talking about the CPEC’s special economic zones (SEZ), Mr Iqbal said that these would attract investment in different sectors and boost the overall economic status of the provinces.

“SEZs will help create thousands of jobs for the youth,” he told the Senate, adding that the government was planning two or three road shows in China to attract investors as well.

Published in Dawn, January 27th, 2018


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