The tax free status granted to Gwadar and proposal to award similar status to five new special economic zones (SEZs) under discussion with the Chinese, have nearly held up new investment in the country.
An official source disclosed that the tax incentives to Chinese have held expansion plans of many industrial units. The industrialists fear that the units set up in SEZs will get more tax incentives and have delayed their expansion projects.
The business community fears that the government would have to provide major tax breaks to attract new Chinese investment. The government has further compounded the problem, by providing unprecedented tax relief to the Chinese contractors working on different projects under the China Pakistan Economic Corridor (CPEC), the source added.
Improvement in power generation and lowering of the discount rate during the last two years was likely to give push to new investment in the manufacturing sector but the situation remained stagnant. The major reason being attributed is the unfair tax incentives for new investment as compared to Chinese investment, the source said.
We have proposed to the government to clear this confusion. There should be similar incentives for investment across the country. The government was looking into the issue and the matter would be resolved through next year’s finance bill, the source said.
The government has granted 23 year tax concessions for establishing business in Gwadar free zone. The industrial zone in the coastal city may take three to five years to become fully operational. If the government did not implement uniform tax rate for all areas then investment will further dry in the country, the source said.
