ISLAMABAD: As the concerned ministries failed to justify the special exemption on taxes being given to Chinese companies under China Pakistan Economic Corridor (CPEC), the parliamentary panel has shown serious concerns over special treatment to a Chinese firm in Sukkur-Multan motorway project.
National Highway Authority (NHA) and Federal Board of Revenue (FBR) could not justify the exemption of taxes worth billions of rupees to Chinese company executing the motorway project, however the institutions claimed that they were bound to follow the Framework Agreement signed by Pakistan and China under CPEC which provides special treatment to Chinese companies.
The members of Senate’s Standing Committee on Finance, who met here on Tuesday, grilled the NHA Chairman Jawad Rafique, for giving the controversial duty and tax exemptions to China State Construction Engineering Corporation Limited while undermining the interests of the local industry.
As admitted by NHA, the company was 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).
Pakistan Tehreek-e-Insaf Senator Nauman Wazir Khatak said that the three Chinese firms participating in the bid were also unaware of the exemption before signing the contract. He said initially the cost of the project was Rs240 billion which went up to Rs440 billion but was brought down to Rs296 billion after re-tendering. He asked if this was the standard policy and if the government would give exemptions like this on all CPEC projects.
He said Chinese funding led projects will carry an interest rate of LIBOR (London Interbank Offered Rate) plus 4.5 per cent and 7 per cent premium. “It is better to get the loan from IMF and other lenders at an interest rate of 3 to 4 per cent.
Senator Mohsin Aziz said that it is highly unjustified to give exemption of taxes to Chinese products while imposing huge taxes on local firms producing the same products. 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 is incomprehensible.
Speaking in defence of the SRO, FBR Spokesperson Dr Muhammad Iqbal said that the Ministry Of Communications had moved a summary to the Economic Coordination Committee (ECC), which considered and approved it.
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.
Earlier, NHA chairman said that the Chinese firm had increased the bid by including Rs18 billion for meeting unnecessary obligations and sale tax-related issues in the project. NHA, through deliberation, had reduced cost of the project by Rs40 billion.
His arguments, however, could not satisfy the members who termed the tendering process as unfair and highly unjustified.
