Govt to provide billions in tax exemption to Chinese companies

ISLAMABAD: While rejecting the Senate Standing Committee on Finance’s recommendation to withdraw the tax exemptions given to Chinese companies, the tax department has again proposed to give billions of rupee exemptions to two Chinese construction companies in the Finance Bill 2018-19.

Documents show that the government has decided to give tax exemptions to M/s CSCECL and M/s CCCC, two Chinese companies which are constructing the Karachi – Peshawar Motorway (Sukkur – Multan Section) and Karakorum Highway (KKH) Phase-II (Thakot – Havellian Section).

“Plant, machinery, and equipment including dumpers and special-purpose motor vehicles, if not manufactured locally, imported by M/s CSCECL and M/s CCCC subject to the following conditions that the exemption under this notification shall only be available to contractors named above and that the equipment and construction machinery imported under this notification shall only be used for the construction of the respective allocated projects”.

Documents further indicate that the Pakistan Customs, along with the Director Reforms and Automation were asked to furnish relevant information for the clearance of imported goods.

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“In Collectorates or Customs stations where the Pakistan Customs Computerized System is not operational, the Director Reforms and Automation, or any other person authorized by the Collector shall enter the requisite information in the computerized system on a daily basis, whereas the entry of the data obtained from the customs stations which have not yet been computerized shall be made on a weekly basis”.

In addition to this, documents state that the equipment and construction machinery, imported under this notification, shall not be re-exported, sold or otherwise disposed of without prior approval of the FBR. “In case the goods are sold or otherwise disposed of with the prior approval of FBR, the same shall be subject to payment of duties as may be prescribed by the FBR”.

Furthermore, FBR in the Finance bill 2018-19 purposed to give an exemption from taxes to M/s China Railway Corporation for importing equipment for the Lahore Orange Line Metro Train Project.

“Equipment, whether or not locally manufactured, imported by M/s China Railway Corporation to be furnished and installed in Lahore Orange Line Metro Train Project shall only be used in the aforesaid Project”.

It is pertinent to mention here that Pakistan People Party Senator Murtaza Wahab had raised the matter in Finance committee that the above mentioned Chinese company was granted a complete exemption from payment of excise duty and sales tax and relevant laws were not followed which is against the constitution of Pakistan.

The ECC and cabinet cannot grant such exemptions under the Apex court decisions, he stated.

The FBR and NHA officials had informed the committee that rules and regulations were being followed while granting exemptions after which, the committee made several observations.

A memorandum of understanding (MoU) was signed with a company for Rs232 billion that was not executed and subsequently, bids called were in excess of Rs400 billion.

The committee had an opinion that the completion at the time of bidding between Chinese companies was totally unfair and the SRO issued to provide relief only to one company from tax, hampered the local industry by keeping it at a distance.

The committee had recommended withdrawing the SRO and the matter may be referred to NAB for investigation.

It is worth mentioning here that the tax department had given Rs540 billion in tax exemptions to affluent business including the Chinese companies.

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Shahzad Paracha
The writer is a member of Pakistan Today's Islamabad bureau. He can be reached at [email protected]
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