MG Link News – The Federal Government has allowed tax and customs duty exemption to China State Construction Engineering Corporation to import equipment and raw material for some key infrastructure projects to build under China Pakistan Economic Corridor (CPEC), according to the documents.
According to the new Finance Bill for 2018-19 which has to be passed from upper and lower house of assembly reads that two Chinese companies working in the country on different projects have been allowed exemptions. Specifically, the China State Construction Engineering Corporation (CSCEC) which is currently working on Peshawar – Karachi Motorway and Karakoram Highway. The newly incorporated clause added in the bill reads: “The provisions of section 148 of the Income Tax Ordinance, 2001(XLIX of 2001), shall not apply for import of construction materials or goods up to a maximum of 10.898 billion rupees ($91.849 million) imported by (CSCEC) for construction of Sukkur-Multan section of Karachi Peshawar Motorway project of National Highway Authority under China Pakistan Economic Corridor (CPEC).”
The newly incorporated clause added in the bill reads: “The provisions of section 148 of the Income Tax Ordinance, 2001(XLIX of 2001), shall not apply for import of construction materials or goods up to a maximum of 10.898 billion rupees ($91.849 million) imported by (CSCEC) for construction of Sukkur-Multan section of Karachi Peshawar Motorway project of National Highway Authority under China Pakistan Economic Corridor (CPEC).”
Furthermore, another Chinese company namely China State Construction Engineering Corporation (CSCEC) has also been awarded a tax holiday for its work on Karachi Peshawar Motorway and Karakoram Highway. The clause mentions that, “provisions of section 148 shall not apply for import of plant, machinery and equipment including dumpers and special purposes motor vehicles imported by the following for construction of Sukkur-Multan section of Karachi-Peshawar Motorway project and Karakorum Highway (KKH) Phase-II (Thakot to Havellian Section) of CPEC project respectively”.
The provision of Section 148 Income Tax Ordinance, 2001 shall also not apply on the import of equipment to be furnished and installed for the Rail Based Mass Transit Projects in Lahore, Karachi, and Quetta under CPEC.
Hence, the Chinese companies working through out multiple projects across Pakistan in Rail, Road Projects have been awarded multiple exemptions despite the mounting debt from the Chinese Loans. In a recent report, amongst the list of countries participating in the China’s Belt and Road Initiate – China Pakistan Economic Corridor – Pakistan faces highest debt distress from Chinese funds. A research report recently released went on to mention that adding to the debt distress is the high cost of interest-rates being charged by India on Pakistan.
In addition to that, the bill has also allowed exemption on thirty-five armored and security vehicles to be imported by Ministry of Foreign Affairs meant for travel and security of foreign dignitaries within Pakistan. The clause also adds a condition on the purchase, “the importing Ministry at the time of import shall furnish an undertaking …. that the vehicles imported under this clause shall not be re-exported, sold or otherwise disposed of without prior approval of the Board and in the manner prescribed therefore”.
Despite the high rates and expanding external front woes, authorities in Pakistan continue to award tax exemptions and holidays to Chinese companies who have been already awarded with these contracts without a free and fair bidding process.
