40-year tax exemption: Senate body on finance summons details of deal with China on Gwadar port

ISLAMABAD: The Senate Standing Committee on Finance has summoned details of concessional agreement with China on Gwadar Port for providing 40 years tax breaks.

It also directed to furnish identification of owners and board of directors of contractors and sub-contractor firms for expanding scope of tax exemptions for Gwadar port beyond scope of original agreement. Many senators plunged into heated debate and took stance that they were ‘deceived” and their privilege was breached because original agreement with Singapore Port Authority was meant for just 20 years that would be going to lapse by 2026.

It was also interesting to witness during the proceedings of Senate panel as members belonging to PML-N Mussadiq Malik and Ayesha Farooq were supportive of the FBR’s move for broadening of tax base related to provision of Computerised National Identity Cards (CNICs) for jacking up limit from Rs50,000 to Rs100,000 while senators from ruling party Mohsin Aziz and Senator from JUI-F Taleh Mehmood were united for opposing tax machinery moves for heading towards documentation of economy.

The Senate Standing Committee on Finance Chairman Farooq H Naek after holding heated debate gave his ruling and directed Secretary Ministry of Maritime Affairs to furnish copy of Ordinance, concession agreements done with Singapore Port Authority (SPA) signed in 2006 and then with Chinese company in 2013.

Secretary Ministry of Maritime Affairs Rizwan Ahmed testified before the Senate panel and said that original agreement was done with Singapore Port Authority in 2006 and provided sovereign guarantees for providing tax exemptions. The same agreement was done with Chinese company in 2013 on same terms and conditions.

Senator Mussadiq Malik inquired whether these tax exemptions were committed for contractors and sub-contractors of developers of Gwadar port and Special Economic Zone. When the Secretary Ministry of Maritime Affairs read out the agreement there was no mention of sub-contractors in the written material of agreement.

It was also shocking for senators when they came to know that the original concession agreement with Singapore Port Authority was done for 20 years as it was supposed to lapse by 2026. They inquired when the same agreement was offered to Chinese firms then why it committed 40 years tax exemptions.

Only two senators Mohsin Aziz and Zeeshan Khanzda supported the FBR’s move for granting 40 years tax exemptions without scrutinizing any details. All other senators belonging to PML-N, PPP, JUI-F and MQM Pakistan vehemently opposed blanket exemptions for contractors and sub-contractors and supported the ruling of the chairman committee for furnishing all required details before the committee till 11:am on Thursday (today).

In the second session of Senate Standing Committee on Finance for finalizing recommendations on Finance Bill 2020-21 here at the Parliament House on Wednesday, the FBR proposed to jack up CNIC condition for buyer from limit of Rs50,000 to Rs100,000 in the budget. When senators mainly belonging to business class started opposing this move, Senator Mussadiq Malik argued that this proposal was meant for broadening of tax base so how the senators could oppose such move of the FBR.

Senator Ayesha Farooq from PML-N also supported this proposal of the FBR. It was quite interesting the PTI senator Mohsin Aziz and JUI-F Senator Taleh Mehmood were staunch supporter that the limit for CNIC provision should be further increased.

The FBR Chairperson Nausheen Javaid shared startling disclosure before the Senators and stated that there were 325,000 tier-1 retailers but only 197 were registered with the FBR. There were over 0.3 million B type electricity connection but only 18000 were registered with the FBR. She said that the FBR decided to utilise artificial intelligence for gathering data from Nadra, DISCOs, gas utility companies and other state agencies in order to broaden the narrowed tax base.

The FBR also proposed to get real time access for expanding from manufacturers to suppliers, wholesalers and retailers up to certain limits with the purpose to enforce GST on value added mode.