ISLAMABAD: The government of Balochistan has refused to allow blanket tax exemption to Chinese companies working in Pakistan under the China-Pakistan Economic Corridor (CPEC), hence negating the idea of a standardised tax policy for Chinese investors.
This was conveyed by the representative of the Balochistan government during a high-level meeting chaired by the secretary of planning and development, held at the Ministry of Planning to review the progress of CPEC projects.
It was also informed by the representative that instead of adopting a blanket tax exemption policy for all Chinese companies working under CPEC, a case to case tax exemption/relaxation approach would be implemented in Balochistan.
Additional secretary, Ministry for Planning, Development and Reform (MPD&R) told the meeting that all provincial governments, including Balochistan’s, had earlier agreed upon developing a standardised tax policy for the imposition of provincial general sales tax (GST) on CPEC Projects, for groups falling under the Schedule (2) of the Provincial Sales Tax Regulations, using the tax rate of Punjab government as a yardstick. According to a representative of FBR, all Chinese companies working under CPEC have been exempted from sales tax and federal excise duty under the 3rd Schedule.
In response to the representative’s remarks, secretary Ministry of Planning and Development directed for a letter to be written to the Balochistan government asking them to settle down all the tax issues with regards to CPEC projects.
A representative of AJK government informed that a Chinese company had earlier asked for tax reduction under the CPEC arrangement which resulted in the current sales tax regime to come down to a flat five per cent from the initial adjustable 16 per cent, in both AJK and Punjab. However, he further said that the same company asked for sales tax regime to be further reduced, which would be deliberated in a committee headed by the finance minister.
According to the Sindh representative, no company approached them for a further tax reduction under the current sales tax regime part of which is adjustable (13 per cent) and part flat (eight per cent). The additional secretary MPD&R, however, said that proper tax legislation should be drafted to tackle tax issues proactively.
In Khyber Pakhtunkhwa two tax regimes 15 per cent adjustable and five per cent flat are currently in place. According to the representative, work is under process to bring the tax legislation more in accordance with that in rest of the provinces. It was directed by the chair for a letter to be written to chief secretary Khyber Pakhtunkhwa to come up with a revised tax regime for CPEC projects within 15 days.
It was told by the secretary Gilgit Baltistan that tax policies framed by FBR have been adopted by GB and hence the income tax and annual tax rates are the same as those of the Federation.
It was decided at the meeting that a meeting with representatives of all the provinces will be later held by the government so that a standardised tax policy can be formulated.
The secretary Ministry of Planning and Development said that a uniform tax regime should be adopted all over the country and tax mechanisms and operations should be made simpler for the convenience of foreign investors and companies.