Chinese investment in Pakistan will be heavily concentrated in the China-Pakistan Economic Corridor (CPEC), a combination of transport and energy projects and the development of a major deep-sea port “Gwadar” offering direct access to the Central Asia and Europe. Between Gwadar and Kashgar, the corridor passes through areas that need rapid development for the betterment of people and both countries. Recently CPEC has completed its first stage and moving towards other stages. There were various concerns from both countries before the commencement of the project, an important one was transparency. Various people were skeptical that it is one way or the other colonization of China and Pakistan is becoming the next Chinese colony.
Recently Balochistan Provincial Government took a step to caricature the cliché. The Provincial Government clearly rejected the application of Chinese companies which are working under the umbrella of CPEC for tax exemption. The Government of Balochistan reiterated that, there will be no concept of tax exemption, standards have been set and they have to follow it. Furthermore, it has been notified to every section of FBR that Chinese company’s bank accounts should not be carried out by anyone, until unless the people are sitting in the echelon of the institute.
In the meeting held by Ministry of Planning and Development with the Provincial Government, one of the officials from Balochistan Government said that, “blanket tax exemption is not possible for Chinese companies working on CPEC projects; adding that tax exemption/relaxation in this regard could be brought about on case to case basis”. The Secretary Ministry of Planning and Development directed that a letter is written to Chief Secretary Balochistan highlighting these observations as there must be some solid grounds to negotiate. He further added that all stakeholders should be on the page rather than bringing these issues into the limelight.
Furthermore, the Secretary said that the FBR must issue administrative instructions and SOPs regarding Chinese companies who are engaged with CPEC projects. The representative of FBR said that exemption from sales tax and FED (federal excise duty) has been given to Chinese companies working on CPEC and non-CPEC projects under the 3rd Schedule.
The chair (Secretary Ministry of Planning and Development) noted all the proceedings and concluded that tax adjustment and refund process is a clumsy process and undoubtedly it will affect the CPEC growth. Although such refund mechanism is also a worrisome problem for investors. He reiterated the stress on the need of pricing a level playing field to all investors, adding that Provincial Governments should ensure a countrywide uniform tax regime so that domestic investors and businessmen will be secured from the loss. He further said that tax mechanisms and operations should be made simpler and faster for facilitating foreign investors and companies.
Overall the Chinese Government and its companies and banks, making the investment in Balochistan have no doubt about the completion of the project in the stipulated timeframe. But the issues like tax exception leaves a negative vibe on people. Balochistan Government took a very good initiative for not giving this exception. Common grounds would be decided soon between Chinese companies and Balochistan Provincial Government.