ISLAMABAD: The federal government has put off a move to give more sweeping tax concessions to Chinese operators of Gwadar Port and its free zone.
China had showed reservations that Pakistan was not honouring the promise of 23-year tax holiday for the port in true spirit.
Prime Minister Shahid Khaqan Abbasi put off approval of a summary that the Ministry of Maritime Affairs tabled in the Economic Coordination Committee (ECC) of the cabinet for necessary exemptions for Gwadar Port and the Gwadar Free Zone.
The ECC constituted a committee to remove any anomalies in the proposed amendments to the Gwadar Port Concession Agreement, according to a statement issued by the Prime Minister’s Office after the ECC meeting.
The Federal Board of Revenue (FBR) has already tabled the amended Finance Bill 2018 in the National Assembly. More tax concessions to the Chinese will require further amendments to the bill.
The maritime ministry informed the ECC that Chinese operators of Gwadar Port were facing problems due to ambiguity in rules and laws about the nature of tax exemptions.
Three years ago, Pakistan had approved a 23-year tax holiday for the China-run Gwadar Port in an attempt to make the deep-sea Arabian port a hub of commercial activities.
The original Gwadar Port Concession Agreement was signed between the Gwadar Port Authority and Port of Singapore Authority, which the ECC approved in 2007. In February 2013, China Overseas Ports Holding Company Limited (COPHCL) took over operations of the port from the Singaporean company.
In April 2015, the ECC decided to extend the tax holiday for Gwadar Port and the Gwadar Port Free Zone from 20 years to 23 years on an understanding that the 23-year period will come into effect from 2007.
But China has now demanded that the tax holiday should be applied from 2013 instead of 2007. This would allow Chinese firms to enjoy tax-free status till 2036, even beyond the scope of China-Pakistan Long-Term Plan of CPEC that will end in 2030.
