Senate panel to probe tax waiver to Chinese firm

ISLAMABAD: The Senate on Friday referred the issue of tax exemptions to the tune of Rs10.9 billion to a Chinese construction firm executing the Karachi-Peshawar Motorway project to the finance committee for a probe.

Opposition lawmakers and Senate Chairman Raza Rabbani appeared unimpressed by the clarifications offered by two government ministers – that defined procedure had not been bypassed while approving tax relaxation.

Speaking on a calling attention notice, the opposition senators dubbed the relaxation in sales tax and federal excise duty as “mother-in-law of all corruption” and claimed it had been granted bypassing prescribed procedure that identifies only the federal cabinet as the approving authority of tax exemptions rather than the Economic Coordination Committee (ECC).

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On January 23, the government had issued an SRO whereby a Chinese firm, China State Construction Engineering Corporation Limited, which is working on the Sukkur-Multan section of the Karachi-Peshawar Motorway project, was granted tax relaxation amounting to Rs10.9 billion.

Senator Murtaza Wahab, one of the movers of the calling attention notice, said the law bestows the right to exempt any tax to the federal cabinet – not to the ECC.

“[The] ECC cannot exercise a discretionary power rests with the cabinet in contravention of law,” he said, adding defined procedure had been violated while approving that SRO as it was the mandate of the federal cabinet – and not the ECC – to grant tax relaxation.

“If the government intends to grant exemptions, then it should be done across-the-board so that local manufacturers may not suffer at the hands of practices based on favouritism,” Wahab observed.

Ilyas Bilour, while pointing out some discrepancies in the award of this Rs296 billion contract, said the SRO had been issued as a favour and after the firm completed almost 37 per cent of construction work on the project.

“Through the platform of the Senate, former finance minister Ishaq Dar had categorically claimed that the government has stopped the practice of granting undue benefits to favourites through SROs,” Bilour said.

He demanded of the government to withdraw that SRO immediately.

Senator Nauman Wazir alleged that ‘someone’ had pocketed up to Rs110 billion in this project and it should be probed who is behind this mega corruption.

Responding the senators’ concerns, Minister of State for Finance Rana Muhammad Afzal informed that the ministry of communication had moved the summery, seeking tax exemption to the ECC as the Chinese firm wanted to import construction material for that project.

“[The] ECC considered the summery and approved it. The finance ministry was instructed to issue that SRO in the light of the ECC decision,” he said, adding the ministry of communication would be in better position to inform under what circumstances it moved summery.

He said the CPEC projects were based on loans and collection of tax on a loaned project would only add to the original loan.

At that point, Senate Chairman Mian Raza Rabbani said that the federal government was the appropriate authority to grant tax relaxation – not the ECC.

“It’s a violation of defined procedure and authority,” the chairman observed.

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To that the minister informed that the federal cabinet had ratified the ECC decision – a claim opposed by Senator Wahab, saying the notification categorically states that it’s been approved by the ECC and there was no mention of any approval from the federal cabinet.

Minister for Planning Ahsan Iqbal said all CPEC projects had been granted tax exemptions in a bid to reduce loan involved in those project.

“All these projects are based on concessional finance. It will not be a wise decision to increase the government’s loan through tax collection.”

Both the government ministers insisted that the defined authority had not been violated while approving that SRO, as the federal cabinet had ratified the ECC decision.

The Senate chairman, who appeared unimpressed from government’s response, admitted the opposition senators demand of referring the matter to the Senate Standing Committee on Finance and sought a report from the committee during the next session.

The house also discussed in detail the recent violent clashes in Punjab University.


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