Pandora’s box: First China, then Japan and now ECC approves tax cuts for German Development Agency too

Americans, British and Koreans also seeking tax exemptions for their development projects

ISLAMABAD

The Economic Coordination Committee (ECC) of the cabinet met on Wednesday, and took a number of decisions, which include approving tax exemptions for the German Development Agency (GIZ), allowing Rs 864 million for purchasing new printing machines for general elections, also giving the nod to paying a month’s salary for the Pakistan Steel Mills (PSM) employees along with power sector getting syndicated term finance facility to the tune of Rs41 billion.

With Finance Minister Ishaq Dar chairing the meeting, the committee decided to give tax concessions to GIZ on the pattern of tax concessions granted to different Chinese contractors working on the CPEC projects and the Japanese International Cooperation Agency (JICA), said an official source.

The type of tax exemptions being provided to the Chinese will also be sought by other friendly countries, international financial institutions (IFI) and donor agencies, the source said. After Japanese and Germans, the Americans, British and Koreans are also seeking tax exemptions for their development projects.

The biggest worry is how to refuse similar tax concessions to IFI-supported projects. Since all the Chinese contractors working on the CPEC projects enjoy tax concessions, it will be very difficult for the government to refuse similar treatment to the contractors working on IFI-financed projects, the source added. In order to support the development activities carried out by GIZ in Pakistan, the ECC approved the GST exemption to the German development agency GIZ for goods purchased by it.

This exemption shall also apply on procurement of services obtained by GIZ in Islamabad.

The ECC also approved a proposal of Ministry of Water and Power for provision of a government guarantee by the Ministry of Finance for repayment of loan as well as interest, for a syndicated term finance facility for the power sector amounting to Rs 41 billion. The amount will be utilized for the purposes of funding the repayment liabilities of the distribution companies (DISCOs), through arrangement between Power Holding Private Limited and DISCOs.

A proposal of Ministry of Commerce for extending the deadline for export of sugar from May 31, 2017 till July 31, 2017 was also approved. The committee also accepted Ministry of Industries proposal for not deregulating the price of sugarcane. It also directed the relevant ministries to ensure price stability especially during the holy month of Ramazan.

The ECC also approved a proposal from the finance division regarding revised pay packages for the employees of PSDP-funded projects. A proposal of the Ministry of Water and Power for amendments in the support package for provision of power to the industrial sector was approved.

OGRA also made a presentation to the ECC regarding the trends in the prices of petroleum products. It was noted that the sales tax and PD levied on petroleum prices was in most cases currently lower than 2013.

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