Gwadar Port and Free Zone tax concession agreement offers only 20 years of tax holiday to port operators and there is no clause in the agreement that accords tax concession to sub-contractors.
This revelation was made by the Ministry of Maritime Affairs Secretary Rizwan Ahmad in a meeting of the Senate Standing Committee on Finance called on to review the Gwadar Port concession agreement with China.
Earlier, the Federal Board of Revenue (FBR) had briefed the committee that it had suggested a tax exemption for 40 years for Gwadar Port operators, contractors, and sub-contractors on the recommendation of the Maritime Affairs Division.
However, Secretary Maritime Affairs has confirmed that that tax holiday period under the agreement is 20 years instead of the earlier stated 40 years and sub-contractors are ineligible for any tax concession.
Clause 7.1.1 of the Gwadar Port and Free Zone tax concession agreement states that the concession holder and its contractors and lenders will have tax exemption for 20 years.
According to the Secretary Maritime Affairs, the original Gwadar Port and Free Zone tax concession agreement was signed in 2007 with the Singapore Port Authority. In 2013, Singapore sold its rights to China Port Holding Company, without modifying the terms and conditions that it had originally agreed with Pakistan in 2007.
The Chinese company then registered Gwadar Free Zone Company Limited, Gwadar Maritime Services Limited and Gwadar International Terminal Limited with the Securities and Exchange Commission of Pakistan (SECP)
Last year in October, the federal government through a presidential ordinance granted a 40-year tax holiday to the Chinese operators of Gwadar Port and Free Zone. Once the ordinance expired, the federal government granted legal cover to these concessions through Finance Bill 2020.
The Finance Standing Committee initially rejected the proposed amendments with 5-3 vote but then unanimously agreed to reopen the matter.
Chairman Finance Standing Committee, Senator Farooq H Naek, said the Ministry of Maritime Affairs has deliberately misled the parliament and breached its privilege.
Senator Naek has now directed the Secretary Maritime Affairs to furnish the original copy of the 2007 Gwadar Port and Free Zone tax concession agreement between Pakistan and a Singapore Port Authority, the 2013 Novation Agreement between the Singapore and Chinese company, names of contractors, sub-contractors, and their owners before the Finance Standing Committee.