One proposal was related to exemption from minimum tax to M/s Byco and the other was about three school buses donated by China Overseas Port Holding Company Limited (COPHCL) for local community of Gwadar.
Minimum tax exemption: Ministry of Petroleum & Natural Resources informed that the ECC had granted tax exemption for 71/2 year to M/s Byco Oil Pakistan Limited, for the refinery project located at Gaddani. This exemption was based on the incentives approved by the ECC for the coastal refinery Khalifa Point. In pursuance thereof, the FBR introduced exemption from corporate tax in light of the provisions of clause -132A of Part I of the Second Schedule to the Income Tax Ordinance, 2001. At the time when this clause was being introduced and negotiations / discussions with FBR were underway, there were no provisions for the charge of Minimum Tax on turnover. [Minimum tax under Section 113 of the Ordinance was deleted in 2008 and was reinserted by the Finance Act, 2009]. As a result, FBR notified tax holiday for only corporate tax on profits, without mentioning exemption from Minimum Tax @ 0.5% on turnover despite the fact that ECC had granted tax holiday to Byco Oil Pakistan Limited. Tax levied under the Ordinance represents taxes based on income and a minimum tax liability based on turnover. In almost all the cases, especially in capital intensive high turnover project, exemption is provided for taxes encompassing both the forms of direct tax levy under the Ordinance.
It was pointed out that under clause -11A of Part IV of the Second Schedule to the Ordinance, majority of entities are exempt from income tax. Almost all the enterprises related to oil and gas sector have been provided exemption. There was no economic and technical basis for discrimination for the entities in same sector, particularly in view of ECC's decision for granting tax holiday. It was reiterated that the concession approved by the ECC had not been completely incorporated in the Ordinance as the FBR introduced exemption for the corporate tax by way of Clause-132A of Part 1 of the Second Schedule to the Income Tax Ordinance 2001. The Board of Investment (BoI), therefore, requested the ECC to clarify that tax holiday covers exemption from Minimum Tax as well.
Chairman FBR, Tariq Bajwa explained that exemption on overall taxes was different from exemption on the turnover. He, therefore, did not support exemption from minimum tax. Special Assistant to Prime Minister on Revenue, Haroon Akhtar Khan endorsed the views of Chairman FBR saying that even loss making companies have to pay the minimum tax.
Finance Minister/Chairman ECC advised the Board of Investment to clarify the concept of minimum tax through its promotional/awareness program.
He further advised that the impact of minimum tax should be factored into the investment feasibility. The Minister for Petroleum and Natural Resources was of the view that tax holiday should be deemed as an exemption from all kind of taxes to promote investment. Chairman ECC said that tax holiday was there but minimum tax had to be paid. He further said that any exemption from tax, including the minimum tax could only be given by the Parliament.
ECC directed the Board of Investment to clarify the concept of minimum tax through its promotional/ awareness programme. The ECC further directed that the impact of minimum tax should be in-built in the future investment feasibilities.
Exemption from all taxes on import of 3 buses: Ministry of Ports and Shipping informed that the Gwadar Port Operator, M/s China Overseas Port Holding Company Ltd (COPHCL), donated three Chinese imported school buses for the school children of Gwadar along with the grant of financial assistance by the Chinese Embassy to District HQ Hospital and three government schools. The goodwill gesture of COPHCL has been appreciated by both the governments, as well as people of Gwadar. However, the buses are ever since parked at the Port on account of issue of payment of customs duties, etc.
The ECC was informed that Federal Minister for Finance was requested for the special dispensation of grant of exemptions from all import duties and taxes for three school buses. Consequently, FBR issued special exemption order No. 4/2015 to exempt as a special case from payment of customs duties only. Now the Model Customs Collectorate Gwadar had intimated to deposit an amount of Rs 45,16,522.00 [as total due taxes] under section 81 of the Customs Act, 1969, or to furnish the exemption orders from payment of sales tax/withholding tax and income tax. FBR was again requested for the said exemption. However, FBR instead of granting exemption advised that the matter be taken up by the ECC of the Cabinet.
Ministry of Ports & Shipping requested the ECC of the Cabinet to grant exemption from of all taxes including sales tax / withholding tax, additional sales tax and income tax etc amounting to Rs 45,16,522/- as per assessment sheet on three buses and accessories / spare parts donated by COPHCL as a part of their corporate social responsibility for local, community schools at Gwadar.
Minister for Information, Broadcasting and National Heritage asked that the usage of the buses was not known. He said that the schools which would use/ benefit from the buses should have been clearly mentioned so that any possibility of misuse of the faculty could be avoided. Chairman Privatisation Commission said that the matter should have been addressed timely as it was already delayed.
Minster for Finance/ Chairman ECC was of the view that ECC was no more authorised to grant exemption from taxes as these powers had been withdrawn from the FBR/ ECC and vested in the Parliament.
After detailed discussion, the ECC did not approve the proposal and directed Ministry of Ports & Shipping to make arrangements for payment of due taxes to ensure clearance of vehicles within 10 days.