NBR prefers no addl tax benefits for PPP projects

March 26, 2015

The National Board of Revenue has recommended for maintaining the existing tax and duty benefits for the projects to be implemented under the public private partnership scheme, officials said. They said that ample tax benefit was given to the newly established physical infrastructure projects in line with the government’s priority lists in the income tax and customs acts.‘Maintaining the existing tax incentive for PPP projects is important for the sake of continuation of revenue collection,’ the revenue board said in its opinion on the draft tax incentive package for the PPP projects recommended by PPP cell under the Prime Minister’s Office.
The NBR, however, opined that the existing benefits particularly related to income tax might be extended for the sectors under the PPP scheme which were currently not included in the tax laws.
A high official of the revenue board said that generally the prevailing incentives for physical infrastructure projects were enough and covered major benefits for any new initiative under PPP or similar projects.
The government may extend some benefits for few other fields through next budget if it feels necessary, he said.
The PPP cell had earlier recommended an incentive package seeking 11 types of income tax, customs duty and value-added tax benefits for projects to be set up under the PPP scheme to minimise tax burden of the investors.
Last week, the revenue board forwarded its opinion on the draft package to the PPP cell after getting approval of finance minister Abul Maal Abdul Muhith.
The three wings of the revenue board—income tax, customs and VAT—have given the same opinion on the package.
The draft offered full exemption of corporate income tax for 10 years on physical infrastructure projects, 12 years for projects for the welfare of marginalized people and in rural areas, full tax exemption on capital gain tax and interest on foreign loans, full exemptions of value added tax and customs duty on imported goods and full exemption of stamp duty.
The revenue board said that the rate of tax on capital gain derived from share transfer might be reduced from the existing 15 per cent for the investors in physical infrastructure projects.
The government should not exempt the capital gain tax for commercial projects including power, oil, gas, coal and mineral resources, oil refinery, LPG, fertilizer, telecommunication and tourism sectors, it said.
The NBR also gave its opinion against the proposal of exempting tax on interest on foreign loans.
Customs wing said that the investors availed duty-free import of capital machinery for project implementation on some conditions and in general, importers pay only 2 per cent duty on import of capital machinery.
So, there is no necessity to provide additional benefit such as full exemption of customs duty and stump duty, it said.
However, cement, rod, pre-fabricated building materials, electric cable, transformers have local production. Import of those products under PPP does not require incentives, customs wing’s opinion said.
The package offered some other benefits related to finance, stock market and foreign exchange transaction.
According to the Article 46C of the Income Tax Ordinance-1984, investors get income tax exemption on newly established physical infrastructure for 10 years at gradually reduced rates including 100 per cent exemption for first two years.
There is tax exemption facility for 15 years to the investors of coal-based private power companies that will sign contract with the government by June 30, 2020, according to the NBR.
The revenue board said that the activities including land reclamation, dredging of rivers, economic zone and industrial estate which were not specified in the law for tax exemption might be included for the tax benefits.

-Input from New Age

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