Budget 2018-19: K-P seeks 10-year tax break for its energy companies

Demands right to impose excise duty on crude oil production to boost revenues

ISLAMABAD: The government of Khyber-Pakhtunkhwa (K-P) has asked the federal government to exempt provincial oil and gas holding companies from income tax payment for 10 years and allow provinces to impose excise duty on crude oil production in their territories in the upcoming budget for 2018-19.

“Provincial holding companies, incorporated after the petroleum policy of 2012, can play a pivotal role in bringing rapid economic stability and energy security in the country through fast-tracked exploration and production of oil and gas reserves,” said the K-P administration in a letter to the central government.

“Provincial governments have very rightly pleaded the federal government to strengthen all the provincial holding companies.”



It emphasised that while the provincial governments were gathering every available penny to strengthen the holding companies to bring economic prosperity to the country through energy security, the federal government should exempt these companies of all provinces from income tax for 10 years.

The province pointed out that the exemption would be viewed as prudent investment of the government that would result in much greater tax revenues after 10 years and would be a win-win proposition.

It cited similar exemptions granted to a number of other sectors and companies such as the 24-year tax exemption for venture capital companies, 23-year tax exemption for Chinese companies and even to their contractors and sub-contractors working at the Gwadar Port.

Other instances included 20-year tax exemption for the Khalifa coastal refinery, 10-year tax exemption for all industrial undertakings in the Larkana industrial estate, 10-year tax holiday for all industrial concerns in Gwadar, 10-year exemption for all industrial units in special economic zones, lifetime exemption for power companies, lifetime exemption for a coal mining project in Sindh supplying coal to a power project and five-year exemption for LNG terminal operators and owners.

It sought for the provincial governments their right under the 18th Amendment to the Constitution to impose federal excise duty on crude oil to keep up the sanctity of Article 161(1)(b) of the Constitution.



The K-P government recalled that a joint resolution was passed for last year’s finance bill to urge the Oil and Gas Regulatory Authority to include excise duty in the petroleum price fixing formula.

The provincial governments have now once again asked the federal finance ministry to impose excise duty on crude oil production in their regions in the upcoming Finance Bill 2018.

“This will increase revenue receipts of the provinces which, in turn, could be used for further oil and gas exploration, economic development, job creation and boosting the national economy as a whole,” said K-P in the letter.

Published in The Express Tribune, April 26^th, 2018.

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