Sensitive taxes

There is a certain irony about the report that a Chinese company that supplies coal to the 1,329 MW Sahiwal Power Plant has been caught evading taxes. The company has owned up and deposited a Rs1.2 billion cheque in the national exchequer in the last month but the initiating agency, the Federal Board of Revenue, is reluctant to file a criminal case due to the “sensitivities” that surround it. The Sahiwal plant is an element of the China-Pakistan Economic Corridor (CPEC) and it is possible, indeed likely, that it will not be an isolated instance as the vast CPEC enterprise continues to expand and mature. The irony lies in the fact that Pakistan has pursued, and nailed a foreign tax evader but has signally failed to catch or prosecute fish of no lesser stature on its home ground where blatant tax evasion is a cultural norm. The Chinese will have noticed this wrinkle in the fabric of reality. The FBR has used the fig leaf of “the national interest” in making its decision, and one might wonder to what extent a similar fig leaf has been applied to the thousands that duck the tax radar but are indigenous.

Ironies aside there are serious issues underlying this event. There has been a painless resolution in that there was a swift admission followed by a substantial payment and we will never know whether the Chinese “made a mistake” in the non-declaration of equipment imported for the Sahiwal project, or whether this was something rather more criminally driven.

The Chinese company involved is a vast state-owned conglomerate with interests in development, investment, construction and the construction and management of power sources and it will not be alone. The next decade is going to see Chinese interests in Pakistan grow exponentially. As the FBR has admitted this is not an isolated case. Sensitive or not the Chinese are no less liable to taxation than anybody else. Now let us see the FBR turn its gaze inwards.

Published in The Express Tribune, May 16^th, 2018.

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