Indecisiveness mars ECC meeting

Committee fails to evolve consensus on tax incentives for telecom sector

ISLAMABAD:

The government on Wednesday failed to take a clear decision on giving tax incentives to the telecom sector and set up yet another committee to resolve the issue, continuing its policy of indecisiveness that is causing damage to the economy.

Headed by Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh, the Economic Coordination Committee (ECC) of the cabinet constituted a sub-committee - the third on the issue since May - to arrive at a consensus on giving tax incentives to the telecom sector.

“In order to facilitate the telecom sector by the waiver of certain taxes, the ECC decided that the proposal may be granted approval in principle,” said a statement issued by the Ministry of Finance.

“The ECC further directed that a sub-committee may be constituted, consisting of adviser to PM on revenue, adviser on institutional reforms and austerity, minister for industries and production and adviser on commerce, to prepare a modified proposal in view of FBR’s response for final approval,” it added.

The consultative process had already been exhausted and it was for the ECC to either accept or reject the proposal. It was for the third time that the Ministry of Information Technology requested the ECC to take a decision. It was also the third committee that had been constituted since May to resolve the issue.

The IT ministry had already exhausted all the options and presented its final position to the ECC for taking a decision on abolishing 12.5% withholding tax, reducing the minimum tax from 8% to 3%, reducing federal excise duty to 16%, abolishing the Rs250 SIM card activation charges and reducing the additional customs duty to 3%.

The indecisiveness on the part of the government in key economic matters has caused significant losses to the economy. According to a news report, the delay in taking timely decision to import wheat and sugar caused a loss of Rs404 billion.

The ministry took the final proposal to the ECC after extensive discussions, said IT Ministry Secretary Shoaib Siddiqui.

He said these measures were crucial to promote healthcare and education during the Covid-19 outbreak and the reduction in tax rates would, in the longer term, increase tax collection and promote economic growth.

In May, Prime Minister Imran Khan had constituted an inter-ministerial committee to deliberate on tax issues related to the telecom sector with a view to facilitating the delivery of online education and healthcare services.

Subsequently, in August this year, the ECC set up a committee and directed the Ministry of Industries and the Federal Board of Revenue (FBR) to examine the proposals and submit their positions to the IT ministry for incorporating in the summary.

The industries ministry supported the proposal of abolishing 12.5% advance income tax on telephone calls while the FBR vehemently opposed it. Similarly, the industries ministry was in favour of lowering the federal excise duty to 16%, which was also opposed by the FBR.

The only proposal where the FBR and the Ministry of Industries arrived at a consensus was abolishing the collection of Rs250 on the issuance of a new SIM card.

The FBR and the Ministry of Industries were also in favour of reducing the additional customs duty on raw material imports for the manufacturing of optic fibre cable from 5% to 3%.

The FBR did not support the proposal of exempting the telecom sector from the quarterly advance income tax. The FBR also did not agree on reducing the minimum income tax for the telecom sector from 8% to 3% while the industries ministry was in its favour.

Other decisions

The Ministry of Maritime Affairs presented another summary for waiving demurrage charges on the Afghan transit cargo/ Afghan-bound containers stranded at Karachi ports.

Earlier, the government had decided to ask terminal operators to waive 75% of demurrage charges on Afghan transit containers/ cargo landing at ports from March 22 to September 30, 2020 (the Covid-19 period) including the refund of demurrage charges already recovered from importers of Afghan-bound transit container/ cargoes.

But the terminal operators showed their inability to accede to the ministry’s request. These operators were Karachi International Container Terminal (KICT), South Asia Pacific Terminal Limited (SAPTL), Pakistan International Container Terminal (PICT) and Qasim International Container Terminal (QICT).

“The ECC directed that the same committee that had been engaged with the terminal operators should again negotiate with the operators to reach an amicable solution to the issue,” said the finance ministry.

The ECC had directed the Ministry of Maritime Affairs to take up the issue with the port authorities and terminal operators to amicably decide the issue of waiving demurrage charges on the Afghan transit cargo stuck at Karachi ports.

A majority of these containers had been stuck due to the mishandling of transit cargo by the customs and port authorities.

Total outstanding demurrage charges amount to Rs1.7 billion for this year. Maximum dues of Rs600 million were owed to SAPTL, Rs568.5 million to PICT, Rs455 million to KICT and Rs42 million to QICT. There were 19,770 containers that got stuck at ports during this period.

But the maritime affairs ministry had requested that in order to maintain friendly diplomatic relations with Afghanistan and as a gesture of goodwill, Afghanistan-based importers may be given relief of Rs1.3 billion.

The ECC was of the view that it could not ask private sector operators to write off their dues.

The ECC approved a summary moved by the Ministry of Energy (Petroleum Division) for the allocation of another 38 mmcfd of gas from three new wells, subject to all regulatory approvals.

The ECC granted approval for the renewal of contract with Tavanir, Iran for the purchase of 104 megawatts of electricity subject to vetting by the Ministry of Law. The contract, if approved by the law ministry, will be valid till December 31, 2021.

Published in The Express Tribune, October 29^th, 2020.

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