The Joint Cooperation Committee (JCC) on China-Pakistan Economic Corridor (CPEC) has decided to expedite tax dispute settlement process, increase interaction between tax authorities (Federal Board of Revenue and State Administration of Taxation, China) and utilize double taxation treaty fully to maximize tax incentives to Chinese companies operating in Pakistan.
Sources told Business Recorder here on Saturday that the decision to resolve tax-related disputes between Pakistan and China through tax dispute settlement was taken in the 7th meeting of the JCC held in Islamabad for promoting and developing the CPEC.
There would be frequent interactions between the Federal Board of Revenue (FBR) and State Administration of Taxation of China to resolve issues of Chinese companies working under the CPEC.
According to the decision, the JCC believed that in order to facilitate the development of CPEC and promote bilateral trade and investment, the two sides should further expand the cooperation among the tax authorities of the two countries, make full play the tax treaties (DIA), expedite tax dispute settlement, strengthen tax administration capacity, enhance tax certainty, and provide quality taxpayer service, so as to create a good environment for trade and investment.
The Pakistani side agreed to facilitate the early resolution of provincial sales tax issues so that CPEC power generation projects are not adversely affected. The JCC expressed satisfaction over the progress of the "Two Big Projects." The Chinese side expressed its satisfaction and greatly appreciated the efforts of government of Pakistan for making safety and security arrangements for Chinese working on these projects.
It was assured by the Pakistani side that the issues relating to tax on machinery/equipment and construction material as per commercial contract will be resolved by the end-2017.
The JCC highly appreciated the tangible endeavours of the Pakistani side to protect the safety of CPEC. The Pakistani side agreed to enhance input to strengthen and protect the safety of the projects, companies and organizations, besides personnel working for the CPEC. The Chinese side assured expediting allocation of resources for capacity building of SSD and other law enforcement agencies. The two sides will continue the close coordination and cooperation to secure the safety and smooth development of CPEC.
The JCC noted with appreciation that due to the efforts of experts from both the sides, consensus has been developed on the Long Term Plan (LTP) of CPEC with the approval of the two governments. The JCC approved LTP of the CPEC and appreciated the hard work and endeavours made by the working teams of both sides for the smooth completion of LTP, and appreciated the NDRC, MPDR and China Development Bank for their outstanding contribution and significant role in formulating the LTP.
Subsequently, both the parties will press ahead the implementation of the LTP together, maintain close communication, follow up the implementation progress, and evaluate and update the content of LTP in due course.
Reporting about the visit of high-level delegation from NRA and NDRC in July 2017, it was informed that both the sides have reached agreements on making fast track arrangements for completing all related tasks for ML-1 implementation in a timely manner. The forum was informed that substantial progress has been made on ML-1 project. The two sides have signed the framework agreement for implementing ML-1 Project during the "Belt and Road" Forum for International Cooperation. The review of the preliminary design of Phase-I sub-projects would be completed by November 30, 2017; the process for hiring of project management consultant (PMC) has been initiated and aligned with hiring of EPC contractor in terms of its timing; tendering process for EPC contracting of Phase-I, in three contract packages, would he initiated soon; security plan is jointly being prepared; two batches Pakistan Railways officials have been trained in China with the support of National Railways Administration China, CREC and Ministry of Railways Pakistan and initial discussion on financing held. The JCC appreciated the progress made on the MI-1 project and support provided by Pakistani side.
Given the strategic importance of ML-1 project, both the sides jointly decided that financing arrangement would be made proactively and work on ground could be started early. The forum was informed that a high-level financing group, headed by secretary MPDR and represented by relevant ministries, has been already notified in terms of the decision of the 6th JCC. The first meeting of the working group was held on July 20, 2017. Pakistani side proposed that broad terms and conditions of financing may be considered for sharing by the Chinese side, so that financial close can be achieved in the timely manner. Both the sides emphasized the need for timely arrangements of financing for the ML-1 project.
Given that the JCC has declared ML-1 as strategic project as it creates 'win-win' situation for both the sides. Pakistani side proposed that financing arrangement for the project may have favourable terms and conditions which Chinese side agreed to consider in financial negotiations, as both the countries are strategic partners and will support each other in early execution of the strategic project.
As jointly agreed during 5th meeting of the Joint Working Group on Transport Infrastructure that the work on Phase-I of ML-1 project would be started early 2018, and all requisite arrangements including preliminary design review, signing commercial contract, etc, would be completed through proactive approach in a timely manner. The JCC also directed that both the sides should make joint efforts to promote the completion of abovementioned work as soon as possible.
Pakistani side proposed extension of ML-1 to Torkham. Both the sides agreed to discuss the extension of ML-1 to Torkham at technical level on completion of the feasibility study being carried out. The JCC endorsed the proposal.
The JCC endorsed the Pakistani side's proposal for developing a comprehensive capacity building programme/plan for railways to promote communications and cooperation between the Ministry of Railways Pakistan and National Railways Administration of China.
Karachi Circular Railway (KCR) project, as recommended by the 5th JWG, was discussed in detail and both the sides agreed that the project is a technically qualified and mature for implementation. For Greater Peshawar Mass Transit-Circular Rail and Quetta Mass Transit Projects, both the sides agreed that after approval of PC-I, projects will be discussed in the next JWG on transport infrastructure. Both the sides further agreed that NRA may nominate a design institute for reviewing the feasibility study.
With regard to new projects approved by the JCC, an implementation mechanism will be developed through mutual consultation at the earliest.
The JCC appreciated the endeavours made by the Pakistani side on security protection for the CPEC transport infrastructure projects and suggested that the existing security arrangements could be optimized in line with the features of transport infrastructure projects.
The JCC appreciated Five-Year Action Plan for Technical Cooperation on Highways between China and Pakistan (2018-2022). As decided in 5th JWG on Transport, Pakistani side has notified the executive body for implementation of technical cooperation. The Chinese side was requested to notify their counterpart executive body.
For development of all-weather opening of KKH at Khunjrab, Chinese side noted this project for further internal consultations.
The JCC highly appreciated the remarkable progress of Gwadar Free Zone. The primary development and investment of Initial Zone of Gwadar Free Zone progressed successfully and the ground breaking ceremony of the Initial Zone as well as the first session of Gwadar Expo International Commodity Fair are planned to be held in January 2018. The China Overseas Ports Holding Company (COPHC) has submitted the feasibility report of Gwadar Port (Phase-II) Expansion and the feasibility report of Gwadar Free Zone (Phase II) to Gwadar Port Authority (GPA), and both sides supported to carry out relevant construction work as soon as possible.
Both sides agreed that since Gwadar Port and Free Zone was handed over to COPHC, it has made an outstanding contribution to the local social and economic development, especially for employment, education, medical treatment, and environmental protection, etc. Both sides will further support the relevant work of Gwadar Port, making Gwadar a model project of CPEC. Pakistan side emphasized that marine life and environmental protection be kept in mind in development of industrial sector in Gwadar. It was proposed that Chinese standards (eg in Fujian province) will be followed by and be replicated in Gwadar.
Both sides agreed that resolution of water scarcity problem in Gwadar is the urgent priority. With regard to the 5.0 MGD desalination plant agreed earlier, both sides shall make efforts to complete the next steps to address the water requirement of the city on permanent basis. Following the discussion in 6th JCC meeting, it has been agreed by both sides will continue to explore all possibilities to establish the 5.0 MOD desalination plant through multiple channels including Chinese financial support as well as BOT, PPP, etc.
The Chinese side highlighted the need for increasing the frequency of commercial flights to (3waclar from Karachi, Islamabad and Lahore). In response, Pakistan side informed that the airlines will be asked to increase the number of flights. Chinese side and Pakistan side will further deliberate on this.
Pakistan side expressed that the two projects should be launched at an early date. Chinese side stated that the two projects were steadily promoted according to the procedure of foreign aid program and they strive to have a substantial progress. Both side agreed to sign LOEs by the end of 2017. The GPA and GDA will complete formalities with MOFCOM through EAD.
Both sides agreed to complete joint feasibility in accordance with decision of the 6th JCC, latest by June 2018 and ensure that the capital dredging and others components are undertaken simultaneously in accordance with relevant rules.
It was informed that a task force on social sector headed by the chief secretary Balochistan was constituted and a number of visits and meetings have been held in China and Pakistan between the members of two sides. It was informed by Chinese side that China-Pakistan Paternity Emergency Care Centre was completed by the Red Cross Society.
The Chinese experts conveyed that Dhabeji Industrial Park at Thatta, Hattar Industrial Estate-II of Khyber Pakhtunkhwa and M-3 Faisalabad, Punjab, currently have more advantages than other proposed sites for PSEZs. However, Pakistan side expressed that Rashakai SEZ is its preference in Khyber Pakhtunkhwa, and an additional SEZ (M-2/ Quaid-e-Azam Park Sheikhupura) in Punjab. This description & expert opinion and observation were given for reference purpose only by the Chinese Expert Group. However, Pakistan side expressed that Rashakai SEZ is its preference in Khyber Pakhtunkhwa, and an additional SEZ (M-2/ Quaid-e-Azam Park, Sheikhupura) in Punjab. The Chinese expert group noted that Khyber Pakhtunkhwa pays high attention to the development of SEZs especially has done abundant work in Rashakai SEZ; it is suggested to make full use of the positively of Khyber Pakhtunkhwa to promote the construction of Rashakai SEZ at the earliest.
The JCC agreed that as next step, the priority of industrial cooperation is to enhance the industry coordination of the two countries. Pakistan could propose cooperation demand in key industries eg textile, iron & steel and petrochemical etc. China will use its advantages in equipment, technologies, management experiences and funds to support Pakistan in developing relevant industries.
Both sides agreed to strengthen cooperation on vocational & technical education and training. National Vocational and Technical Training Commission (NAVTTC) Pakistan will provide a detailed plan for the proposed cooperation under the ICJWG umbrella.
The Pakistani side proposed that the visit of the Pakistani exporters may be facilitated in 2017 to which Chinese side stated that NDRC will facilitate the visit and encourage the interaction between Pakistani and Chinese business community and major procurement organizations.