A parliamentary panel Wednesday expressing serious concerns over non-recovery of Rs 3.11 billion of income tax from Motorway Operation and Rehabilitation Engineering Company (Private) Limited (MORE) has directed the concerned authorities to recover the stalled money and deposit it in national kitty as early as possible.
The subcommittee of the Public Accounts Committee (PAC) met here under the chairmanship of Syed Naveed Qamar, which was also attended by Hina Rabbani Khar and Khawaja Sheraz Mehmood to discuss and review the audit paras of Ministry of Communication for the year 2016-17. The panel was informed by the officials of the Auditor General of Pakistan (AGP) that MORE in 2014 signed an agreement with National Highway Authority (NHA) for overlay modernization and operation of Islamabad-Lahore Motorway costing Rs 36.825 billion on Built-Operate-and-Transfer (BOT) basis which also included Rs 30.82 billion on account of construction/civil works/capital cost for a period of 20 years. The AGP officials added that as per agreement the company had to pay Rs 9.5 billion to NHA as upfront guaranteed payment on achievement of financial close.
The AGP officials maintained that during audit of the project, it was observed that MORE paid upfront amount of Rs 9.5 billion to NHA in three instalments in consideration of lease of right to collect toll. They said that NHA didn't collect advance tax amounting to Rs 950 million at 10 percent of upfront amount as required under section 236A of income tax ordinance. Moreover, the company executed overly and modernization works worth Rs 30.935 billion which is subject to income tax at 7 percent of the cost, but the company didn't deposit income tax amounting to Rs 2.165 billion. The Audit officials said that on above two accounts, the NHA failed to recover Rs 3.115 billion tax from the concessionaire.
Responding to a question asked by member committee Hina Rabbani Khar, the secretary communication said that the company MORE was created by Frontier Works Organization (FWO) to get the contract. The secretary Ministry of Communication further said that as per SRO of Federal Board of Revenue (FBR), FWO and National Logistic Cell (NLC) are exempted from taxes.
FBR senior official Faheem-ul-Haq also endorsed the statement of the secretary communication. But the committee members questioned the FBR officials whether such exemptions were also provided to other public sector entities or military-owned commercial organizations are being specially treated.
Convener Committee Syed Naveed Qamar said that he has not seen any other public sector commercial organization seeking such exemptions, adding whenever the government tries to privatize public sector entities like Oil and Gas Development Company or Pakistan Petroleum Limited and others, the major argument of these companies against privatization always remains that being public sector entities they are paying huge taxes and privatization may reduce the tax collection. Hina Rabbani Khar said when it comes to acquire multibillion contracts, NLC and FWO declare themselves as commercial entities but when it comes to paying taxes, they declare themselves as exempted from taxes. The committee members observed that there is no law in the country providing any tax exemption to any government commercial entity or private, so therefore taxes must be collected from NLC and FWO. The audit officials said FBR as penalty has deducted the liable tax amount from the accounts of NHA which should have been received from MORE.
The audit officials said that hence FWO through SRO has tax exemptions but MORE isn't liable to any exemptions as it was established as a commercial entity. The secretary communication said that the dispute is in a court of law between NHA and FBR and the ministry is waiting for the court decision.
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