FBR declines $50m tax exemption for TAPI gas project due to IMF conditions
The Federal Board of Revenue (FBR) has decided not to include the Turkmenistan–Afghanistan–Pakistan–India (TAPI) gas pipeline project in the Foreign Investment Promotion and Protection Act (FIPPA) 2022. This decision has been made due to the potential tax exemption of $40 to $50 million, which is not feasible for Pakistan at the moment, as the country is currently under the scrutiny of the International Monetary Fund (IMF). The Energy Ministry’s senior officials revealed this information on Tuesday, as reported.
According to the officials, the tax collection agency has already denied tax exemptions to local refineries on the incentives they were supposed to receive from the government’s ESCROW account under the refinery policy for upgrading. They further mentioned that the Petroleum Division circulated a draft summary to the Economic Coordination Committee (ECC) on October 3, 2023, proposing the inclusion of the TAPI gas line project in the FIPPA. In a meeting held on December 28 of the previous year, the ECC discussed the matter and instructed the Petroleum Division officials to engage with FBR and Finance Division officials to address the issue.
It is important to note that the FIPPA was initially approved by Parliament to provide legal protection for the Reko Diq project, a copper and gold mine in Balochistan province, which is being developed by a consortium of foreign companies. Previously, Turkmenistan had requested the inclusion of the TAPI gas line project under the FIPPA, as they believed that Pakistan had already guaranteed the protection of Turkmen investment through a sovereign guarantee under the Host Government Agreement (HGA).
In order to maintain financial stability and adhere to the guidelines set by the IMF, the FBR has made the decision to exclude the TAPI gas pipeline project from the FIPPA. This decision aligns with the agency’s refusal to grant tax exemptions to local refineries, ensuring a fair and consistent approach to tax collection.