January 25, 2003	Saturday	Ziqa’ad 21, 1423

ISLAMABAD, Jan 24: The United Arab Emirates (UAE) has protested over alleged arbitrary increase in taxes on Pak-Arab Fertilizers Company (PAFCO) and has decided not to make further investments in it.

Sources in the foreign office told Dawn that UAE has raised the issue with government of Pakistan through diplomatic channels and has termed the tax rate increase as disastrous.

These sources said the board of directors of International Petroleum Investment Company (IPIC), which is owned by the government of UAE recently called Pakistan’s ambassador Maj-Gen Salimullah to brief him on their grievances regarding the taxes on Pak-Arab Fertilizers Company.

The IPIC officials told the ambassador that taxes have been increased from 35 per cent to 61 per cent since 1999 owing to the alleged arbitrary change in the status of the company from a public entity to a private one by the Central Board of Revenue.

In a letter to secretary foreign affairs, Pakistan’s ambassador to the UAE reported that the matter was also discussed by the PAFCO board meeting held in Abu Dhabi last month, which decided to resolve the matter through diplomatic channels.

Saif Saeed Saed, under secretary of the UAE foreign affairs ministry, had also conveyed to Pakistan his government’s deep concern over the decision of the Pakistani tax authorities to arbitrarily declare the company as private company.

Pakistan has been told the tax regime on PAFCO, mostly back dated, was increased by the tax authorities without prior consultation with UAE or without intimating any reason except that the unilateral decision to increase the taxes was taken due to the change in company status as private entity.

The IPIC is of the view that PAFCO since its inception in 1972 has been a joint venture company between the two governments and thereby it was treated as a public sector company without any clear stipulation in the papers as to its status.

The IPIC has also been pursuing the matter in the appellate tribunal. However, they did not seem to be much optimistic about the verdict, said Mr. Salimullah in the communication.

Pakistan has been told that IPIC “intended to inject more investment into PAFCO with a view to making the 20-year old company viable but the tax issue discouraged them to do so. Terming the government of Pakistan’s decision to raise the tax rate as “disincentive” and a “disaster”, the IPIC officials asked the ambassador to take up the matter with Pakistan government in the interest of excellent bilateral relations.”

The UAE government, said these sources, have also directed their ambassador in Islamabad to take up the matter with minister for production and advisor to the prime minister on finance.

Officials in the CBR when contacted said that the company was a private limited company and the CBR’s decision was strictly in line with applicable laws in Pakistan.

They said the government of Pakistan will have to make special rules to restore PAFCO’s original benefits.

Secretary industries Dr. Akram Sheikh admitted that PARCO did not come under the application of corporate tax because it was not listed at any stock exchange. He said the issue has already been taken up with the adviser to prime minister on finance and would be resolved amicably.

He, however, said the figure of increase in tax from 35 per cent to 61 per cent was far from reality.

Pak Arab Fertilisers (Pvt) Limited is located at Khanewal Road, Multan over an area of 302 acres.

It is the largest fertilizer complex in Pakistan and the only factory producing Calcium Ammonium Nitrate (CAN) and Nitrophosphate with annual production capacity of 90,000 tons urea, 450 tons CAN, 305 tons NP and 847,000 tons multi product. It uses rock phosphate imported from Jordan and Morocco.

PAFCO was established as a result of protocol concluded between Abu Dhabi and Pakistan to co-operate in the fields of petroleum industries and natural resources available in both the countries.