The China-Pakistan Economic Corridor (CPEC) promises many forms of benefits for the country. An increase in foreign direct investment is one of the more major and immediate boons. However, by the looks of things, the government is not reaping all the benefits, and the many tax breaks being provided for Chinese investors is causing us to lose much more than we should be. Cuts and breaks on custom duties, federal excise and withholding taxes, income and sales taxes have all been promised.

Encouraging investment is well and good, but it must not reach a point where looking to incentivise takes away from important revenue streams. Rs 150 billion – the amount lost as a result of these tax breaks – is a large amount and if the government is looking to forgo this amount, it must have a substitute in mind. Merely asserting that Chinese investment will bring development is not enough; the government must have a realistic plan for increasing its revenue from other sources.

Additionally, while providing tax breaks to Chinese investors opens up immediate opportunities for projects to start, not offering the same incentives to domestic investors leaves them out in the cold, and does nothing to foster local businesses, and in fact prevents them from flourishing by pitting them against competition that the government is backing. Pakistani investors and businesses are bound to feel discriminated against, and they will be completely justified if they do.

Incentivising foreign investors is not a bad thing, but the government must balance this by ensuring that domestic businesses are allowed to offer fair competition – if Chinese investors have access to duty-free machinery, equipment and are not charged other federal excise or withholding taxes, they are already one foot ahead of the locals.

The government needs to look at CPEC from all angles, there are aspects beyond infrastructure development, and Pakistan should look to get the maximum out of this mega-project.