RESTRICTED
WORLD TRADE G/SCM/Q2/PAK/2
20March 1997
ORGANIZATION(97-1169)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Questions from theEUROPEAN COMMUNITY Regarding theNew
andFullNotification ofPAKISTAN1
Thefollowing communication, dated 12March 1997, hasbeenreceived fromthePermanent
Delegation oftheEuropean Community.
_______________
Pakistan submitted on14October 1996 itsnotification ofsubsidy programmes totheWTO
pursuant toArticle XVI:1 GATT 1994 andArticle 25oftheWTO Subsidies Agreement.
Inthisrespect, theCommunity would liketoobtain clarification onanumber ofissues onthe
notified scheme asdescribed below.
Moreover, theCommunity hasobtained information ondifferent subsidy schemes which were
notnotified totheWTO although theirnotification seems necessary pursuant toArticle 25.2ofthe
Subsidies Agreement.
I. NOTIFIED SUBSIDY PROGRAMMES
Pakistan notified fourprogrammes which areavailable tothePakistani industry. However,
thenotification islimited tothetotalexpenditure under eachprogramme. TheCommunity requests
afullnotification ofeach programme using thenotification format (document G/SCM/6 of
9August 1995).
II. ADDITIONAL PROGRAMMES NOT NOTIFIED TOTHE WTO
PakistanhasnotnotifiedanumberofprogrammeswhichappeartobenotifiableunderArticle25.
TheCommunity findsthattheschemes described below provide afinancial contribution which confer
benefits tothelocalindustry. Inaddition theschemes areclearly specific (aspertaining toaspecific
sector orcontingent uponexports). Inaddition tothespecific questions asked, theCommunity would
likeclarification whytheseprogrammes werenotnotified totheWTO andrequests that,ifappropriate,
Pakistan supplies anotification under Article 25,using thestandard format.
1G/SCM/N/3/PAK.
./.G/SCM/Q2/PAK/2
Page2
1. TaxExemption onincome originating from exports.
2. Exemption from income taxon75%oftheincome earned from export offurniture,
doors andwindows.
3. Special treatment onimports ofmachinery formanufacture offootwear providing a
percentage isexported.
4. Rebate onincome taxonexports (a25%exemption onexport earnings from cotton
yarnanda75%exemption onexport earnings oncarpets, leather, manufactures and
value-added textiles).
5. Duty drawback scheme which provides forarefund ofcustoms duties andsalestaxes
onrawmaterial usedinthemanufacture ofgoods which areexported.
6. Karachi Export Processing Zone
Pakistan established oneexport processing zonenearKarachi. Companies located in
thiszonebenefit from acomplete exemption from income taxuptotheyear2000,
exemption fromimport duties, exemption fromcapital gains taxandexemption from
labour lawcontributions.
7. Special Industrial Zones
Special industrial zones willbeestablished indifferent partsofthecountry: threeare
located intheprovinces ofPunjab andSingh, twointheprovince ofNWFP, twoin
theprovince ofBaluchistan andoneintheNorthern Areas andAzad Kashmir. The
maincriterion foreligibility istheexport ofatleast60%oftheproduction. Thebenefits
include exemption fromincome tax,exemption fromcustoms duties, exemption from
salestaxonimports ofplantmachinery andexemption forfiveyears fromcapital gains
tax.
8. ThePakistan Council ofScientific &Industrial Research (PCSIR) gives R&D grants
toselected industries suchastheleather industry.