One state two rules

EDITORIAL: Finally, after unending uproar from business and industry, the government is in no mood to extend tax and duty exemptions for ex-FATA and PATA regions. Finance Minister Mohammad Aurangzeb confirmed as much on the floor of the house, saying no legislation to extend the exemptions was under consideration especially after all chambers of commerce and industry insisted on a level playing field across the country.

These exemptions were a one-time, five-year incentive at the time of the tribal areas’ merger with KP, of course, but they were extended for one more year even as this arrangement turned into a convenient smuggling racket, flooding settled areas with all sorts of products without paying a penny in sales tax.

Indeed, local industry has lamented throughout this time that as much as 90 percent of steel (long, flat and round) and 30 percent cooking oil produced in former FATA and PATA areas is simply smuggled into the rest of the country. Surely, the government does not need a textbook lesson in how such practices do not incentivise but rather destroy local business and industry.

It’s no surprise that legislators in KP are not for ending the tax and duty exemptions at all. Sadly, these lawmakers only confirm the widespread suspicion that, once elected, most of their kind pander to interests of power brokers even if it means deliberately deflating the real economy and bloating the black economy.

But the finance minister in the centre must have a better idea of how close the economy is to total collapse. And while another IMF programme, which is being worked on day and night, will push the threat of default further down the road, the bigger problems will not simply disappear unless and until local industry is able to stand on its feet again.

Yet here we are, compromising our own production matrix, despite the uproar up and down the country, that too in the name of incentives and reforms. While there is no doubt that the former tribal areas have braved some of the worst terrorism and exploitation that has ever been witnessed in Pakistan’s checkered history, and should be compensated for it, there is still no justification in crippling the entire country’s economy just so a few unscrupulous factory owners in one small corner can add to their illegitimate stash.

This practice has already encouraged unfair competition, made documented/tax-oriented local industry unviable, and dealt a large revenue hit to producers and government alike. It has also led to cries of “one state two rules” from legitimate businesses, which is like standing standard economic theory on its head.

The government must stick to its position and not revisit the decision to end these tax and duty exemptions. There are, no doubt, relevant forums to address genuine grievances of the old tribal area representatives, which should be mobilised and monitored properly.

But these issues must not, under any circumstances, be allowed to hurt the economy anymore. It has already led to losses that run into many billions of rupees. Surely, that should be enough.

Copyright Business Recorder, 2024