Tax exemption for erstwhile Fata/Pata becomes bone of contention

PESHAWAR: Tax exemption to the industrial units of the erstwhile Federal Administered Tribal Area (FATA) and Provincial Administered Tribal Area (PATA) of Malakand Region has been extended for another year. But, the business community of the areas demands extension of the facility for another term of five years.

In the federal budget for financial year 2023-24, the government has extended the tax exemption of FATA and PATA by one year till June 30, 2024. The districts where industrial units are operating include Dargai (Malakand), Swat, Dir, Buner of PATA and Bara, Mohmand Marble City, Bajaur, North and South Waziristan of FATA. Hundreds of ghee, steel mills, plastic factories, power loom mills, marble factories have been given tax exemptions in income tax and machinery export, raw material import.

When FATA and PATA were being merged into Khyber Pakhtunkhwa province, five years tax exemption was given till 30 June 2023. From the National Finance Commission, the four provinces and the federal government allocated one percent of the divisible pool for the development of the merged districts.

But, it was never paid to FATA and PATA, and the merged districts are still lagging behind in the process of progress and development. Irrespective of the fact that federal government has extended the tax exemption for another year in the budget of the new financial year. The owners of the industrial units of Punjab, Sindh provinces and Hazara division of Khyber Pakhtunkhwa started rhetoric against it.

Customs Act is not applicable in the merged districts of Fata/Pata and by opposing the extension; the people of other parts of the country want to bring the businesses of the exempted areas in the tax net. The regions have thousands of non-duty paid vehicles and by the withdrawal of the exemption, they will be made bound to pay the customs duty on non-duty paid vehicles. The federal while taking into consideration, the backwardness of the regions extended the exemption.

The business community and particularly presidents of the Chamber of Commerce of the merged districts have formed an eight-member committee under the chairmanship of the renowned industrialists, Muhammad Shoaib Khan. The members of the committed has adopted a position and demanded the extension of the tax exemption for a period of five years presenting the strong arguments like distance from the sea, terrorism, floods and backwardness.

Under the influence of the Governor Khyber Pakhtunkhwa, Haji Ghulam Ai and Special Assistant to Prime Minister on Political Affairs, Amir Muqam, the federal government has extended the tax exemption by one year. But, on the other hand Malakand Trade Union headed by Abdul Rahim has threatened to start a protest movement against the implementation of taxes in FATA and PATA.

Copyright Business Recorder, 2023