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ISLAMABAD: The Pakistan Association of Large Steel Producers (PALSP) has raised strong concerns over ‘unfair and preferential’ treatment of untaxed sectors of erstwhile Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) compared to the burden faced by fully regulated industries/ sectors.

In this connection, the documented steel sector has strongly criticised the existence of a dual tax system within Pakistan.

The PALSP, a prominent voice representing large steel producers, protested against the preferential treatment given to tax-evading factories operating in erstwhile FATA/ PATA regions. These factories exploited the lenient tax policies in these areas while law-abiding taxpayers and fully regulated industries bear the brunt of a heavily burdened tax system. This disparity is seen as not only unjust but also a ‘criminal offence’ against honest taxpayers.

A startling revelation from the long steel industry alone showcases the severity of the issue. The steel industry in newly merged districts (NMDs), with the sanctioned load from PESCO/ TESCO, has the capacity to produce 944,851 tons of steel, accounting for approximately 25% of Pakistan’s total steel consumption.

Surprisingly, the actual steel consumption within the NMDs is a mere 2% of Pakistan’s total steel consumption, indicating that around 92% of the steel produced in NMDs is being smuggled to the settled areas without the payment of sales tax.

The PALSP has estimated that this rampant tax evasion has resulted in an annual loss of Rs 30.61 billion to the national exchequer, and an alarming total of approximately Rs 150 billion over a span of five years in the long steel industry alone. This rampant tax evasion places a significant burden on the national exchequer and forces the burden of compensating for this loss onto honest taxpayers and fully regulated industries.

Moreover, income tax slabs for the salaried class have been dramatically increased, further burdening the already overburdened taxpayers at the expense of the evasion occurring at FATA/ PATA industries. This lopsided situation not only exacerbates the injustice but also raises questions about the fairness and equality of the tax system.

The PALSP emphasised the need for immediate action to rectify this unjust tax system and level the playing field for all businesses in the country. The extension of the exemption period in the Finance Bill 2023 is seen as a step in the wrong direction, deepening the divide between the untaxed FATA/ PATA and the heavily taxed areas of the country. This extension prolongs the unfair advantage enjoyed by tax-evading entities while hindering the growth of legitimate taxpayers and fully regulated industries.

“It is imperative that the government addresses this serious concern and ensures a fair and transparent tax system that applies uniformly across all regions of the nation,” stated the PALSP spokesperson.

“The recovery of lost revenue from tax evaders should be a top priority, and a just and equitable tax landscape should be established to encourage compliance and foster a conducive environment for all industries to thrive.”

The PALSP has urged the government to take immediate action to rectify the dual tax system and hold tax evaders accountable. The recovery of lost revenue from the FATA/ PATA regions would not only alleviate the burden on honest taxpayers and fully regulated industries but also promote a fair and sustainable economic environment for the betterment of Pakistan’s economy and its citizens, it added,

Copyright Business Recorder, 2023

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