Key Takeaways
- Khyber Pakhtunkhwa Chief Minister Muhammad Sohail Afridi has written to Prime Minister Shehbaz Sharif requesting a deferral of the proposed tax exemption withdrawal.
- The move is seen as disregarding commitments made during the merger of FATA with Khyber Pakhtunkhwa and risks undermining public confidence in the process.
- Afridi highlighted ongoing financial, administrative, and security responsibilities of the province despite unfulfilled federal commitments.
Khyber Pakhtunkhwa Chief Minister Muhammad Sohail Afridi has penned a letter to Prime Minister Shehbaz Sharif, urging the federal government to defer its proposed withdrawal of tax exemptions for the Merged Districts and Malakand Division. The request comes amidst concerns that the move disregards commitments made during the merger process.
In his letter, dated July 6, Afridi emphasized that the issue is not about taxation itself but about the disregard of federal commitments made at the time of the merger. He noted that the merger was founded on a broad national consensus and accompanied by explicit federal promises to provide sustained financial support and institutional assistance for successful integration and development.
Afridi highlighted Khyber Pakhtunkhwa’s unwavering commitment to implementing the merger, despite many of these commitments remaining unfulfilled. He pointed out that the province continues to shoulder significant financial, administrative, and security responsibilities, including expenditure on law and order, policing, counter-terrorism operations, rehabilitation of affected communities, and reconstruction of damaged infrastructure.
The Chief Minister further noted that despite Khyber Pakhtunkhwa’s sacrifices in the fight against terrorism, the Federation has yet to fulfill its commitment regarding the Province’s NFC share. He also highlighted the impact of the prolonged disruption of legal cross-border trade with Afghanistan, which has significantly reduced commercial activity, particularly in border districts.
Afridi stated that the tax exemptions applicable to the Merged Districts and Malakand Division were intended as transitional measures to promote investment, encourage industrialization, generate employment, and facilitate economic integration. Withdrawing these exemptions before the intended developmental objectives have been realized would discourage investment, weaken economic recovery, and place an additional burden on local businesses and communities.
The Chief Minister referred to the Federal Government’s own consultative mechanism, noting that a committee headed by the Federal Minister for Inter-Provincial Coordination had been constituted to formulate recommendations on proposed taxation measures. However, he regretted that despite limited meetings of this committee, the proposed withdrawal was pursued without completing the envisaged consultative process or adequately engaging the Provincial Government and local stakeholders.
The move has received significant opposition from the PTI-led KP government as well as traders in the region. Last week, the provincial government decided to formally communicate its concerns to the Centre through an official letter. The development comes at a time when Khyber Pakhtunkhwa continues to face numerous challenges, including persistent locational disadvantages, inadequate infrastructure, limited industrialization, high transportation costs, and energy constraints.
In his letter, Afridi requested that existing tax exemptions should continue until conditions justifying such exemptions have materially improved in Malakand and the merged districts. He emphasized that the people of Khyber Pakhtunkhwa are not opposed to taxation but remain committed to strengthening Pakistan’s economy through a fair, equitable, and sustainable taxation system.
