The tax connection

The country has been seized by a political storm after the Panama leaks. The military has, perhaps on its own, started an operation in Punjab after the horrific Lahore suicide blast in a public park. The security challenges in Fata and Balochistan need no mention, yet out of the blue comes a decision from the federal government to impose the Customs Act in the Provincially Administered Tribal Areas (Pata), which mostly comprise the districts in the Malakand Division.

The region has just recovered from two major disasters – the 2009 military operation and the consequent displacement of millions of people from the Swat-Malakand region, and the worst floods in 2010. Both these disasters have broken the backbone of the under-developed economy of the region already. The security situation is still fragile, as is evident from the shooting of a police officer, in broad daylight, by a militant in Mingora city just a few days ago.

The trader community of the Malakand Division has strongly reacted against the tax imposition by protests and shutter down strikes. Almost all major political parties of the province, including the PTI have led the public protest to resist the extension of the Customs Act to Pata.

The question is: who is behind the idea to raise this controversy at such a sensitive time? The rationale behind the extension of the Customs Act to Pata seems to be the need to document the informal economy, in the form of non-custom paid, locally called NCP, vehicles.

There are hundreds of thousands of vehicles on the roads of the Malakand Division and the owners do not pay the customs duties on the import of these vehicles, which are mostly smuggled through the routes of Chaman in Balochistan, Waziristan, Khyber and the Bajaur Agency bordering Afghanistan. Most of these vehicles are transported from the border regions of Balochistan, Waziristan and Khyber Agency and are then transported via road in Balochistan and Khyber Pakhtunkhwa to reach the Malakand Division. Except for the border routes through Bajaur and Dir, the rest of the Malakand Division does not share a common border with Afghanistan, yet it is argued that the NCP vehicles problem exists only in the Malakand Division.

Those who are familiar with the trade know that a large number of NCP vehicles, apart from those in Khyber Pakhtunkhwa, are also sold in Punjab and Sindh, where they roam on the roads with fake registration numbers. This is not possible without the complicity of the higher authorities in the Federal Board of Revenue (FBR), the political agents in Fata, and other officials of the provincial government.

The NCP problem started with the rise of the Taliban in Afghanistan in 1994. The government authorities, mostly benefiting from this trade, looked the other way when these vehicles were transported in the first place. Transporters and the general public from the Malakand Division invested heavily in the vehicles, as there were no checks from the government.

With the repeal of the PATA Regulations in 1994, Maulana Sufi Muhammad mobilised the public against the enforcement of the Pakistani court system and demanded the implementation of sharia law in the Malakand Division. While Sufi Muhammad’s Tehreek-e-Nifaz-e-Shariat-e-Muhammadi (TNSM) was gaining momentum and public support, there came the genius idea of imposing the Customs Act in theMalakand Division to check the growth of the NCP vehicles business. Feeling the pulse of the local investors, Sufi Muhammad announced that there would be no other tax in a shariah system except those prescribed by Islam, such as zakat and usher.

The investors rallied to the cause of Sufi Muhammad, not because they wanted to but because they were pushed by the government’s unwise decision to impose customs duties in a critical time. With donations and other support from the transporters, the Sufi Muhammad-led movement became a success, rallying thousands of people around his cause.

Though the movement was crushed by the government, Sufi Muhammad was able to force the government to impose Shariah regulation in the Malakand Division. This was the precursor the second rise of the TNSM after 2001, when Sufi Muhammad was imprisoned by the government, after crossing over from Afghanistan, when he had led thousands of youths from the Malakand Division to fight against the coalition forces. The second rise of the TNSM was more brutal, as it took the shape of the Swat Taliban in 2007.

Today, it seems that history is being repeated. By pushing for the imposition of the Customs Act in the Malakand Division, some people in the federal government are providing a prime opportunity to Mullah Fazlullah, the son-in-law of Sufi Muhammad and the fugitive head of the TTP, to give a call against the imposition of any taxes in the Malakand Division. This will draw public support to his cause once again and jeopardise the hard-won battle against the militants in the Swat-Malakand region.

While the idea of imposing taxes is genuine, it is the timing and the means of achieving the goal that are questionable. The government should take all stakeholders on board before making a decision of such import. The people should be given, for a certain period of time, a tax amnesty on vehicles that are registered with the government revenue authorities.

The extension of customs duties should be done gradually, corresponding with measures from the federal government to restore the economy of the region to its original state, if not to bring it at par with rest of the country.

The writer is an Islamabad-based Fulbright scholar with a background in law, politics and human rights.

Email: mr352@georgetown.edu