Alarm over govt ‘move’ to restore ex-Fata/Pata tax exemptions

ISLAMABAD: Steel, edible oil and ghee industries are deeply concerned over reports of government intention to withdraw/reverse the budgetary amendment/measures of gradual phasing out of ex-Fata/Pata tax exemptions in the final Finance Act 2024-25.

The sector representatives say that under political pressure, the government seems to be all set to withdraw/reverse the fata/pata-related amendments that were announced in the Finance Bill. The steel, edible oil and Ghee industries will go on indefinite strike against this move which is aimed to support rent seekers at the cost of entire industry, they added.

The move is being taken under pressure from the influential politicians and will be most damaging for the local industry, despite the fact that it is being opposed by IMF. “If this happens, we have no doubt that it would be most damaging single measure which would further push the local struggling industry of the country towards closure,” they said.

In a statement issued by Pakistan Association of Large Steel Producers here on Sunday stated the steel industry urged the government that all decisions related to economy must be taken on merit instead of adopting policies aimed at appeasement of politicians.

“It is time we learn from past mistakes where economy related decisions were taken under political considerations. That approach did not work and destroyed the industry as well as the economy of the country. The results of such ill-conceived policies are quite evident as hardly any one is ready to invest here,” they noted.

The tax holiday given to erstwhile Fata/Pata has badly damaged the domestic industry during the last six years. It’s worth noting that some influential from political and trade bodies have stakes in ex-Fata/Pata as they own steel and ghee units and other industries in these areas. These elements are advocating for the perpetuation of ex-Fata/Pata tax exemptions, purely for personal gains and their vested interests; with no relief intended for the poor common man of ex-Fata/Pata. These exemptions granted to ex-Fata/Pata were largely misused and the goods produced in the non-taxed areas were blatantly sold in rest of the country/taxed areas without the levy of sales tax.

Massive misuse of tax exemption given to industry in ex-Fata/Pata during the last six years wiped out more than 50/60 percent industry in Gadoon Industrial Area, Hayatabad Industrial Area, Hattar Industrial area as well industry in Islamabad and Punjab. This practice is not only destroying the steel (long, flat, round) & oil & ghee industry and causing joblessness but also the exchequer is facing huge revenue loss to the tune of hundreds of billions of rupees. These exemptions were so badly misused that around 90 percent of the steel (long, flat & round) and 30 percent of ghee produced in ex-Fata/Pata was being smuggled to the settled areas without payment of sales tax. Due to worst situation created for the local industry due to such ill-conceived policies, the Chinese have put the first private sector steel mill that was being established in Rashakai Special Economic Zone but has been put on the halt. The second steel mill established by Chinese in Gadoon Industrial State has already been shelved. “Through these mindless measures, what signal are we sending to the existing as well as any new investors,” they asked.

Also, theses exemptions establish a dual discriminatory two-tier tax system in Pakistan where tax compliant industry is being overburdened to incentivize/reward unregulated industry in ex-Fata/Pta. Government must ensure to establish a fair and transparent tax system that applies uniformly across all regions of the country to save the industry from permanent closure and to stop the ongoing assault against the taxpaying industries of the country.

PALSP appeals the government not to withdraw the amendment announced in the Finance Bill of a gradual reduction of ex-Fata/Pata tax exemptions.