Tribal districts to enter tax net in July
The government has mandated the task force to review the FBR’s tax collection data, its performance indicators and reporting mechanisms, and identify the areas of revenue performance and potential. photo: file
The Khyber-Pakhtunkhwa government has initiated the implementation of 22 taxes in the newly merged tribal districts and Malakand Division.
Historically, Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) enjoyed exemption from all taxes, making them attractive for industries seeking to evade tax compliance. Following their merger into K-P, a five-year tax exemption was announced for these regions.
Official sources disclosed to The Express Tribune that the implementation of 22 taxes, including sales tax on services, along with strict enforcement of minimum wages, is underway in these areas.
These taxes are set to be collected from ex-FATA and PATA starting July this year. Government departments, both provincial and federal, have completed preparations, with the excise department already establishing offices in these districts and sub-divisions. Additionally, a tax on non-customs paid vehicles is slated for implementation.
Last month, Fouzia Iqbal, Director General of the Khyber-Pakhtunkhwa Revenue Authority (KPRA), emphasized that tax exemptions for erstwhile FATA and PATA expired on October 31, 2023. She underscored that there is no longer an exemption from sales tax on services for merged districts and PATA.
During visits to the offices of the Secretary of Irrigation, Muhammad Tahir Orakzai, and the Secretary of Mines and Minerals Development Department, Mutahir Zeb, Fouzia Iqbal and her team sought to strengthen cooperation in ensuring tax compliance. They held detailed meetings with the respective departments, briefing officials on sales tax regulations and requesting support for data sharing and tax compliance in projects.
Addressing Secretary Mines and Minerals, Fouzia Iqbal emphasized the need for leaseholder data and full sales tax compliance in royalties and heavy machinery contracting. She reiterated the expiration of tax exemptions for erstwhile FATA and PATA.
In response, Mutahir Zeb expressed full support to KPRA, affirming cooperation in providing leaseholder data and ensuring tax payments from all projects. Muhammad Tahir Orakzai, former DG of KPRA, also pledged support, highlighting the importance of tax compliance and expressing readiness to assist KPRA upon the release of funds.
Fouzia Iqbal highlighted the issue of misclassification of taxes, leading to KPRA’s sales tax on services being submitted to the federal government’s accounts. She stressed the need for control over this process to ensure accurate revenue allocation.
The DG KPRA briefed the officials about the sales tax on services and thanked them for taking out time to listen to her team. She pointed out the areas where the KPRA team needed support and cooperation from both departments and requested data sharing and tax compliance in projects executed by both departments.
She further informed that the exemption to erstwhile FATA and PATA has expired on October 31, 2023 and there is no exemption from sales tax on services to FATA and PATA after that.
Muhammad Tahir Orakzai, who has served as DG of KPRA, welcomed the KPRA team and assured them of full support from his side and the officials of the Irrigation Department.
“It is a pleasure for me to see that KPRA is expanding and thriving,” he said adding that he and his team will be available for any support.
Published in The Express Tribune, May 6th, 2024.