The Pakistan Association of Large Steel Producers (PALSP) have voiced strong criticism against the existing dual tax system in the country, raising concerns about the preferential treatment and unfair advantages enjoyed by untaxed regions such as the Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA).
PALSP has issued a statement condemning the preferential treatment granted to tax-evading factories operating in FATA/PATA regions. While these regions were integrated with Khyber Pakhtunkhwa (KP), the taxation benefits have remained intact.
In a concerning revelation, PALSP highlighted the severity of the issue within the long steel industry. The steel industry in the Newly Merged Districts (NMDs), supported by authorized load from provincial electric supply companies, has the capacity to produce 944,851 tons of steel, constituting approximately 25pct of Pakistan’s total steel consumption. However, steel consumption within the NMDs accounts for only 2pct of the country’s total steel consumption, indicating that approximately 92pct of the steel produced in NMDs is being smuggled to settled areas without paying sales tax.
According to the Finance Act 2018, sales tax exemptions were exclusively provided for goods manufactured and consumed within the NMDs for a five-year period, aiming to support the NMD residents’ transition into the formal economy until June 30, 2023.
According to the steel body, the decision to extend the exemption period in the Finance Bill 2023 is viewed as a misguided move that further widens the gap between untaxed FATA/PATA regions and the heavily taxed areas of the country.
PALSP’s study reveals widespread abuse of these exemptions by opportunistic individuals who are not NMD residents. These individuals have formed partnerships or employed NMD representatives in various industries, including the long steel industry, flat steel industry, pipe manufacturing, and others.
The steel producers are urging the government to take immediate action to rectify the dual tax system and hold tax evaders accountable.
