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Pakistan says will withdraw tax exemptions for industries in former tribal regions

KARACHI: Pakistan’s government will not extend the preferential tax treatment for the erstwhile Federally Administered Tribal Areas (FATA) and the Provincially Administered Tribal Areas (PATA), Finance Minister Muhammad Aurangzeb said on Thursday, saying that business communities across the country were demanding equitable conditions for industries nationwide. 

Pakistan approved tax exemptions for erstwhile FATA, tribal areas in northwestern Pakistan which were merged with the Khyber Pakhtunkhwa (KP) province, in 2018. The exemptions were also extended to PATA, regions within KP which are administered by the provincial government due to their historical and cultural significance. 

The exemptions were extended till January 2023 but were granted another extension for one year. They are now set to expire on June 30, 2024. 

KP lawmakers this week demanded the government extend the incentives for the regions, saying that many princely states in northwestern Pakistan decided to join the country after independence when they were promised tax exemptions. 

“These exemptions are set to expire on June 30 this year by operation of law,” Aurangzeb said during a session of the National Assembly. He was responding to a call attention notice on the withdrawal of tax exemptions and concessions in former FATA and PATA areas. 

He clarified that the government is not “proposing any new legislation” to extend the tax exemptions. 

“The exemptions at that time were given for sales and income tax to integrate these areas into the mainstream economy,” the finance minister explained. He added that business communities, throughout their interactions with the government, were demanding equitable conditions for industries across the country. 

The exemptions were granted to industrial units of iron/steel, plastics, ghee, textile and other sectors and industries located in former FATA and PATA areas. 

Aurangzeb said business delegations from across Pakistan were seeking tax exemptions in line with those offered to ex-FATA and PATA. 

“Since the past few days various chambers have been coming in including steel, fabric, tinplate, oil, tea, and ghee,” Aurangzeb said. “They all are consistently asking about preferential tax treatment.”

Former National Assembly Speaker Asad Qaiser last week urged the federal government to extend the exemptions till 2028. He had argued that the withdrawal of tax exemptions would adversely impact industrial growth and employment in the areas. 

Some areas of northwestern Pakistan, including Malakand division, have been observing shutter-down strike for the past few days against the government’s decision to bring PATA under the tax net. 


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