KP CM Urges PM to Defer Withdrawal of Tax Exemptions for Merged Districts and Malakand
Chitral Times Report
PESHAWAR: Chief Minister Khyber Pakhtunkhwa Muhammad Sohail Afridi has written to Prime Minister Muhammad Shehbaz Sharif, strongly urging the Federal Government to defer its proposed withdrawal of tax exemptions for the Merged Districts and Malakand Division, stating that the move disregards the commitments made by the Federation at the time of the merger and risks undermining public confidence in the merger process.
In his letter, the Chief Minister stated that the people of Khyber Pakhtunkhwa are not opposed to taxation and remain committed to strengthening Pakistan’s economy through a fair, equitable and sustainable taxation system. He emphasized, however, that the issue is not taxation itself but the proposed withdrawal of tax exemptions in disregard of the commitments made by the Federation during the merger process.
The Chief Minister reminded the Prime Minister that the merger of the erstwhile FATA with Khyber Pakhtunkhwa was founded upon a broad national consensus and accompanied by explicit federal commitments to provide sustained financial support and institutional assistance for the successful integration and development of the region. He noted that, despite the Province’s unwavering commitment to implementing the merger, many of these commitments remain outstanding, while Khyber Pakhtunkhwa continues to shoulder disproportionate financial, administrative and security responsibilities. He further pointed out that the Federation’s committed NFC allocation has yet to materialize.
Highlighting the province’s immense sacrifices in the fight against terrorism, the Chief Minister observed that Khyber Pakhtunkhwa continues to shoulder significant financial and security responsibilities, including expenditure on law and order, policing, counter-terrorism operations, rehabilitation of affected communities and reconstruction of damaged infrastructure, all in the larger national interest. He regretted that, despite these sacrifices, the Federation has yet to fulfill its commitment regarding the Province’s NFC share.
The Chief Minister further pointed out that the prolonged disruption of legal cross-border trade and transit with Afghanistan has significantly reduced commercial activity, particularly in the border districts whose local economies have historically depended on such trade. He added that these challenges have been compounded by persistent locational disadvantages, inadequate infrastructure, limited industrialization, high transportation costs and energy constraints, all of which continue to impede private investment, employment generation and sustainable economic growth.
The Chief Minister stated that the tax exemptions applicable to the Merged Districts and Malakand Division were conceived as transitional measures to promote investment, encourage industrialization, generate employment and facilitate the economic integration of historically disadvantaged regions. Withdrawing these exemptions before the intended developmental objectives have been realized, and before the Federation fulfills its commitments, would discourage investment, weaken economic recovery and place an additional burden on local businesses and communities.
Referring to the Federal Government’s own consultative mechanism, the Chief Minister noted that a committee headed by the Federal Minister for Inter-Provincial Coordination had been constituted to formulate recommendations on the proposed taxation measures. However, he regretted that despite the committee holding only limited meetings and failing to finalize its recommendations, the proposed withdrawal of tax exemptions was pursued without completing the envisaged consultative process or adequately engaging the Provincial Government and local stakeholders.
The Chief Minister cautioned that proceeding with such unilateral measures, without fulfilling the Federation’s commitments and completing the promised consultative process, could undermine public confidence and have adverse implications for law and order in these sensitive regions.
The Chief Minister also referred to the unanimous Resolution No. 260 passed by the Khyber Pakhtunkhwa Provincial Assembly on July 2, 2026, urging the Federal Government to defer the proposed taxation measures until the commitments made to the Province are fulfilled.
Calling upon the Prime Minister to reconsider the proposed decision, the Chief Minister urged the Federal Government to allow the existing tax exemptions for the Merged Districts and Malakand Division to continue until the Federation has substantially fulfilled the commitments made at the time of the merger and the socio-economic conditions that warranted these exemptions have materially improved.
Expressing confidence that the Prime Minister would give due consideration to the province’s concerns, the Chief Minister said he hoped the matter would be resolved in the larger national interest and in keeping with the commitments that underpinned the historic merger process.
