PTA urges PM to reassess exemptions for tribal areas

ISLAMABAD: The Pakistan Tea Association (PTA) has expressed serious concerns about the proposed budget’s continuation of sales and income tax exemptions for the erstwhile Fata/Pata region.

The PTA stated that although these exemptions were initially introduced with good intentions, they have been misused for a long period. It said that the population of the erstwhile FATA/PATA region, approximately 6.5 million, should import around 1 million kilograms of tea annually based on standard consumption metrics. However, current import figures are at 23 million kilograms, indicating significant misuse of the tax exemptions and resulting in substantial revenue losses for the government.

Tea imported through legal channels is subjected to a total tax rate of 53 per cent, including a 6.5 per cent income tax. In contrast, tea imports into the erstwhile Fata/Pata region are taxed at only 15-19 per cent. This disparity results in a massive loss of sales and income tax revenue on the 22 million kilograms imported, amounting to about $70 million annually. This is based on the average pricing of tea at $3.12 per kilogram, leading to a loss of Rs4.77 billion to Pakistan’s economy each year.

The PTA stressed that this situation drains Pakistan’s foreign exchange reserves (FER), as the disproportionate volume of tea imports into the region leads to a significant outflow of foreign exchange through illegal or informal channels. The association highlighted that the tax exemptions create an environment ripe for smuggling and tax evasion, distorting the market and undermining legitimate businesses.

The PTA has appealed to Prime Minister Mian Shehbaz Sharif to reconsider the blanket tax exemptions currently offered to the erstwhile FATA/PATA region. The association demands a reassessment of fiscal policies regarding tea imports, proposing uniform tax slabs for all tea imports to support regional development and safeguard the national economy.