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Tax hounds to sniff Karkhano

April 29, 2011

PESHAWAR, April 29: The Excise and Taxation Department has sought the government’s permission to seal business centres owned by tribal traders in Karkhano market on account of non-payment of Urban Immovable Property (UIP) Tax.

“The law authorises the department to seal the properties in Karkhano market in case their owners do not pay taxes. However, action in this regard will need the approval of top political leadership,” a senior tax official told Dawn.

Karkhano market is the trading hub of foreign-made smuggled goods with over 8,000 shops in about two dozen shopping malls.

Collection of taxes from businessmen of these markets had been a contentious issue and whenever the federal or provincial government tried to raise the tax issue it faced resistance and agitation from the tribal owners of these markets.

Interestingly, these ‘no tax yielding’ markets are located in settled area of the provincial capital close to the Industrial Estate Peshawar where the factory owners pay all the federal and provincial taxes.

The provincial government had constituted a high-level committee in February 2008 under the additional chief secretary to work out a plan for recovering the UIP tax from these markets.

Secretaries of finance, law, local government, E&T department, law and order (Fata Secretariat), E&T department director general and political agent of Khyber Agency were its members.

Majority of the traders in Karkhano market belong to the Khyber Agency, bordering Peshawar.

Citing a recent meeting of this committee, the official said that the political administration of Khyber Agency had expressed its inability to convince these businessmen on payment of provincial taxes.

However, the political authorities argued that as the shopping plazas were locating in the settled area it was the provincial government’s responsibility to collect taxes, including the UIP tax.

Traders in these shopping malls, however, claim that the federal government is not collecting income tax and sales tax from them, mainly to offset the impact of poverty and lack of economic activities in the tribal areas.

In the past, the E&T department has served several notices on the businessmen for payment of UIP tax under the Urban Immovable Property Tax, Act, 1958, but it could not recover a single penny, the official said.

According to the E&T department’s estimates, the arrears on account of the UIP tax from Karkhano market stand at around Rs200 million, which are increasing with the passage of time due to non-payment.

The official said that the tax department had recently approached the Chief Minister’s Secretariat for securing a go-ahead for penalising the traders of Karkhano market for non-payment of tax.

“The government lacks the political will to bring these traders into the tax net, as so far no decision has been made to this end,” he said.

Asked why the department needs the chief minister’s approval when it already has the authority under the law to move against tax evaders, the official feared that in the absence of government’s support the tax department could face severe backlash from the tribal traders.