Islamabad, October 30, 2024 – The Federal Board of Revenue (FBR) has raised significant concerns over the Khyber Pakhtunkhwa (KP) government’s recent imposition of a 2% Infrastructure Development Cess (IDC) on exports. In a statement to the Senate, the FBR highlighted potential repercussions of the cess on Pakistan’s export competitiveness, a stance echoed by the Pakistan Business Council (PBC). The KP government imposed this 2% IDC on export consignments via air, road, or rail through Section 3(c) of the Khyber-Pakhtunkhwa Infrastructure Development Cess Act, 2022. This cess, effective since August 23, 2024, applies to goods exported from KP’s border posts, notably those transiting to Afghanistan. According to the FBR, this levy, while legal under provincial powers, could hinder Pakistan’s export potential by adding financial burdens on exporters. Federal laws authorize the Federation to impose taxes and duties on imports and exports, while provinces can levy taxes on goods and services produced within or transported through their jurisdictions. In the case of exports, however, the FBR argues that imposing additional charges could undermine foreign exchange inflows. The FBR emphasized that no duties or taxes are generally levied on exports to avoid discouraging foreign trade, a critical source of revenue for Pakistan. A substantial portion of KP’s exports is routed to Afghanistan, a key trade partner. Imposing an additional 2% cess on exports through KP’s border posts could adversely affect trade with Afghanistan and Central Asia, which Pakistan is actively working…