PESHAWAR, PAKISTAN — Khyber Pakhtunkhwa Chief Minister has urged Prime Minister Shehbaz Sharif to reconsider a proposed plan to withdraw tax exemptions for the province's merged tribal districts and the Malakand Division, arguing that the federal government has yet to fulfill commitments made during the merger of the former tribal areas.

In a letter to the prime minister, the chief minister said the proposed withdrawal of tax relief had sparked public concern and drew objections from the Khyber Pakhtunkhwa Assembly, which has passed a unanimous resolution calling for the measures to be deferred.

The provincial government said it supports a fair taxation system but argued that the dispute is rooted in the federal government's failure to deliver financial, constitutional and institutional commitments made when the former Federally Administered Tribal Areas (FATA) were merged into Khyber Pakhtunkhwa.

The letter said the province has yet to receive the agreed allocation for the merged districts under the National Finance Commission (NFC) Award, while continuing to bear the financial burden of security operations, counterterrorism efforts, reconstruction of conflict-affected areas and the integration of the districts.

It said border trade disruptions with Afghanistan, underdeveloped infrastructure and persistent energy shortages continue to constrain economic activity in the merged districts and the Malakand Division.

The chief minister argued that the tax exemptions were introduced to promote investment, employment and economic development, and that the conditions underpinning those incentives have not substantially improved.

Ending the exemptions before federal commitments are met would discourage investment, slow economic recovery and increase pressure on local businesses, the letter said.

The chief minister also said a federal committee established to review the proposed tax measures did not reach final recommendations, and criticized the decision to proceed without consulting the provincial government and local stakeholders.

The letter warned that implementing the proposed tax measures in sensitive border regions could have implications for law and order.

The provincial government called on the federal government to postpone the proposed withdrawal of tax exemptions and retain the incentives until merger-related commitments are fulfilled and socio-economic conditions in the region improve.

There was no immediate response from the federal government to the letter.