PESHAWAR: A controversy has surfaced over the Federal Board of Revenue’s move to impose a 10 per cent tax on the revenue from markhor trophy hunting in northern parts of Khyber Pakhtunkhwa.

Eighty per cent of the annual income generated by the sale of markhor hunting permits for the region goes to the local community for area development and the rest to the provincial kitty.

Under Section 236-A of the Income Tax Ordinance, 2001, the FBR recently imposed a 10 per cent tax on the foreign currency payments made by foreigners for hunting markhor in northern areas of the province, officials told Dawn.

However, the law and finance departments and advocate general’s office have declared the unjustifiable, according to official documents.

Insists taxing services is a provincial subject

Their legal response to the FBR’s move was formally sought by the climate change and wildlife department.

The local communities, which take away lion’s share in the markhor trophy hunting revenue, also opposed the tax and formally requested the provincial government through the wildlife department for exemption from it.

Officials told Dawn that the FBR, under Section 236A of the Income Tax Ordinance, 2001, imposed 10 per cent tax on the foreign currency payments by foreigners for haunting markhor.

In the response to the wildlife department’s letter, the advocate general’s office insisted that the auction and tender of permits of trophy hunting of markhor/ibex essentially related to the services that were being provided to hunters through registered outfitters and was not essentially “property or goods.”

It also said the matter, which was related to the taxing of services, was a provincial subject, so it didn’t fall within the ambit of the FBR.

The AG office said under Section 11 of the KP Wildlife and Biodiversity (Protection, Preservation, Conservation and Management) Act, 2015, all wild animals, free ranging or captive, tamed or untamed, found within the territorial jurisdiction of the province shall be deemed to be the property of the provincial government.

“Since the issuance of permit for trophy hunting of markhor/ibex through open auctions or tenders does not fall into the ambit of Section 236-A of the Income Tax Ordinance on account of it being “services” and not “property or goods” and since tax on services is a provincial subject and not federal and therefore, the department is not required to collect tax as withholding agents from the registered outfitters/trophy hunters,” the AG office said in the letter.

The law department, in its formal response to the wildlife department’s letter, said after examining the matter, it endorsed the views of the advocate general.

An official in the wildlife department told Dawn on condition of anonymity that the imposition of the FBR’s tax on trophy hunting revenue was unjustified as the hunting permits given away to foreigners was for haunting and not for exporting animals.

“Foreigners take away the trophy only as the meat of the hunted markhor is distributed to locals,” he said.

The official said foreign currency was involved in trophy hunting, so it was exempted from the tax.

He said the FBR also called for the payment of four years dues from the money generated through trophy hunting.

Every year, the wildlife department generates millions of rupees through the auction of permits to haunt four aged markhors in northern parts of the province. A month ago, the provincial government auctioned those permits for Rs182.4 million.

Published in Dawn, January 7th, 2024