Nov 1 - 7, 2010

Pakistan, a key conduit to move supplies to North Atlantic Treaty Organisation (NATO) and US troops in Afghanistan, is reportedly mulling the option of imposing some sort of tax on Nato trucks as compensation for use of road network, though there is no agreement between the two parties to collect the same. Numerous Pakistani highways have been adversely affected due to the transporting of heavy Nato supply trucks going to Afghanistan through Chaman in Balochistan and Torkhum in Khyber Pakhtunkhwa road networks. The federal government recently said that it is considering imposing a tax on Nato supply trucks going to Afghanistan from Pakistan routes, meanwhile it announced to reopen Torkham routes closed in protest at a cross-border Nato helicopter attack that killed two Pakistani soldiers. Most of the 580 daily truckloads of supplies and fuel for the 142,000 Nato troops fighting the Afghan Taliban cross at Torkham.

The government may also demand road tax from the US for the past seven years of transporting these trucks, which would amount to approximately Rs600 million. Analysts believe that the tax on Nato supplies should have been imposed earlier as repair and maintenance of damaged highways due to Nato transportation has cost the national exchequer billions of rupees. Critics say that the government has so far been unable to check the truckloads of Nato forces, which have been badly damaging the country's main highways and the government did not claim even for once the cost of the repair and maintenance work from Washington and Nato.

Some analysts flay the International Monetary Fund (IMF), which did never propose imposing a tax on Nato trucks but always pressed the country to impose different taxes in order to broaden the country's tax base.

The government may fix some amount on every Nato truck carrying supplies to Afghanistan, according to Chaudhary Ahmad Mukhtar, the Defence Minister. Federal government departments are trying to find a way out to get compensation from Nato for using roads, because former President Pervez Musharraf had allowed Nato to use country's road infrastructure free of cost.

Hundreds of trucks filled from Pakistani refineries have been traveling to Afghanistan on a daily basis for last seven years. The country has been the major supply route for the international missions assigned in the Afghanistan since late 2001. Truckloads with oil and other material pass the Indus Highway to enter Afghanistan. Critics say that authorities should have imposed the tax long before when the country agreed to offer logistics support to US and Nato forces fighting Islamist extremists in the neighboring Afghanistan.

Indus Highway is worst affected, as cracks are developed after three to four months due to overloading of Nato trucks which have been frequently using the Indus Highway mainly from Karachi to Peshawar for a long time.

Last month, Pakistan reopened the vital supply route for Nato forces in Afghanistan 10 days after it was shut following a cross-border air strike by Nato forces. Torkham border crossing in the northwest is used for transporting supplies for Nato-led International Security Assistance Force (Isaf).

The country had blocked the passage of supplies for Nato troops fighting in Afghanistan on September 30 after an air strike killed two of its soldiers. The incident underscored tensions between the US and Pakistani armed forces as the American military escalated the number of missile strikes against Taliban and al-Qaeda militants in the country's northwest this month. Since Pakistan closed the border crossing, Taliban guerrillas have claimed responsibility for four assaults that have left tankers parked along the route ablaze. The United States apologised to Pakistan for the Sept 30 raid that killed Pakistani soldiers

Some analysts believe that imposition of tax on Nato trucks is the necessity especially after the recent floods that destroyed roads, bridges and infrastructure across the country and they argue that revenue generated from the tax should be spent on repair of damaged highways and road networks.

Pakistan suffered a loss of about $9.5 billion (over Rs800 billion) in recent floods, in terms of damaged crops, infrastructure and public and private property all over the country, according to a preliminary Damage Need Assessment (DNA) report prepared by the World Bank and Asian Development Bank.

In the aftermath of devastation caused by floods, the country's financial requirements have gone up tremendously and it direly needs the increased revenue targets. Tax on Nato trucks would help the cash-strapped country to earn money on regular basis.

Critics say that IMF has been urging the country for tax reforms and more drastic cuts on development and current expenditures but it ever neglected the source of income could be created from taxing the Nato supplies. The fund had stopped disbursement of about $4 billion assistance to Islamabad in July this year mainly on account of delay in taxation and energy sector reforms.

Washington is concerned about the huge economic impact of devastating floods on the country, which is on frontline position in US-led war on Al-Qaeda and Taliban. Destruction of infrastructure and roads by the worst floods across the country threatens to affect the oil supplies to Nato forces in Afghanistan. The country lacks the capacity and resources to deal with the disaster of unprecedented magnitude.

Some analysts believe that the devastating floods have put the US interests at stake. The country is not in a position to continue its fight against Islamist extremists, as devastation brought by the floods would have substantial impact on the already crumbling economy. The expected food shortages due to ravaging floods may lead to widespread violence and armed militants could take advantage of the country's worst humanitarian disaster by operating among its displaced victims.

Pakistan has been playing a frontline role in US-led war on Islamist extremists in AfPak region for the last 9 years. It paid heavy costs, both in men and money. Its military reimbursement bills have been increased; foreign investments have been dried up and imports and exports affected. The country's economy is virtually under attack from militants, who are perpetrating devastating acts of terrorism driving the foreign investor's concerns higher. On the other hand, war on terror still faces an ownership crisis in the country- the government owns it but still it is not owned by many political and religious parties, as they call it an American war that has brought a human disaster and huge economic losses to the country.