Liberalising commerce: Second phase of tariff reforms to kick off in July
Duty rates and slabs will be reduced to open up trade with other countries.
Under the first phase of tariff liberalisation that was implemented in July last year, the government slashed the maximum 30% tariff to 25% except for the automobile sector. It also reduced tariff slabs from seven to six. PHOTO: FILE
ISLAMABAD:
The government has decided to implement the second phase of tariff liberalisation from July this year and will reduce maximum tariff slabs to five besides cutting duty rates as part of its agreement with the International Monetary Fund (IMF) to open up trade.
“From July, the number of tariff slabs will be reduced from six to five,” said Mohammad Nisar, Member Customs of the Federal Board of Revenue and the country’s chief negotiating officer in trade issues with international organisations.
Nisar said at present a plan was being considered to set new tariff rates for imported goods and it would be finalised in consultation with the stakeholders.
He was responding to questions at a press conference addressed by Commerce Minister Khurram Dastgir Khan here on Wednesday.
The exact quantum of tariff reduction would be determined by a committee, said Dastgir.
The FBR submitted a preliminary plan to Finance Minister Ishaq Dar on Tuesday. There was a possibility that the government would cut the maximum tariff from 25% to close to 20% and increase the minimum rate from 1% to 3%, said an official of the FBR on condition of anonymity.
The tariff liberalisation plan is part of an agreement with the IMF and the World Bank, primarily aimed at opening the country’s trade with other countries, reducing the cost of doing business and discouraging smuggling.
Under the first phase that was implemented from July last year, the government slashed the maximum 30% tariff to 25% except for the automobile sector. It also reduced tariff slabs from seven to six. Owing to the reduction in tariff and its slabs, the government had estimated a revenue loss of Rs1.5 billion.
Similarly, it replaced the 0% tariff slab with 1% aimed at removing the structural flaws and improving documentation. It also introduced a new Fifth Schedule in the Customs Act in a bid to protect socially sensitive imported items.
The last phase of tariff reforms will be implemented from July 2016 when the number of slabs will come down to four.
The tariff liberalisation was one of the concerns raised by members of the World Trade Organisation (WTO) during a recently concluded trade policy review of Pakistan, said the commerce minister.
He said the WTO members recommended greater openness and transparency in Pakistan’s trade policy.
Dastgir said the WTO members also voiced concern over the country’s discriminatory Statutory Regulatory Orders (SROs), adding the second phase of SRO withdrawal would also be implemented from July this year.
Last month, the government unveiled a plan proposing withdrawal of more SROs that would help generate roughly Rs150 billion in additional taxes.
To a question about excluding the SROs specifically meant for the automobile sector from the tariff and SRO plans, Dastgir said the auto sector’s tariffs would be separately revised under the auto policy that would be unveiled shortly.
The minister acknowledged that the WTO members also raised the issue of over-protection to Pakistan’s automobile industry.
In one of his articles, Dr Ishrat Husain, former governor of the State Bank of Pakistan, has praised the speed with which trade liberalisation is taking place in Pakistan. He wrote that although the maximum tariff was 25%, the average applied rate came down to 15% compared to 51% in 1995.
He said the number of regulatory duties had dropped significantly and virtually all tariffs (99.3%) were ad valorem – based on goods value – and revolved around only six slabs.
Husain, however, suggested that the maximum tariff should gradually be reduced from 25% to 15%, by reducing tariff dispersion and tariff escalation and by plugging loopholes created by special exemptions.
Published in The Express Tribune, April 2nd, 2015.
The government has decided to implement the second phase of tariff liberalisation from July this year and will reduce maximum tariff slabs to five besides cutting duty rates as part of its agreement with the International Monetary Fund (IMF) to open up trade.
“From July, the number of tariff slabs will be reduced from six to five,” said Mohammad Nisar, Member Customs of the Federal Board of Revenue and the country’s chief negotiating officer in trade issues with international organisations.
Nisar said at present a plan was being considered to set new tariff rates for imported goods and it would be finalised in consultation with the stakeholders.
He was responding to questions at a press conference addressed by Commerce Minister Khurram Dastgir Khan here on Wednesday.
The exact quantum of tariff reduction would be determined by a committee, said Dastgir.
The FBR submitted a preliminary plan to Finance Minister Ishaq Dar on Tuesday. There was a possibility that the government would cut the maximum tariff from 25% to close to 20% and increase the minimum rate from 1% to 3%, said an official of the FBR on condition of anonymity.
The tariff liberalisation plan is part of an agreement with the IMF and the World Bank, primarily aimed at opening the country’s trade with other countries, reducing the cost of doing business and discouraging smuggling.
Under the first phase that was implemented from July last year, the government slashed the maximum 30% tariff to 25% except for the automobile sector. It also reduced tariff slabs from seven to six. Owing to the reduction in tariff and its slabs, the government had estimated a revenue loss of Rs1.5 billion.
Similarly, it replaced the 0% tariff slab with 1% aimed at removing the structural flaws and improving documentation. It also introduced a new Fifth Schedule in the Customs Act in a bid to protect socially sensitive imported items.
The last phase of tariff reforms will be implemented from July 2016 when the number of slabs will come down to four.
The tariff liberalisation was one of the concerns raised by members of the World Trade Organisation (WTO) during a recently concluded trade policy review of Pakistan, said the commerce minister.
He said the WTO members recommended greater openness and transparency in Pakistan’s trade policy.
Dastgir said the WTO members also voiced concern over the country’s discriminatory Statutory Regulatory Orders (SROs), adding the second phase of SRO withdrawal would also be implemented from July this year.
Last month, the government unveiled a plan proposing withdrawal of more SROs that would help generate roughly Rs150 billion in additional taxes.
To a question about excluding the SROs specifically meant for the automobile sector from the tariff and SRO plans, Dastgir said the auto sector’s tariffs would be separately revised under the auto policy that would be unveiled shortly.
The minister acknowledged that the WTO members also raised the issue of over-protection to Pakistan’s automobile industry.
In one of his articles, Dr Ishrat Husain, former governor of the State Bank of Pakistan, has praised the speed with which trade liberalisation is taking place in Pakistan. He wrote that although the maximum tariff was 25%, the average applied rate came down to 15% compared to 51% in 1995.
He said the number of regulatory duties had dropped significantly and virtually all tariffs (99.3%) were ad valorem – based on goods value – and revolved around only six slabs.
Husain, however, suggested that the maximum tariff should gradually be reduced from 25% to 15%, by reducing tariff dispersion and tariff escalation and by plugging loopholes created by special exemptions.
Published in The Express Tribune, April 2nd, 2015.