Tyre manufacturers oppose reduction in import duty

Say further concession will increase smuggling, hurt industry

KARACHI: Local tyre manufacturers have expressed concern over the budgetary proposal for a further reduction in duty on the import of tyres by up to 40%.

A spokesman for General Tyre and Rubber Company, in a statement, asked the government to adopt a rational approach to boost growth and employment opportunities by supporting manufacturing instead of trade, which would also help counter smuggling. However, more concessions on imports will only impact the local industry adversely.

“The proposed reduction in import duty on passenger car tyres from 25% to 15% and light truck tyres from 20% to 15% will hurt the government’s revenue target as Import Trade Prices (ITPs) are low and do not correctly reflect the market dynamics,” he said.

He suggested that smuggling should be controlled through strong administrative measures as duty reduction had proved to be a failure. The duty on radial tyres of trucks and buses from China is zero per cent while it is 5% on imports from other origins. Yet, smuggling goes on.

The government should create a sense of fear among smugglers and make things difficult for them by setting up check posts on main roads that connect the borders like Chaman and Landi Kotal to big cities, he said.

Moreover, the Federal Board of Revenue should put up advertisements highlighting that dealing in smuggled goods is illegal and could lead to seizure of property, goods and imprisonment of people involved. “These measures will create obstacles and also deny ease of distribution they enjoy at the moment, hence reduction in duty is not the answer,” he added.

As news reports suggest, owing to the underground economy, also called the parallel economy, the government loses Rs5,000 million annually on the import of tyres as they are brought on extremely low ITPs, another area of concern which needs to be addressed, he said.

Meanwhile, the industry suggested that at least 20 to 25% increase in the ITPs of tyres imported from China would help the government increase revenue and minimise tax evasion with its ill effects.

They said the existence of such a large underground economy could reduce tax revenues and gross domestic product and increase socio-economic problems.

In 2013-14, around two million tyres or 25% of total tyre demand was produced in Pakistan. Around 48% or 3.8 million tyres were imported while the remaining 27% or 2.2 million tyres were smuggled.

Published in The Express Tribune, June 19^th,  2015.

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