Government targets higher duties for imported luxury goods

FBR mulls 5 to 35pc regulatory duty

KARACHI: The government is mulling to increase regulatory duties on the imported luxury retail goods, and could also bring some new consumer items in the tax net in an attempt to dampen rising import bill, a senior official said on Tuesday.

The official said the Federal Board of Revenue (FBR) was likely to recommend the government to extend regulatory duty on several imported goods and also to rationalise the levy in the range of 5.0 percent to 35 percent on high end luxury products

The government, in December 2015, through a mini budget increased and imposed regulatory duty on a total of 289 products, targeting an additional revenue of Rs40 billion.

“Imports of luxury items have gone up over the past few months and several proposals are under consideration to limit this trend,” the official, who wishes to remain anonymous, said. The official, however said the government would definitely carry on the ‘luxury tax’ or regulatory duties in the upcoming fiscal year starting from July 1, 2016

The government has been struggling to stabilise its external balance sheet, despite a sharp fall in the value of oil imports in line with declining global oil prices.

Analysts said a persistently high import of luxury consumer goods and weak structural reforms was putting downward pressure on the ailing rupee.

The official said goods expected to be subject to the additional levy were imported fruits, carpets, marbles, cameras, refrigerators, other electric appliances and wooden furniture, “which are classified as high-end luxury products.”

“Although the impact (in term of revenue) of the proposed (increase) in the regulatory duty would not be huge, however this would harmonise the import trend,” the official said, adding such goods were consumed only by a niche market and additional levy would not impact the overall market.

“Regulatory duty of 25 percent to 35 percent is expected to be slapped on importable goods subject to the free trade agreements, while levy of 5.0 percent to 20 percent may be imposed on other goods based on the import patterns,” the official said.

The government officials view the country could not get benefits of the low oil prices as there was a considerable increase in the imports of luxury items. The central bank in a report had also expressed concern over the rising import bill despite low oil and commodity prices in the international market.

“Besides the regulatory duty, other measures are also under consideration, which would be presented in the next fiscal year’s finance bill,” the official said.

During the last fiscal year, the government withdrew tax exemption worth Rs105 billion and in the current fiscal year, another Rs120 billion worth of distortions were being removed. “The planned withdrawals for next year are estimated at another Rs120 billion,” the official said.

Finance Minister Ishaq Dar repeatedly said the government has undertaken a series of reforms to achieve macro-economic stability and now wanted to consolidate these gains through promotion of robust tax culture and elimination of concessions for the privileged class to finance national economic growth.