‘Tariff rationalisation pressing need of the time’

ISLAMABAD: Minister for Finance and Revenue Shaukat Tarin on Wednesday underscored the need of tariff rationalisation to encourage industrialisation as the government struggled to avert the impact of import duty cuts on revenue collection. “Tariff rationalisation is a pressing need of the time. Rationalising tariff structure must aim at broadening and strengthening industrial base and contribute towards overall economic growth,” Tarin said during a meeting at the finance division.

“A dynamic tariff structure is vital for export-led industrialisation and improves competitiveness of domestic industry.”

Minister for Industries and Production Khusro Bakhtyar, Adviser to the Prime Minister on Commerce Razak Dawood, Special Assistant to Prime Minister on Revenue Waqar Masood, and others attended the meeting.

The ministry of commerce made a detailed presentation on current tariff structure and updated the finance minister on tariff rationalization measures and its role in enhancing economic activities in the country.

The government has been talking about tariff rationalisation to improve industrial production competitiveness in the global market and ease of doing business. The government rationalised duty/tariff structure for more than 30,000 raw materials and intermediary goods in the budget for fiscal 2020/21. The government abolished additional customs duty and regulatory duty on 30,000 items of raw materials and this would have negative annual revenue impact of Rs14 billion.

The government has been advised to change its reliance from importation to other taxes, such as sales tax and income tax as Pakistan’s 45 percent taxes are collected at import stage, while in India it stands at 21 percent, Bangladesh (28 percent) and developed world (10 percent).

The government, however, wanted to achieve the objective of industrialisation through rationalization of tariff. This reduction in import duty will help boosting economic activities and jacking up dwindling exports.

The fiscal deficit was recorded at to 3.5 percent of GDP during Jul-Feb FY2021 compared to 3.7 percent of GDP in the corresponding period a year earlier.

“The fiscal performance during the first eight months of FY2021 is an indication of successful adherence to fiscal discipline through careful expenditure management and efforts to improve the revenues,” the finance ministry said in a latest report. “Particularly, FBR tax collection has witnessed a double-digit growth during the first nine months of FY2021 which is a reflection of growing economic activities in the country despite facing the challenge of the third wave of COVID19. The current revenue performance is expected to improve further during the last quarter of FY2021 relative to the same period of FY2020 when economic activities were interrupted due to COVID-19.”