Budget may bring major changes in tariff rationalisation

A major change is likely in tariff rationalisation policy in the coming budget. Tariff cuts would be industry-oriented rather than revenue-oriented which had been the guiding principle in budget making so far.
Sources told Business Recorder that pre-budget inter-ministerial meetings have proposed that tariffs should be further reduced to accelerate industrial growth, especially in the engineering goods and textiles sectors.
Other proposals seek further simplification of procedures and removal of irritants to facilitate potential growth in the industrial sector.
Industries had been complaining of certain irritants, which constrained the growth.
The inter-ministerial meetings, presided over by Deputy Chairman of Planning Commission Dr Akram Shaikh who had also served as secretary for industries, are attended by Abdullah Yusuf, Chairman Central Board of Revenue who, it is reported, "is a co-pioneer" of the new approach.
Further continuation of the government policy to reduce interaction between the taxpayer and tax collectors and reduction in the latter's discretionary powers are proposed to minimise chances of harassment to the taxpayer.
Among others, senior officers of the concerned ministries and divisions attended the meetings.
The meetings also considered different proposals to reduce duties on raw materials and machinery whose impact would be examined by the CBR. In the light of this exercise, the tariff cuts would be finalised during this month as the Budget is to be presented on June 5.
Tariff rationalisation has been an ongoing exercise for the past several years but more pronouncedly in the past three to four years, which positively impact industrial growth, exports and revenue generation.
According to one study, with tariffs as high as 45 percent, the effective collection was 17.5 percent. Later with tariffs cut to 25 percent, the effective collection came down to 16.2 percent, but this loss was more than offset by rise in industrial growth and fresh momentum to economic activity.