Planning Commission and Federal Board of Revenue (FBR) have reportedly locked horns over the proposed rationalisation of tariffs on imported goods, a brainchild of Deputy Chairman Planning Commission, Dr Nadeem-ul-Haq, well-informed sources told Business Recorder.
An Australian consultant Garry Prusal has conducted a study for the Planning Commission to rationalise tariffs which includes immediate cut in all textile and clothing tariff to a maximum of 10 per cent. The study which is being backed by the Deputy Chairman Planning Commission, argues that Regulatory Duty (RD) imposed on 397 luxury/ non essential items in August 2008 should be abolished.
The report has discussed in detail the negative impact of these duties on the overall tariff structure as well as distortions created by this levy with respect to the protection available to local industry. As far as the rationalisation of tariff structure is concerned, FBR has fully endorsed the viewpoint of the report. During budget exercise 2010-11, a committee comprising FBR, Ministry of Commerce, Ministry of Industries and Ministry of Food and Agriculture also recommended the removal of this levy.
However, Ministry of Finance, also a member of the committee, strongly opposed the recommendation on the ground that the foreign exchange reserves of the country are still not in a stable condition - the very reason for which this additional levy was introduced in August 2008.
FBR argues that controlling flight of forex through tariff measures may not be an ideal solution but that was decided by the government keeping in view all ground realities at the time and international commitments of the GoP. "The recommendation regarding withdrawal of RD without taking into consideration the viewpoint of Finance Ministry leaves it too vague and far from ground reality to be considered for implementation," the sources quoted FBR saying in its comments.
The recommendations of the report are as follows: (i) non tariff measures including import licencing will not be used to control import and export; (ii) specific duties will not be used; (iii) import tariff should be low and uniform;(iv) the government will aim to bring all tariff down to a maximum ad valorem rate of 10 per cent;(v) uniformity means that tariff on individual products should be the same for all importers including traders-importers;(vi) "tops down" tariff cuts back to the 2002-03 general maximum level of 25 per cent;(vi) pre-announce further "top down" tariff cuts to a general maximum of say 10 percent;(vii) required that all concessionary tariffs should be available to all importers specially traders-importers; (viii) inclusion of a consumer/ buyer interest clause in the anti-dumping law; and (ix) review of the current situation in which many tariff changes are being made with reference to NTC.
Commenting on the report, FBR stated that Terms of Reference (ToRs) of the study indicates that the aspect of revenue was not one of the considerations while formulating this report. This was also confirmed during the meeting on this matter held on March 31 under the chairmanship of Deputy Chairman Planning Commission. "Recommendations of the report, particularly those relating to downward revision of maximum tariff slab to 10% would have serious revenue implications. These recommendations, if accepted, would have grave consequences for Pakistan's fiscal deficit as well as its decade long stand with other developing nations in WTO negotiations for protection of local industry," the sources quoted FBR as commenting.
FBR is one of the many stakeholders in national tariff policy formulation. Other stakeholders include all ministries (both Federal and Provincial) as well as the private sector affected by these polices - whether individuals or their representative trade associations / chambers.
All preferential trade related policies are initiated by the Ministry of Commerce in consultation with national trade bodies as well as the relevant ministry of the partner country. Similarly, tariffs (whether protective or allowing concessions) affecting the local industries, are recommended by the National Tariff Commission (NTC), Ministry of Industries/ EDB, Board of Investment, Ministry of Health and Ministry of Textiles, etc.
The recommendations / proposals of any stakeholder are submitted to the Economic Co-ordination Committee (ECC) of the Cabinet where these proposals are discussed threadbare before its approval or rejection. The major role of FBR is implementation of the final policy as approved by the Government of Pakistan.
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