Transparency International Pakistan has requested Chairman, Federal Board of Revenue (FBR) to act on the advice of the Competition Commission of Pakistan (CCP) and Ministry of Finance in controlling monopolistic practices in the country.
Acting on a complaint received by manufacturer of polyethylene terephthalate (PET) resin, PET bottles and BOPET polyester film, and biased acts of FBR and NTR, favouring the only local manufacturer Novatex Ltd, TI-Pakistan, Adviser, Syed Adil Gilani in a letter sent to the Chairman, FBR, Ali Arshad Hakeem on February 15 advised him not take measures to benefit only M/s Novatex Ltd, which is a corrupt act under NAO 1999, Section 9 a (vi).which states: "A holder of a public office, or any other person, is said to commit or to have committed the offence of corruption and corrupt practices if he has issued any directive, policy, or any SRO (Statutory Regulatory Order) or any other order which grants or attempts to grant any undue concession or benefit in any taxation matter or law or otherwise so as to benefit himself or any relative or associate or a benamidar or any other person."
TI-Pakistan has detailed main issues of the complaint as:
1. That the Competition Commission of Pakistan has conducted investigation from June 2012 under Competition Act 2010 on the classification of Poly Ethylene Terepthalate (PET) Resins under Pakistan customs Tariff Code (PCT Code) and customs duty levied on them under notifications SRO 507(I)/2007 and SRO 678(I)/2010 which, prima facie, give undue duty protection to the sole local manufacturer/supplier of PET Resins.
That since its formation in 1984, Novatex group has enjoyed substantial duty protection on PET resin (bottle grade) from as high as 45 percent to the current level of 9 percent. And over the years Novatex has grown from strength to strength which could be ascertained from its financial performance during the last three years as the top line of the company registered a profound 45 percent Compound Annual Growth Rate (CAGR) while the bottom-line notched an impressive 37 percent CAGR during this period. Apparently, there is no justification for providing tariff protection.
2. That the Competition Commission of Pakistan on December 28, 2012 completed the investigation and issued the Policy Note. CPP vide its letters on the same day, ie December 28, 2012 sent the Policy Note to FBR and the National Tariff Commission for taking action that the tariff structure of PET Resins, in particular PET Bottle Grade, PET Film Grade and PET Yarn Grade needs to be rationalised and slashed down to a uniform rate to eliminate discrimination in terms of classification and rates of duty to create a level playing field for all the competitors in PET Bottle and BOPET film markets.
That the CCP has confirmed that the classification PET Resins under the PCT Code and diverse rates of customs duty levied on them through notifications seem to extend protection to a particular undertaking by imposing discriminatory rates on similar products, which has resulted in a situation of applying dissimilar conditions to equivalent transactions. And if setting up a PET Resin plant necessitated duty protection to recoup the investment and allowing time to become competitive, such protection cannot be absolute and has to be time bound.
3. This is to keep in mind that Competition Commission of Pakistan is a statuary regulatory authority, and the FBR and NTC are to act on its advice.
4. However, the National Tariff Commission on 26 December 2012 recommended to the ECC has suggested eight percent duty for the film grade resin as well as on bottle grade resin.
Transparency International Pakistan pointed out the contradiction in the recommendations of NTC, and its own decision as follows:
"The existing industry manufacturing PET resin is well established as compared to nascent BOPET film industry. There should be minimum duty on PET resin, which could protect its cost of production in the longer run. There is a need rationalise the duty structure of at least two value chains ie film value chain and bottles value chain. Both these value chains relate to packing industry."
5. That on January 23, 2013 Senator, Saleem H Mandviwalla, Minister of State, Ministry of Finance had also sent a letter to Chairman FBR and Secretary Ministry of Industries, Secretary Ministry of Commerce on the recommendations in view of the CCP Policy Note of December 28, 2013, for the Ministry of Finance to prepare a summary for approval of ECC.
6. That FBR, has prepared its recommendations based on NTC biased note of 26 December 2012, completely discarding the advice of the CCP Policy Note of 28 December 2012.
7. That annual local production of Pet Resin is about 300,000 tons, which is sold at Rs 60 billion, and total annual import of Pet Resin in not more than 10,000 tons. This benefits only one party is unconstitutional and also a corrupt act.
The complaint was discussed with the Chairman FBR, who informed that the FBR note has been sent to the Ministry of Law for advice on CCP Policy Note.
Transparency International Pakistan is striving to have transparency in procedures and Rule of Law in Pakistan, which is the only way to eliminate corruption and have good governance in the country.
Copies of the letter have been forwarded for action under the rules and regulations to: Chairman, Public Accounts Committee, Islamabad, Senator, Farooq H Naek, Minister of Law, Islamabad, Dr Abdul Hafeez Shaikh, Federal Minister of Finance, Islamabad, Senator Saleem H Mandviwalla, Minister of State, Ministry of Finance, Islamabad, Registrar, Supreme Court of Pakistan, Islamabad, Chairperson, CCP, Islamabad, Secretary, Ministry of Commerce, Islamabad, and Secretary, Ministry of Industries, Islamabad.
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