The chairman of the Pakistan Soap Manufacturers' Association (PSMA) and chief organiser of the Consumex-2004 exhibition, M. Yakub Karim, has said the duty and other taxes on soap raw material are irrational, and if these levies are reduced we can combat smuggling and the government will surly get more revenue.
Briefing newsmen at the concluding of 5 days soap and consumer product exhibition, he appreciated the recent inclusion of toilet soap industry in SRO through which the customs duty on palm stearine is reduced to 10 percent, but expressed his concern that discrimination is created within soap industry.
Karim appealed to the government to rectify this unrealistic discrimination.
The PSMA chief said there three key points, which, if not addressed, will continue to burden and make the soap industry uncompetitive as follows:
(i) Reduction in duties on key raw materials, (ii) removal of CED from toilet soaps, and (iii) free trade agreements to enhance exports.
He said first, the government must reduce duties on raw materials, adding soap is one of the largest consumer good categories in Pakistan with over 500 units functioning in the country.
Import duty on finished toilet soap has been reduced to 25 from 30 percent, thus putting more pressure on local industry. What is needed is the reduction in the customs duty of raw materials to help bring down the cost of production, and enable the industry to compete with smuggled, imported and under-invoiced toilet soaps.
The PSMA chief recommended putting all key raw materials at the lowest slab, ie five percent eg currently duty varies from 30 percent to 40 percent as it has a fixed rupee per ton duty rate, tallow, perfumes and all others are currently at 10 percent.
Secondly, the CED reduction on soaps: CED should be levied only on products on which the government wants to discourage usage, for example cigarettes.
There is no reason why the toilet soap that helps provide hygiene and improve health is being penalised and made expensive by this excise duty.
He noted that a number of countries have lowered even their GST taxation on important hygiene items to help their citizens.
He said according to Unicef data at least 250,000 children die every year in Pakistan due to diarrhoea resulting from unhygienic conditions and poor water quality.
It is apparent that affordability of hygiene products especially toilet soaps together with proper hygiene education can lead to a significant reduction in such diseases/deaths.
He said that by eliminating CED on soaps, the government would be able to save millions of Pakistanis from suffering these terrible but preventable diseases.
He said bilateral trade agreements: Given the strategic location of Pakistan, the investment in this country offers the business community a unique opportunity to sell their merchandise in the Central Asian countries, Middle East, European Union and South East Asian markets.
However, the lack of bilateral trade agreements between Pakistan and potential markets in the region discourages investors and local manufacturers from expanding the scope of their respective businesses.
He said Pakistan appears isolated because of a formation of regional blocs all around it.
The free trade agreements with Bangladesh and Sri Lanka have yet to be concluded.