The Federal Board of Revenue (FBR)-led subcommittee has finalised the recommendations to bring down general tariff slabs from 8 to 6 ie up to 25 percent on over 400 items excluding the auto sector related items. The general tariff will be brought down to 10 percent within next three years and the recommendations would be submitted to the Economic Co-ordination Committee of the Cabinet for ratification while the same would be taken to the parliament as money bill, sources told Business Recorder on Friday.
In a recent meeting, chaired by Deputy Chairman of Planning Commission Dr Nadeem ul Haq, it was resolved that the FBR-led subcommittee would submit its approval to the Economic Co-ordination Committee for approval within eight weeks. It was decided that the Engineering Development Board (EDB ) and National Tariff Commission (NTC) would chalk out a timeframe for withdrawal of concessionary tariff within three years so that it could be brought down to 10 percent uniform rate.
The meeting was held to review the development of different committees wherein the Ministry of Commerce-led subcommittee on reviewing the regulatory role of EDB was also discussed in detail. As a result of negligible progress shown by this committee, it was decided to disband it forthwith, sources added.
Sources said that the meeting was briefed that the EDB performs its functions under six different SROs--one issued by the Ministry of Commerce and five by the FBR. There was consensus in the subcommittee, led by Ministry of Commerce, that discriminatory tariff regime for investors and commercial importers has created distortion and inefficiency besides discretionary licensing power to EDB. In view of this, it was resolved that the Revenue Advisory Council would be requested to review SRO Nos. 575, 655, 656, 575 pertaining to EDB role in granting discriminatory tariff for industries and commercial importers.
The FBR Chairman suggested that a pragmatic phasing out approach, spanning over three to five years, needed to be followed. A firm and categorical policy stance on the auto sector would serve as signal to local automobile industry to improve efficiency otherwise it cannot be protected at the expense of consumer welfare in the changed global and local scenarios.
It was also observed that discriminatory practices, like extra protection, are akin to licensing regime which is constraining industrialisation and overall economic development in Pakistan. The meeting was also briefed that Ministry of Industries-led subcommittee on auto sector held five meetings with the stakeholders and a report was prepared in this regard which envisions a short-term and long-term plan action for phasing out protection so as to improve the efficiency in the local automobile industry.
It was decided that the committee would circulate its recommendations to all concerned including the Planning Commission while all stakeholders will give their feedback to Ministry of Industries and Planning Commission within one-week. Based on stakeholders' comments, the Ministry of Industries would chalk out a plan of action on auto sector tariff reforms and present it to the ECC.
It was also resolved that the textile sector is export sector which needs no protection. Protection on textile is depriving domestic consumers and benefiting producers at their cost shifting consumer surplus to the producers. Hence, it was decided that tariff needs to be rationalised by bringing it down to 10 percent in a phased manner starting from next fiscal year 2012-13. The plan to reduce tariff on textile sector will be sent to the ECC by the Ministry of Textile within two weeks.