Local tyre manufacturers on Thursday expressed concerns over budgetary proposal for further reduction of trade duty on import of tyres up to 40 percent. According to spokesman General Tyre has urged the government to devise a rational approach to spur growth and employment opportunities by supporting manufacturing and countering smuggling while further rebate on imports will only impact the local industry inversely.
He said proposed reduction in import duty of passenger cars tyres from 25 percent to 15 percent and light truck tyre from 20 percent to 15 percent will hurt the government's revenue target as the import trade prices (ITP's) are low and do not reflect reality.
Smuggling has to be controlled by strong administrative measures as duty reduction has proved to be a failure. Duty on truck / bus radial tyre from China is zero percent while it is five percent on imports from other origins. Yet smuggling goes on in this category.
The government should create a sense of fear among smugglers and make things difficult for them by creating check posts every 100 kms on roads leading to main consumption centres from smuggling hubs like Chaman & Landi Kotal.
Moreover, FBR should put up advertisements that handling / dealing in smuggled goods is illegal and could lead to seizure of property, goods & possible imprisonment of people involved. 'These measures will create obstacles in their path and also deny ease of distribution they enjoy at the moment, hence reduction in duty is not the answer,' he added.
He further said on one hand with the support of manufacturing sector, the government was eager to achieve gross domestic product (GDP) of seven percent by 2018 while setting the target of GDP in budget 2015-16 at 5.5 percent. On the other hand the government was promoting trading by slashing import duty and discouraging manufacturing sector. This will not help government achieve its growth target.
Similarly, government's macro plans to generate employment in manufacturing sector will also be affected at a large scale as further foreign investment to set-up plants will decrease due to unavailability of level playing field. Moreover, prevailing challenges are likely to continue hurting the manufacturing base in 2015-16 such as war against extremism, energy crises, political instability, high cost of production, settlement of IDPs and strengthening of state institutions, high wage rate and weak export demand etc.
As reported in the media, owing to the underground economy (UGE) which is also known as irregular, black and parallel economy GOP loses approximately Rs 5,000 million annually on import of tyres alone as importers are importing tyres on extremely low Import Trade Prices (ITPs), another area of concern which needs to be addressed. Meanwhile, the industry suggested that at least 20-25 percent increase in the ITPs of tyres imported from China would help the government increase revenue and minimise the size of the tax evasion with its ill effects.
They said it was an open secret that the existence of such a large UGE could decrease tax revenues, depress GDP, and raise socio-economic problems. It is also equally important to mention that in 2013-14 around two million units which is 25 percent of total tyre demand was produced locally in Pakistan whereas, 48 percent or 3.8 million tyres were imported while the rest 27 percent or 2.2 million tyres were smuggled. It is to be noted that out of total import of tyres, imports from China were 50 percent while in Truck Bus radial tyre alone 90 percent imports were from China.-PR