Islamabad:
The government has decided to reduce a large reduction of Rs 120 billion in import tax in the next budget, which aims to open the economy for external competition, but this reduction in taxes has also increased concerns over external financial balance.
Prime Minister Shahbaz Sharif this week approved the plan, rejecting the objections of the Ministry of Industry and the Ministry of Commerce.
2 Federal Ministers told the Express Tribune that the ministries warned that the decision could negatively affect the balance of local industry and payments.
According to sources, the Prime Minister has rejected the Ministry of Commerce’s proposal to increase the level of revenue from 5 to 6 and restrict them to four levels.
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The new maximum customs duty will be fixed at 15 %, which will be reduced in the current 20 % to 5 years.
According to sources, the project will affect a total of Rs 512 billion revenue, but the change in prices imposed on the oil and gas exploration sector is not included. In the early year, revenue of about Rs 120 billion will be reduced, of which Rs 100 billion will be reduced only due to a change in tax levels. According to the decision, customs duty levels will be restricted to four levels in the next budget.
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0 %, 5 %, 10 %, and 15 %. There are currently five levels. At 0 % level, 2,201 items are imported, with 2 % Additional Customs Duty and up to 20 % Regulatory Duty.
However, no existing import tariffs will be changed for the automobile sector. A new 5 % duty level will be introduced. Similarly, the level of 11 % will be reduced by 10 %.
The current fourth level is 16 % on which 545 goods are imported. This level will be reduced to 15 %, while the fifth level, which is 20 %, will be gradually eliminated in five years. Sources said that sudden opening of the economy would increase import pressure and reduce foreign exchange reserves could create a balance of payments.
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According to a senior tax official, the losses caused by the reduction of import tariffs will be met through tax collection in the local economy. The Prime Minister’s Office is of the view that high taxes are reducing the production capacity of domestic companies and they do not focus on exports.
However, the Ministry of Commerce termed the project as “custody principals” for raw materials and manufactured goods. Sources say that out of the total loss of Rs 512 billion, Rs 300 billion will be during the three -year program of the IMF. During the last 14 years, the sales tax and withdrawal tax were reduced.
