RECORDER REPORT
ISLAMABAD: Tax Reform Commission (TRC) has asked the Federal Board of Revenue (FBR) to renegotiate Free Trade Agreements (FTAs) to ensure localization of imported goods through providing adequate protection to local industry.
It is learnt that the recommendations of the TRC would be considered in a meeting to be held at the FBR here on Monday (May 4). The recommendations have been received in the FBR and under examination of the budget makers.
The TRC recommendations available with the FBR revealed that the FTAs were signed without consulting local manufacturers or considering loss of revenue. These FTAs have resulted in increase in imports at the cost of revenue, local industry (which is now shut down resulting in loss of jobs) and hard earned foreign exchange. There is a need to renegotiate these FTAs to ensure localization of imported goods through providing adequate protection to local industry already set up or likely to set up in future. Moreover, FTAs should be linked with trade in local currencies and equal volume of trade in terms of value.
It is recommended that the tax concessions to elected and other VIP’s be withdrawn and diplomats/foreign dignitaries be allowed whole/partial exemption on reciprocal basis in terms of fixed quantity. Diplomatic bonds or duty shops be allowed to sell only locally manufactured goods without involving local taxes and that too against payment in terms of banking instruments. The imports by air including accompanied and unaccompanied baggage be cleared through computerized assessments without allowing any abatement in value or taxes. Presently, imports by air are neither manifested nor electronically transferred to warehouses at the airports. A colossal amount of revenue is siphoned off through manipulation.
All specific concessions of duties and taxes be allowed against certificates electronically feeded in the system by the designated concession certificate issuing authority. Concessions of withholding taxes be also centralized at FBR and allowed against progressively serially numbered exemption certificates, it said.
Temporary imports be also allowed only against consignment-wise progressively serially numbered authorizations by FBR. Present system of allowing temporary imports from Afghanistan and other countries be discontinued. Each G.D. Be allotted progressive serial no. for the benefit of each importer/exporter and customs agent and to put a stop on malpractice of filing G.D. By using code/password of a given importer/exporter or customs agent without his written consent. The present practice of imports/exports against fake/purchased authorization be discontinued.
Presently, the importer is not able to determine the actual rates of custom duties applicable on imported goods because the schedule – I to the customs act, 1969 indicates only the statutory rates. Whereas, the applicable rates on the most of the imported goods have been prescribed under the notifications. The section-18 of the customs act, 1969, provides for levy of customs duties at different rates as are prescribed in the first schedule, on the imported goods. It is therefore proposed that the applicable rates mentioned under FTAs/PTAs, etc. be made part of the first schedule.
It is recommended that the customs duty rates be restored to the rates agreed with foreign donor’s i.e. 5 percent minimum rate on raw materials not locally produced, 10 percent ad-valorem on locally produced raw materials and on locally non manufactured intermediaries, 15 percent ad-valorem on assemblies and subassemblies/intermediaries 25 percent on consumer finished goods and 35 percent ad-valorem on luxury goods. This will make the customs tariff a progressive tax instead of the present regressive system of customs duties.
Presently 62 percent of the total imports are exempt imports which do not attract any customs duties. It is proposed that all exempt imports including imports by diplomats etc. should be subjected to a fee/service charge at 1% ad-valorem under section 18-D of the Customs Act, 1969, to recover the cost incurred by the government on clearance of imported goods. It is a hard fact that local consumer has a reference for the foreign goods. The donors in the past had agreed to provide 10% additional protection to neutralize the effect of consumer preference for foreign goods. It is therefore proposed that the locally produced goods may be provided adequate protection and a study may be got conducted by the Pakistan Institute of Development Economics (PIDE) to determine the level of effective protection to the local industries.
It has resulted in foreign exchange drain & more imports at the cost of local farmers whose inputs are costly, scarce (water & electricity/fuel). C.D On agri-produce should be rationalized / equated with CD in the neighbouring countries. The C.D. on many chemicals & dyes / colors (Chapter 28 to 38 of the Customs Tariff) were reduced for sales tax zero rated sectors. This has extinguished the scope of this industry. Now when zero rating of sales tax has been revised, there is a need to phase-wise restoration of (old rates of C.D. applicable in 1999-2000).
A colossal amount of revenue is siphoned off through manipulation. All specific concessions of duties and taxes be allowed against certificates electronically feeded in the system by the designated concession certificate issuing authority. Concessions of withholding taxes be also centralized at FBR and allowed against progressively serially numbered exemption certificates, TRC added.
Temporary imports be also allowed only against consignment-wise progressively serially numbered authorizations by FBR. Present system of allowing temporary imports from Afghanistan and other countries be discontinued. Each G.D. Be allotted progressive serial no. for the benefit of each importer/exporter and customs agent and to put a stop on malpractice of filing G.D. By using code/password of a given importer/exporter or customs agent without his written consent. The present practice of imports/exports against fake/purchased authorization be discontinued.
Presently, the importer is not able to determine the actual rates of custom duties applicable on imported goods because the schedule – I to the customs act, 1969 indicates only the statutory rates. Whereas, the applicable rates on the most of the imported goods have been prescribed under the notifications. The section-18 of the customs act, 1969, provides for levy of customs duties at different rates as are prescribed in the first schedule, on the imported goods. It is therefore proposed that the applicable rates mentioned under FTAs/PTAs, etc. be made part of the first schedule.
