Islamabad: Pakistan has prepared a plan to liberalize trade by reducing import tariffs, which is expected to result in a decrease of Rs. 476 billion in tax revenue. However, this reduction is anticipated to boost the country’s exports and economic growth.
According to the details, the plan to reduce tariffs on imports essential for exports was discussed with Prime Minister Shehbaz Sharif, who has given his principled approval.
However, the plan still requires approval from the cabinet, and the most critical step is obtaining approval from the International Monetary Fund (IMF).
A special committee led by Federal Minister for Commerce Jam Kamal Khan proposed that reducing tariffs on imports necessary for exports will result in a Rs. 476 billion loss over five years.
However, the plan is expected to increase economic activity, enabling local industries to compete with other industries in the region.
According to the plan, it has been decided to eliminate regulatory duties, additional customs duties, sales tax, and withholding tax on export-based imports to reduce their prices.
It is also proposed to lower the average customs tariff from 20% to 15%.
Additionally, the proposal includes the elimination of customs duty exemptions provided under the Fifth Schedule of the Customs Act.
According to the documents, the implementation of the plan is expected to reduce tax revenue by Rs. 476 billion over five years and by Rs. 282 billion over three years.
The shortfall in tax revenue due to this reduction is expected to be offset by increased tax collections resulting from economic activities.
However, the Federal Board of Revenue (FBR) is opposing the plan. It is noteworthy that in July, the Prime Minister established the Tariff Rationalization Committee under the leadership of Minister for Commerce Jam Kamal.
It is expected that the Prime Minister will announce this plan in September after obtaining confirmation from the IMF.