KARACHI, March 7: The government has planned to bring down the rate of sales tax to zero on full chain of 70 per cent exports of cotton and its products.

Besides, the government is also considering allowing a handsome relief to textile manufacturers-cum-exporters from the payment of sales tax on exports in the next budget to make them competitive in the international market.

This was disclosed by Central Board of Revenue Chairman Mohammad Abdullah Yusuf in a meeting with the members of Site Association of Industry here on Monday. A large scale change in the sales tax system is being made to accelerate trade and industrial activities.

In this context, the rate of sales tax is being considered to bring down to 10 per cent. On the other hand, rates of taxes will be reduced by increasing the number of taxpayers, says a press release of the Site association.

The CBR chief hinted that import duties would be considerably reduced in the next budget to stop the smuggling of polyester fabrics and other goods. He said the issue of sales tax refund and duty drawback would be gradually finished through a system of zero-rated duty.

He said the CBR had started preparing the draft budget whereby import tariff would be zero per cent, five per cent, 10 per cent and 15 per cent. "I will try to send the draft import tariff to trade and industrial associations for their comments," he added.

The CBR chief said that sufficient money would be invested to make the CBR more effective and helpful to the economy. "To remove drawbacks and mal practices, the government has planned to bring a complete new tariff system by taking business community into confidence.

The country's kitty, which receives the largest part of revenue from Karachi, the CBR always first implements every new system in Karachi on test basis, Mr Yusuf added.

He said that rates of income tax were being gradually reduced for the corporate sector, and by the year 2007, the rates for all commercial organizations, including banks, will come to 35pc. However, the Securities and Exchange Commission of Pakistan has set up a task force to review the rates of income tax keeping in view the changing conditions of business. Decision will be taken on receipt of recommendations from the task force.

He said the CBR intended to create such an environment in which industrialists could do business freely. The CBR chief admitted that the DTRE scheme was not working. "We want this scheme to be succeeded. We are ready to make changes in the scheme to make it successful," he added.

Regarding the stamp duty issue, he said that it came under the domain of the provincial government and assured that he would examine the issue and take up the matter with the provincial governments.

Replying a question, he admitted that smuggling had become nuisance and unmanageable. "The government is trying to make smuggled goods unattractive for smugglers by reducing duties and taking other steps."

Mr Yusuf said the government wanted to make economic policies in consultation with the business community. He said that many changes had been made in the policies but still there were some shortcomings. "The days of subsidies and favouritism have gone. Business community has to work hard to remain competitive," he advised.

He said the CBR was going through massive reforms by computerizing the customs department and making it more efficient. Regarding reduction of duty on imported spare parts from industrial machinery, he assured that he would consider the proposal.

On the demand to nominate a Site association's representative at the Adjudication Collectorate Committee, he assured that he would look into it and try to nominate the representative in consultation with the Legal Wing.