ISLAMABAD, May 27: The government is contemplating to further rationalize the customs tariff in the budget for 2003-04, under which the low tariff slabs will be completely eliminated, finance ministry sources told Dawn on Tuesday.

The officials of the CBR and the Ministry of Finance were currently finalizing the lists of items on which the duty rate is 5-10 per cent and have very limited impact on the overall revenue, the sources said.

The exercise emanates from a proposal of the Ministry of Commerce which believed that in some cases the documentation cost of 5 or 10pc duty collection was higher than the total revenue being collected from these items.

It has suggested that such duties should be done away with to give incentives to the importers and exporters in view of the approaching WTO regime. The import and export targets for the year 2003-04 are being fixed on the basis of these exercises, these sources said.

However, the overall tariff level, which is now up to 25 per cent, would remain unchanged as Pakistan has already done the required rationalization, but some anomalies still exist which would be done away with in the budget for 2003-04. At the same time, there were certain items on which the government was convinced that duty rate was still higher and should be reduced. The consultations were currently on among the commerce, finance and CBR officials to finalize the list of such items, the sources said.

A finance ministry official said that a decision had already been made to select only 10 per cent income tax cases for audit through a random ballot and the whole income tax scheme would be based on SAS.

However, penalties and punishments would be made strict in case the SAS was found to have been misused through random audit. This would be done through enactment of new tax ordinance with effect from next fiscal year which the officials said would reduce the powers of the tax collection machinery.

The officials said the duty rationalization process was aimed at curbing the smuggling instead of a revenue generation tool.

The government is estimating that next year trade deficit would be around $1.23 billion in view of expected increase in imports than exports because of some investments in the machinery sector. Import and export targets for 2003-04 are being set at $12.1 billion and $10.8 billion, respectively.

The exports and imports would thus register a growth of six per cent and 7.5 per cent, respectively, when calculated at the target of $10.3 billion exports and $11.1 billion imports announced under the trade policy 2002-03. The trade deficit during 2002-03 was estimated at $900 million in the current year’s trade policy.

The improved projections of exports and imports are based on increase in agriculture production, revival of the manufacturing sector, lower prices of POL next year, diversification of export and industrial base for import substitution and improvement in the overall competitiveness of the external sector.

Exports during the first 10 months (July-April 2002-03) grew by 20.83 per cent and imports by 22.49 per cent. The trade deficit widened by 35.72pc to $1.25bn compared to $920m in the corresponding period last year indicating that the country spent nearly $119.8m more mainly on the imports of power generating and textile machinery, besides spending $445m more on petroleum and petroleum products.