PM asks for cuts in duties and taxes to bring down food prices

Updated 22 Mar 2020

Email

After coming into power, the PTI government imposed regulatory duties and introduced non-tariff barriers to discourage imports as part of policy to bring down overall import bill.
— AP/File
After coming into power, the PTI government imposed regulatory duties and introduced non-tariff barriers to discourage imports as part of policy to bring down overall import bill. — AP/File

ISLAMABAD: Taking notice of high prices of perishable products, Prime Minister Imran Khan has asked the Federal Board of Revenue to come up with a summary for reducing duty and taxes on eatables to bring down prices of essential commodities.

The direction came from the premier at a time when the government is working on various fronts to make sure availability of essential food items in the country amid rising coronavirus cases.

A senior official in the Federal Board of Revenue confirmed to Dawn that a team of tax officers are compiling a list of essential food items, which will be submitted to the federal cabinet on Tuesday for consideration.

Last month, finance ministry had also tasked the National Tariff Commission to compile duty structure including regulatory duties (RD) on essential food items which have led to an increase in domestic food inflation.

Most of the unprocessed essential food items are exempted from the customs duty. “We have already informed the relevant department that there is no customs duty on raw food items,” the official said.

Contrary to this, the FBR collects sales and withholding taxes (income tax) on import stage. There are also some regulatory and additional customs duties on certain items to discourage its imports for the benefits of local farmers.

As per the FBR list, it is collecting 5.5 per cent income tax on import of tomatoes while there is no customs duty or sales tax on the vegetable. However, on the import of onion, the government charges 20pc sales tax and 5.5pc income tax only.

On potatoes, the government collects 25pc additional customs duty, 17pc sales tax and 5.5pc income tax on import. Similarly, the government imposed 60pc RD on wheat, 25pc on wheat flour, 40pc on sugar and 5pc on boneless bovine meat (frozen). There is also around 2pc income tax at import stage on pulses.

The duty structure is very high on import of palm oil from Malaysia and Indonesia, changes to which can bring down edible oil prices in the domestic market.

According to the source, the list of these goods will be presented in the cabinet. “We are also evaluating the revenue impact of all these items in case of withdrawal of taxes,” they commented, adding there are almost 20 essential items which will be considered for waiver of taxes on its imports.

The customs department will not be in favour of reduction in duty on palm oil and tea, which are two major revenue spinners. However, the reduction in customs duties will certainly bring down cooking oil prices in the country. The lower duty on tea will also discourage its smuggling in the country.

After coming into power, the PTI government imposed regulatory duties and introduced non-tariff barriers to discourage imports as part of policy to bring down overall import bill.

The import of fruits and vegetables were linked with quarantine certification requirements at border stations with Iran and Afghanistan. However, the requirement of no-objection certificate is mostly unmanageable, according to traders.

As per an official report, the import of fruits and vegetables from Iran and Afghanistan fill the gaps during the arrival of new crops.

The suspension of trade with New Delhi in the wake of Kashmir issue has also contributed to rising prices of vegetables in the domestic market.

The FBR has also imposed a 50pc RD on the import of cheese and curd, natural honey 30pc, another 20pc on coconuts, Brazil nuts and cashew nuts, fresh or dried, whether or not shelled or peeled; 60pc on fruit juices, 15pc on instant coffee in bulk, 20pc on soups and broths and preparations therefore; homogenised composite food preparations and 20pc on ice cream.

According to the source, FBR will not consider any duty reduction on import of processed or canned food items.

Published in Dawn, March 22nd, 2020