THIS refers to the report ‘Sales tax on luxury goods hiked to 25pc’ (March 9). One fails to understand the economic justification for allowing the import of luxury goods while the country is facing an acute dollar shortage.

The rich can afford to pay higher cost as that is not an issue for them. As such, imposition of general sales tax (GST) is not going to suppress the demand for foreign brands and compress the import bill. Consumer items, like confectionary, aerated water/juice, ice cream, fish, cereal, tissue paper, cigarette etc., are already being produced domestically of relatively good quality and can meet the entire demand.

Not long ago, the government had allowed import of luxury cars/electric vehicles to satisfy the ego of the ultra-rich, while letters of credit (LCs) for the import of essential medicines had been put on hold. It seems there is a complete breakdown of sanity among the economic/finance team.

Or else, it may be a case of preferring political expediency over economic prudency.

The general perception is that the powerful import-based traders tend to support whoever happens to be running the government in Islamabad at any given point. And, as we all know, there is no free lunch,

As for an argument often cited by the vested interests, a ban on selected imports is permitted under the World Trade Organisation (WTO) regulations where a state faces balance of payment crisis and the reserves are low. Therefore, the government cannot take refuge under the WTO ruling either. Squandering borrowed dollars on import of non-essential items is a grave mistake, especially when the country is facing a severe crisis.

Arif Majeed
Karachi

Published in Dawn, April 2nd, 2023

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