ISLAMABAD, March 23: The Central Board of Revenue (CBR) is considering a proposal to further scale down the maximum tariff rate or import duties to 20 per cent from 25 per cent during the up-coming budget. Well-placed sources told Dawn that the CBR had sent the proposal to various relevant ministries for seeking their proposals, suggestion on the proposed move to further reduce the maximum import duty slab. After receiving the comments and suggestions from various ministries, the sources said, the proposals might be open for the stakeholders as well to seek their feedback before it was considered in the upcoming budget of 2005-06.

The government had reduced the maximum tariff on import duties from 125 per cent in 1990-91 to 80 per cent in 1993-94 and 65 per cent in 1995-96.

It was further reduced to 25 per cent in 2002-03, and the number of slabs has also been reduced to only four — 5 per cent, 10 per cent, 20 per cent and 25 per cent during the year under review.

Similarly, during this exercise the effective rate, defined as collection of net customs duties relative to dutiable imports, declined from 72.7 per cent in the financial year 1990-91 to 15.8 per cent in the fiscal year 2002-03.

This rationalization of customs tariffs has resulted into two major losses for the country by exposing the domestic industry to cheaper imports, which ultimately resulted into closing of thousands of domestic industries, which could not compete with the cheaper imports.

Secondly, this rationalization also resulted into revenue loss collected at import of goods. However, this loss was compensated by the tax officials by introducing broad based consumption tax to be collected from all the people in the shape of general sales tax (GST).

This could be gauged from the fact that the trade deficit was steadily increasing during the last years because of massive increase in the imports due to lowering of import duties. The tax officials were defending the downward reduction in customs duty towards making the local industries more competitive and enhancement of trading in the country.

The sources said that this year again the CBR has carried out an extensive exercise to reduce the number of concessionary notifications by allowing exemption on certain raw materials or products to be subsequently used in all kinds of products.

Presently, it was observed that in a certain SROs exemption was allowed on certain raw materials or products for some specific purposes, which resulted into increasing of arbitrary and discretionary powers of the tax officials.

The sources further said that the rationalization of duties during the current budget would be helpful to attract foreign direct investment. Furthermore, it would also help Pakistan to easily negotiate with any country for a preferential trading arrangement, added the sources.