KARACHI, May 29: Pakistan edible oil imports could drop by at least 20 per cent if the government goes ahead with its plan to raise sales tax on imports in the next federal budget, an industry official said on Wednesday.
Pakistan annually imports about 1.4 million tons of edible oil products, led by palm oil, mostly from Malaysia, to meet a domestic demand of 2.0 million tons.
Akhtar Ashraf, chairman of Pakistan Vanaspati Manufacturers Association told Reuters in an interview from Islamabad that the government’s expected move would “depress edible oil demand in the local market”.
“The government is considering increasing sales tax at the import level to 20 per cent from 15 per cent and to levy 15 per cent additional tax on the finished goods,” he added.
“The move, if materialized, may reduce the imports by 20 per cent to 25 per cent.”
Islamabad has not officially announced that it would review the tax structure on edible oil in its 2002-03 (July-June) budget.
Pakistan currently charges a fixed Rs10,800 per ton as a regulatory and custom duty on palm oil imports, in addition to 15 per cent sales tax.
Islamabad also charges duties of Rs9,100 per ton on soyaoil, Rs9,050 to Rs10,200 per ton on sunflower oil, while the duty structure on palm kernel and other edible oil and oilseeds varies.
Ashraf said the industry had calculated that the prices of finished products would go up by Rs6 to Rs8 per kg “due to increase in the existing tariff.”
“On an average we are paying Rs16 of taxes on every kg of edible oil...additional tax burden would increase supplies from the informal sector, which presently enjoys market share of 30 per cent in edible oil trade in Pakistan,” he said.
“Our estimate is that the informal sector’s supplies would increase by 50 per cent.”
The informal sector consists of edible oil producers that are not properly registered and avoid the government’s tax net.
Ashraf said the manufacturers were “holding meetings with the government to come out with an amicable solution on the proposed move”.—Reuters