On November 19, 2019, the Pakistani government cabinet approved the National Tariff Policy (hereinafter referred to as the “Policy”) to reform the national tariff management system and formulate tariff policies. The starting point was adjusted from increasing national fiscal revenue to promoting trade and industrial development. The “Policy” will be gradually implemented in the 2020-2021 fiscal year. The main contents of the “Policy” are as follows:
1. Background
The experience of developing countries shows that Countries that implement tariff structure reforms and trade liberalization develop faster. Over the past decade, the world’s 20 fastest-growing economies have continued to reduce tariff levels, but Pakistan’s import tariffs have increased by 11%. In addition, Pakistan also imposes import adjustment taxes on the basis of normal tariffs, causing Pakistan’s actual tariffs to further increase. Among the 68 countries in the world with annual exports exceeding US$20 billion, Pakistan’s average tariff level ranks third.
The Pakistani government has always used tariff policy as a tool to increase national fiscal revenue. This is the main reason why Pakistan’s tariff levels remain high, and it also leads to the high impact of national revenue on import tariffs. dependence, and to a certain extent hinder the development of industry and trade. Over the past decade, Pakistan’s industrial output as a share of GDP fell from 26.4% in fiscal 2010 to 20.3% in fiscal 2019, and exports as a share of GDP dropped from 13.5% in fiscal 2010 to 7% in fiscal 2019.
2. Purpose of Reform
The core of the reform of the “Policy” is to adjust the starting point of tariff formulation to Promote exports and industrial development. The new tariff policy will strive to optimize the tariff structure, reduce or even eliminate import tariffs on raw materials, and improve the competitiveness of manufacturing and export-oriented industries; improve the transparency of tariff policies, promote manufacturing investment, and increase employment opportunities; reduce the burden of import tariffs and improve Consumer welfare; eliminate structural barriers to tariffs and alleviate price distortions in domestic and international goods.
3. Implementation Principles
The implementation of the “Policy” will follow the following principles: First, use tariffs as The country’s economic policy means rather than the country’s revenue-increasing tool; the second is to simplify the tariff structure and reduce the tariff level; the third is to adopt a stepped tariff structure and gradually reduce the tax levels on finished products, semi-finished products, and raw materials; the fourth is to carry out reforms on infant industries Protection, to achieve a balance between trade liberalization and domestic industrial development, and gradually withdraw protective measures as the infant industry continues to grow; fifth, adopt a certain degree of import substitution policy to promote the development of domestic industry and manufacturing.
4. Institutional improvement
In order to implement the “Policy”, the government will establish a Tariff Policy Board (Tariff Policy Board) , TPB) is the highest body for national tariff policy. The committee is chaired by the Minister of Commerce of Pakistan or the Prime Minister’s Commercial Advisor. Its members include the Minister of Industrial Production, the Permanent Secretary of the Ministry of Finance, the Permanent Secretary of the Ministry of Industrial Production, the Permanent Secretary of the Investment Commission, and the Federal Taxation Commission ( Chairman of FBR) and Chairman of National Tariff Commission (NTC). In addition, the government will establish a Tariff Policy Center (TPC) in the Ministry of Commerce to serve as the secretariat of the Tariff Policy Committee and implement the committee’s decisions. Future proposals for the imposition, modification or cancellation of tariffs must be reviewed by the Tariff Policy Center and submitted to the Cabinet or Parliament for approval after approval by the Tariff Policy Committee.
