FBR against mid-year changes in duty structure: ''move to create distortions in taxation regime''

The Federal Board of Revenue (FBR) has categorically conveyed to the Planning Commission that the changes in customs duty structure under the tariff rationalisation plan should be done at the time of annual budget, as any duty revision during the course of fiscal year 2011-12 might create distortions in the existing taxation regime for both industry and trade.
Sources told Business Recorder here on Saturday that the FBR had submitted its viewpoint in the last meeting of the subcommittee on tariff reform convened at the Planning Commission. Tax officials had opposed immediate revision in customs duty slabs under tariff rationalisation exercise. The representatives of FBR explained that the most appropriate time of making changes in the existing customs duty structure was through Finance Bill.
During the course of the financial year, the government should not disturb the existing duty structure and changes in customs duty slabs of the Pakistan Customs Tariff (PCT) should be made at the time of announcement of budget. It is problematic to immediately change the tariff slabs during the course of financial year.
Responding to a query on immediate changes in duty structure like bringing 30-35 percent duty to 25 percent, FBR officials said that when duty was enhanced from 25 percent to 30-35 percent there was some rationale behind such changes in duty structure under the PCT. The government has to take into account all factors before taking any immediate decision for reverting to previous rates.
However, the government should not revise existing customs duty structure during mid-budget or course of fiscal year, as such measures have been termed as mini-budget or supplementary budget by the stakeholders. This tariff rationalisation should be implemented along with the announcement of the Finance Bill, FBR officials added.
According to sources, the FBR will also submit the revenue impact of regulatory duties (RDs) retained on certain items. During the last meeting on tariff rationalisation, the FBR has been asked to give reason for not abolishing RDs on different goods. If the reason for retaining RDs on different items is that the FBR will suffer revenue loss, then the tax authorities should submit the revenue implications of the RDs. The revenue implications of the RDs would exactly determine whether such duties should continue on the remaining items or not.
In the budget for 2011-12, the FBR had abolished RDs on different items. The regulatory duty (RD) was imposed on 397 items through SRO 482 (1)/2009 dated 13.6.2009. This duty was removed on all items except betel nuts, cigarettes, luxury tiles & bathroom fittings, luxury vehicles (1800 cc above except electric hybrids) and arms & ammunition by amending SRO 482(1)12009 in budget 2011-12.
The FBR will present working of the revenue impact of the RDs in the next meeting of the subcommittee on tariff reform of Planning Commission. The FBR will also submit the reasons for not abolishing RDs on different items and timeframe of the abolition of RDs on the remaining items, if any.
The tariff reform committee has also directed the National Tariff Commission (NTC) to submit the requisite study on the effective industry protection through tariff rationalisation. The NTC should also submit the details of the manpower and financial resources required for completion of the task. The NTC should also provide the time needed for completion of the study on industry protection.
Sources said that the Ministry of Industries and Production has been asked to meet all stakeholders for finalisation of the new auto policy to facilitate the industry, attract foreign investment and ensure benefit of the consumers. Further reduction in number of tariff slabs is not recommended for the time being and merger/reduction in special tariff rates/slabs, mainly on auto sector, will be considered after the subcommittee led by the Ministry of Industries gives its recommendations on the tariff reform on auto sector.