FTO calls for reviewing all customs tariff headings

Federal Tax Ombudsman (FTO) Dr Muhammad Shoaib Suddle has recommended the Federal Board of Revenue (FBR) to review the entire Pakistan Customs Tariff (PCT) of 2011-2012 in the upcoming budget (2012-2013) to correct vague PCT headings for accurately assessing duties and taxes on imported items, particularly vehicles. Sources told Business Recorder here on Thursday that the FTO's office had submitted "valuable budget proposals to the FBR".
FTO's Office, they said, had drafted budget proposals taking into account practical problems and grievances of taxpayers and cases of mal-administrations filed with the FTO. A major budget proposal is that the FBR should review the complete customs tariff to bring more clarity in the applicability of duty rate on the import of items. It was suggested that correcting vague PCT headings would not only facilitate importers, but also check the misuse of discretionary powers of customs officials.
The valuation aspect and defining the proper role of the Directorate-General of Valuation, Customs, FBR, was necessary for accurately valuating imported goods and it was also necessary to avoid wrong assessments, misdeclarations, under-invoicing and under-valuation of such items. Referring to an example, sources said that PCT heading 87.02 (motor vehicles for the transport of 10 or more persons, including the driver) is subjected to 20 percent customs duty. This PCT heading talks about all kinds of motor cars and customs department uses its discretionary powers for assessing duties and taxes on the import of luxury vehicles by covering the same under PCT heading 87.02.
Other PCT headings specify higher rates of duty on the import of vehicles. In one case, it has been observed that a luxury vehicle (with a seating capacity of ten or more persons) has been covered under the said PCT heading to apply lower rate of customs duty on the same.
For example, the PCT heading 87.02 (motor vehicles for the transport of ten or more persons, including the driver) can specify that the heading would be applicable on the import of vehicles excluding luxury cars. If the luxury vehicles are excluded from this heading, customs department cannot use its powers to clear such vehicles under this heading.
The PCT heading 87.03 covers motor cars and other motor vehicles, principally designed for the transport of persons (other than those under heading 87.02), including station wagons and racing cars. The vehicles covered under the PCT heading 8703.9000 ie "others" is subjected to 100 percent customs duty. Sources added that the FTO Office had decided several cases of mal-administration where PCT headings had not been correctly applied, causing inconvenience and serious problems for importers.