Tuesday, May 02, 2006
WB recommends drastic cut in duty on import of cars
By Sajid Chaudhry
ISLAMABAD: The World Bank has suggested to Pakistan to reduce the existing customs duty rate on import of cars and vehicles to 50% in one or two years and bring it further down to 25% under a phased reduction plan by 2011-12.
The World Bank has encouraged the government to impose excise taxes on import as well as locally-produced luxury and expensive cars so that the impact of reduction in customs duty could be offset.
The World Bank has also suggested the elimination of the present deletion programmes, including assembler deletion programmes and sub-component deletion programmes within six months to one-year period.
The World Bank in its proposed Pakistan Growth and Export Competitiveness Strategy paper has made these suggestions to the government of Pakistan for enhancing the current level of investment in the country and encourage other major players to invest in and contribute to the growing economy.
The World Bank is finalizing the proposed Growth and Export Competitiveness Strategy in consultation with all the relevant ministries and divisions for Pakistan. It is expected that the final document of this strategy would be handed over to the government during the Pakistan Development Forum scheduled in May and before the announcement of the budget 2006-07 for implementation.
The World Bank has highlighted that despite recent (in current fiscal year’s budget) cuts in tariffs on cars, their duty rates are still two to three times higher than the normal maximum tariff rate applicable in the world.
The proposed strategy also includes some important suggestions for the local auto industry so that it could be made globally competitive.
The official said that in order to promote an efficient and competitive auto industry in Pakistan that could be integrated with world markets, the World Bank has suggested that the government consider the following measures, as a policy package for near future (in the forthcoming budget 2006-07).
Besides the above-mentioned suggestion, other World Bank suggestions are reduce the present customs duties to a lower uniform single rate that would be the same for all models, ie, to a uniform rate of 50% in near future in one or two years.
Announce a phased tariff reduction programme, starting with 50%, with a reduction of 5% points a year over five years to 25% that is the current normal maximum rate by 20110-12.
The existing import duty on cars is 50% on import of cars of 1000cc to 1500cc, 65% duty is applicable on cars of 1500cc to 1800cc and 75% duty is charged on the import of cars of 1800cc and above engine capacity.
To grant general permission for import of second hands cars, but subject to more rigorous violation rules at customs than the present rules.
Unification of tariff on CKD kits, original equipment components and replacement parts at a single rate at 25% of the current normal maximum rate.
The imposition of excise taxes on expensive and luxury cars could be considered in order to compensate for revenue losses from customs duty reduction on these cars. Obviously, these excise taxes should be levied at the same rate for given classes of both imported and domestically-produced luxury cars, otherwise the excise tax will turn into a protective tax.
Source: http://www.dailytimes.com.pk/default.asp?page=2006%5C05%5C02%5Cstory_2-5-2006_pg5_1