Islamabad, Oct 30: National Tariff Policy Hinders Industrial Growth in Pakistan
According to the Policy Research Institute of Market Economy (PRIME), the National Tariff Policy (2019–24) was a positive move, although it was unsuccessful in eliminating barriers and streamlining the tariff structure.
In its most recent paper, “An Empirical Critique of National Tariff Policy 2019-24,” PRIME pointed out that a complicated tariff system hinders and ineffectively promotes Pakistani manufacturing exports.
Shortly after it was passed in 2019, NTP 2019-24 was put on hold since the Federal Board of Revenue (FBR) kept using imports as a revenue source. 75 percent of customs charges are collected from 15 product groupings, while import duties account for 24 percent of indirect taxes.
The Ministry of Commerce, the FBR, and regulatory agencies are attempting to control imports through onerous and ambiguous processes for enforcing and obtaining the fifth schedule’s exclusions.
In order to solve market shortcomings, the government wants to gradually eliminate protectionist policies. However, under-invoicing and smuggling are caused by high tariff rates, complexity, and corruption. The government attempted to address these issues with the National Tariff Policy 2019–24.
Cascade was the main goal of the national tariff policy in order to safeguard the domestic industry. Based on analysis, it seems that Pakistan’s trade is being restricted and a rent-seeking mentality is being fostered by the policy to preserve local industry.
Due to the inability of small and medium-sized businesses to get duty exemptions, the cascade principle has a selectivity bias. Commercial importers of iron, steel, and paper, for instance, profit from duty concessions. According to this research, Pakistan’s tariff structure is now more complex due to the SRO culture and the exclusions provided in the fifth schedule.
Pakistan’s international commerce is impacted by a number of rates and non-tariff barriers (NTBs). The main source of earnings is still custom duty. In fiscal year 2022–2023, import sales tax accounted for 61% of Pakistan’s total sales taxes, making it a substantial contributor.
Pakistan’s import structure demonstrates that goods with low tariff rates have higher trade volumes, as the survey noted. High tariff rates and Non-Tariff Measures (NTMs) imposed by the government on specific goods would not totally deter people from using them. Rather, there will be a preference for smuggling and under-voicing over traditional methods.
Dr. Zulfiqar Ali Bhatti, the Parliamentary Secretary, discussed how aid indiscriminately hinders economic growth and suggested trade volume as a measure of wealth. For Pakistan to benefit from international trade, it must sell to the rest of the world. In this way, the National Tariff Policy 2019–24’s cascade concept shields domestic industry from possibilities in international markets.
