LEVYING REGULATORY DUTIES ON IMPORTED 'LUXURIOUS' ITEMS
TARIQ AHMED SAEEDI (firstname.lastname@example.org)
Sep 8 - 14, 2008
The government seemed to tap the soft resources of revenue ever since it held the helm of affairs. From levies of general sales tax to removal of subsidies it has been resorting to all easy ways of earning monies, giving a clear impression as if government is inconsiderate of end users rallied under the gloom of spiraling prices of both domestic and imported essential and non essential consumer goods.
In a statutory regulatory order issued last month federal government has specified over 379 imported items on which 15 to 50 percent regulatory duties are imposed. The list includes mainly food and non food items imported to give substitution to products available locally or to increase the varieties in local market. The regulatory duties will not be imposed on items imported under free and preferential trade agreements. According to the government custom duties are levied on items which are luxurious.
For few products like kitchen items and heavy road rollers entitlement of luxuriousness befits in some way. But many items especially food products are beyond quality parameters of local goods, above all unregulated imported varieties cause price competition that keep unfair increase in prices of local made consumer goods under control. Following factoring in additional cost certainly prices of imported foods would inflate by as low as 15 percent.
Apparently aimed at to promote local trade and industry levies over imported food and non-food items would provide shields to indigenization process besides bring at par prices of imported goods with the prices of local goods in view of heavy inflationary pressures faced unanimously by food, automobile, agriculture, petroleum sectors. However, money collection neither has passed compensation down to end user nor will it likely to do so in future. The ultimate sufferer would remain the end user for whom prices are subject to go more up than down.
Syed Naveed Qamar, Minister for Finance & Economic Affairs has stated regulatory duty will not affect domestic market; probably he suggested that prices of domestic products would not rise because of the imposition of custom duties ad valorem. Things might happen in accordance with what he said. But at least local traders will be unchained to fleece consumers at will. Despite that common people use imported foods uncommonly they would find price of local food items considering price of imported substitute. For example, sausage or frankfurter which somehow has gotten acquaintance with the general public is made locally as well as imported. 25 percent levy on its import clearly implies inflating prices of both local and imported hotdogs.
These new duties will also increase prices of car and jeep of above 1800 Cc. Despite that these vehicles are not commonly in use of middle and lower income group, 50 percent additional duties would undermine the interest of non resident Pakistanis and impact the sales of automobiles in local market.
"The regulatory duties may render loss to 2,500 stakeholders and 3000 showrooms all around the country," says Shahzad, Chairman All Pakistan Motors Dealers Association. Up to 50 percent customs will increase the final cost of automobiles. He says though not commonly used these vehicles have core link with the livelihood of significant numbers of people, investors, and NRPs whose interests are at stake owing to this illogical levy.
"Import should have been targeted in case government wanted to discourage inflow of imported vehicles," argued Shahzad. "But these vehicles were imported under transfer of residence, gift, and baggage scheme that did not involve flow of foreign reserves from the country. Even letter of credit is not opened nor is dollars transferred to import these vehicles". With privilege of TR or gift schemes, Pakistanis bring vehicles in the country and sale them to motor dealers. "The regulatory duty will weaken flows of remittances," he says. "The association has lodged its protest against this indiscriminate levy with the Prime Minister and already pulled forward the case to federal government."
Chairman standing committee on co-ordination with customs, FPCCI, Sheikh Maqbool consented with the outcry of motors dealers. He says items imported under TR and gift scheme do not transfer foreign reserves from the country. "I am not aware whether such items come in the purview of recent regulatory duties," he says, adding "but if they do so motor dealers are justified in their apprehension". "They are right." He says levies will translate in rise of prices of automobiles.
"Sale of local automobiles may get the indirect effect, however, direct impact of regulatory duties over prices of local vehicles is not possible," utters Abdul Waheed Khan, Direct General, Pakistan Automotive Manufacturers Association while thinking for awhile. Vehicles that are imported by Pakistanis are usually not assembled in domestic market. They are not in direct competition to local brands.
Regulatory duties are imposed on mainly consumer goods on the ground that yogurt, curd, bread spread, pineapple, apple, orange, cherries, apricots, peaches, corn flake, tomato and tomato paste, potato, cirrus fruit, cooking range, toasters, etc. are luxurious items.
Custom regulatory duties may shift attention of purchasers from foreign to local products. However, it would not necessitate the change in buying tendency in general as consumers in Pakistan with buying power tend to distend their budgets after every price increase instead of boycotting to reject price hike. This common consumer characteristic motivates price hikers to keep swelling prices of products [dharalay sey]. Definitely government can earn substantial revenue due to levy of regulatory duties on consumer goods. But, will there be a relief for consumers? Or they will even be snatched of their buying power to have biscuit. Can government control rise in prices of local consumer goods in subsequent effect to price surge of imported goods.