Tax experts and highly placed sources in Customs Intelligence told Business Recorder Thursday that the increase in RD on imported goods is against the tariff rationalization exercise of the Federal Board of Revenue (FBR). The whole exercise of tariff reduction on imported items during the last five years seems to be counterproductive due to higher rates of RDs on imported items. Whether the items are luxury or essential, the RDs would considerably increase smuggling of these products already subjected to customs duty and additional customs duty.
In most of the cases, the items subjected to RD may be brought into Pakistan under the guise of Afghan Transit Trade due to higher cost of imports.
One of the major preventive measures to check smuggling is tariff reduction while imposition of RD has negative implications on import of such items, sources said.
When asked about type of items whose smuggling may increase, sources said it depends on demand and supply. If demand of any item (subjected to RD) has increased in Pakistan, its smuggling would definitely increase, particularly from Pak-Afghan border.
For example, sources quoted that smuggling of mobile phones would increase following proposed increase of RD from 5 percent to 17.5 percent, reflecting an increase of 12.5 percent.
Another disadvantage of imposing RD is that the import regime would be shifted to smuggled regime under the Afghan Transit Trade facility. Secondly, smugglers would make attempts to misuse the green channel facility for bringing high dutiable items under the cover of green channel.
The government is planning to increase RD on more than one thousand imported items. In December 2017, the then government had also revised regulatory duty (RD) on dozens of imported items, of which RD was imposed on 11 items (58 tariff lines), scrapped on 8 items (59 tariff lines), increased on 5 items (43 tariff lines) and reduced on 6 items (22 tariff lines) on the proposal of different sectors.
In January 2018, the FBR had revised regulatory duty (RD) on dozens of imported items on the proposal of different sectors. It included 5 percent RD on the import of sacks and bags of polymers of ethylene by registered units for in-house use for packaging food and dairy products.