Pakistan Losing Billions Due to Import Tariff Anomalies

Import of high value, high price items are being cleared at low duty due to anomaly in import tariff policies as duty is paid on the basis of weight of imported item instead of its market price.

Pakistan is having a policy of applying import duties on parts by taking into consideration only the weight of the part rather than its market value which results in a monumental loss to the national exchequer. Luxury items are by definition expensive; however, importing parts either for a luxury car like Mercedes or cars like Suzuki, Toyota cost the same if they weigh the same. The market values of both the mentioned items are worlds apart.

"Spares of engine, transmission, suspension, and body parts like hoods and fenders are more likely to be imported through wrong declarations to avoid custom duty, while smaller parts like ball bearings, filters, spark plugs, are prone to smuggling through the porous borders of the country," Syed Nabeel Hashmi Chairman, Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) said.

Throughout the world, customs duties are calculated on ad valorem percentages of the imported items. For instance BMW windshield wipers should be imported at a higher ad valorem tax on account of the item being of a luxurious nature.

On the other hand, this tax for windshield wipers imported for the locally produced cars should be abysmally low so that the government could give extra incentive to local carmakers to invest more in their expansion.