In a bid to boost its manufacturing sector, Pakistan is considering a cut in taxes on import of raw materials needed by several industrial sectors.
Advisor to Prime Minister on Commerce and Investment, Abdul Razak Dawood, told Bloomberg that custom duties imposed on the import of raw materials required by pharmaceutical, chemical, engineering and food processing industries will be reduced to 10%. The proposal will be floated in the upcoming budget for fiscal year 2021-22, which will be presented on June 11.
The said step is likely to decrease the import of finished goods, and boost local production which can stimulate exports as well.
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“Pakistan had ridiculously high duties,” Dawood said. “The objective is to put Pakistan on par with other countries on trade taxes,” he said.
After a contraction of 0.5%, Pakistan has reported Gross Domestic Product (GDP) growth of 3.94% in the current fiscal year.
As per the report, cutting taxes on import is a major policy shift for Pakistan, where over 40% tax revenue comes from levies on inbound shipments.
The incumbent government is keen on increasing exports to spur economic growth, and in the upcoming budget will extend concessional long-term financing for exports as well as working capital financing to businesses, said Dawood.
Pakistan exports posted a growth of 14% to reach $22.563 billion during the first 11 months (July-May) 2020-21 as compared to $19.801 billion in the corresponding period of 2019-20, as per the figures released by the Ministry of Commerce.
In May 2021, exports showed an increase of 18.7% and reached $1.657 billion as compared to $1.396 billion in May 2020. However, exports in May declined by 25% as compared to April 2021.