RESTRICTED
WORLD TRADE WT/BOP/15/Add.1
11April 1997
ORGANIZATION(97-1529)
Original: English Committee onBalance-of-Payments Restrictions
1996 CONSULTATIONS WITH PAKISTAN UNDER ARTICLE XVIII:12(b)
OFTHE GATT 1994 AND THE RELATED UNDERSTANDING
Basic Document Supplied byPakistan
Addendum
MAIN FEATURES OFPAKISTAN 'SNEW ECONOMIC REVIVAL PROGRAMME
1. Thenewly elected Government inPakistan hasannounced on28March 1997atariffandfiscal
reforms package which constitutes animportant steptowards further liberalization ofcountry 'strade
regime andbroadening ofitstaxbase. Thesalient features ofthereform package areoutlined below.
Tariff Reforms:
2. Thetariffreforms arepremised onreducing themaximum rateofduty, cascading ofthetariff
structure, simplification oftheratestructure, reduction inthetariff slabsandbroadening ofthebase.
Thepackage encompasses thefollowing specific measures:
- Maximum tariff hasbeenreduced to45%from thepresent level of65%. (Except
Chapter 87andChapter 22).
- Regulatory import dutyof10% previously applicable across theboard hasbeen
abolished.
- Number oftariff slabs hasbeenreduced from13to5withratesof10%, 15%, 25%,
35%and45%respectively.
- Rateoftariffonplantandmachinery (excluding locally manufactured machinery) has
beenstandardized andbrought down to10%. Locally manufactured machinery is
taxable at25%.
- Cascadingofthedutiesonprimaryrawmaterials,secondaryrawmaterials,intermediate
goods andfinished goods within therange of10-45% hasbeenintroduced.
Fiscal Reforms:
3. Aprimary rationale behind fiscal reforms istoreduce thecountry 'sdependence ontradetaxes
andinstead place more reliance ondirect taxes suchasincome andsalestax.Thefiscal package is
characterized bythefollowing features :WT/BOP/15/Add.1
Page2
- Toprovide asupply sidestimulus totheeconomy, ithasbeendecided tobring down
thecurrent GSTstandard ratefrom 18%to12.5%.
- There willnowbetwoGSTratesof10%and12.5% instead oftheprevious range
of5%to23%.
- Tobroaden thetaxbase, ithasbeen decided toextend theGST toretail trade.
However, initially itisproposed tointroduce theGSTonretail trade intheform of
ataxonturnover attherateof3%. With theimprovement indocumentation ofthe
economy overtime, itisproposed tomake atransition toafullscalevalue-added tax
withaproper provision oftaxinvoicing ofpurchases.
- Asaninvestment-inducing measure, itisproposed toexempt bothimported and
domestically manufactured plant andmachinery from thecoverage oftheGST.
- Thepackage proposes reduction inpersonal income taxrates. Thenewrateswould
range between 5-20% asagainst thecurrent range of10-35%.
- Salaried persons progressively willreceive ataxbreak fromabout 50%to20%. Tax
incidence fornon-salaried persons willfallbyover50%. Ithasbeendecided thatthe
income taxforthecorporate sector fortheAssessment Year1997willbepaid@33%
bypublic companies, @58% bybanking companies and@43% bytheother
companies. FortheAssessment Year1998-99, thepublic companies would pay30%,
banking companies 55%andother companies 35%.
- Only those companies would beeligible tobetaxed atthelower ratewhich allocate
2%oftheirnetprofit ascontribution toeducation, health, pensions andgratuity for
theirworkers.
- Obligatory filing ofreturns hasbeenextended towealth tax.
Export Promotion:
4. Thepackage envisages doubling thedollar value ofexports inthree years. Toachieve this
target, thefollowing main steps havebeenproposed:
- Dutyonimport ofmachinery forexport oriented industries hasbeenreduced to10%.
- Import ofrawmaterials usedmainly forexports arebeing zero-rated.
- Thedutydrawbackscheme isbeing streamlined andinfuture therefund willbemade
within 14daysofthefiling oftheclaim andshallbecalculated onthebasis ofinput-
output co-efficients.
- Tofacilitate exports fromSMEs, ithasbeendecided tochannel export credit tosmall
andmedium exporting firms onapreferential basis.
- Toencourage exports ofnon-traditional items, theGovernment proposes toextend
support through introduction ofsimplified customs anddutydraw- backproceduresWT/BOP/15/Add.1
Page3
andlowering oftransaction cost ofexports byupgrading thetransport and
communications infrastructure.
- Thepackage places aspecial emphasis onstrict quality control ofexports andinthis
regard Ministries ofIndustries andScience &Technology have been directed to
accelerate theirefforts toputinplace systems ofaccredition andcertification soas
tofacilitate obtaining ofISO9000 certifications bytheprivate companies.