Proposed tariffs call for rationalisation
Wednesday, 20 June 2007
Abu Taher
IT is projected that the tariffs across the board on imported commodities -- raw materials and intermediate products -- would rise notably if the next year's budget is adopted in its present form without amendments.
The rate of tariff on these goods is likely to be raised substantially from their present rate. There are a large number of goods which have been getting exemption from import tariff in recent years on various considerations, ranging from their being essential goods consumed by common people to life saving medicines. The tariff exempt status was proposed for continuing only for a few of them; tariff was proposed on all the others. Only the present 25 per cent uniform tariff on complete products or finished products, was proposed to remain unchanged.
It is relevant to discuss here that keeping unchanged the tariff on only whole products or finished products, will help the overseas exporters of these products. If some of these products are manufactured locally, these manufacturers will not gain any competitiveness in relation to their imported equivalents. As for raising the rate of tariff on some raw materials, the same happening will raise sharply the costs of production in these industries, barring the extent of relief to be enjoyed in relevant cases by the proposed withdrawal of the development surcharge. No matter whether these are oriented towards foreign markets or domestic ones, such enterprises will have to bear, in many cases, an extra burden and suffer some erosion as well in their competitiveness.
Local industries making consumption items with imported raw materials, these can only seek to compensate the extra production costs by raising the prices of their consumption goods. This, in turn, will increase the costs of consumption for consumers in many areas.
Revenues are needed by the government and the same are certainly needed in much greater amounts. But the search for greater revenues needs to be directed with prudence and hindsight. Businesses can be stimulated by fiscal policies perceived by them as favourable that may create incentives or increase the same for them to go for business expansion. This, then, would likely facilitate economic growth. The lack of such incentives will create the opposite undesirable results and consumer suffering.
There are other ways of improving revenue collection leaving the economy and the consumers largely unaffected. For example, the potentials of the income tax remain very largely untapped. There are at least 3.0 million potential income tax payers in the country and half this number do not pay any tax. The ones who do, pay taxes that do not wholly reflect their real income. Income taxes yield only about 20 per cent of the total revenues. By easing rules and rationalising matters relating to income tax, the aggregate revenue earnings can be augmented.
Thus, there is so much opportunity to increase revenue earnings by only ensuring payment of taxes in right proportion to income by the present payers of income tax and by bringing a large number of the current evaders under this net. Big increases can also be achieved in the collection of value added tax (VAT) by streamlining administration thereof. Similarly, higher revenue earnings is possible from streamlining the collection of other duties and charges.
Thus, revenue earnings should be increased. But doing of this should be attempted by going for increased collection from the sectors mentioned above while easing the pressure of tariff on sectors that directly involve production and consumption.
IT is projected that the tariffs across the board on imported commodities -- raw materials and intermediate products -- would rise notably if the next year's budget is adopted in its present form without amendments.
The rate of tariff on these goods is likely to be raised substantially from their present rate. There are a large number of goods which have been getting exemption from import tariff in recent years on various considerations, ranging from their being essential goods consumed by common people to life saving medicines. The tariff exempt status was proposed for continuing only for a few of them; tariff was proposed on all the others. Only the present 25 per cent uniform tariff on complete products or finished products, was proposed to remain unchanged.
It is relevant to discuss here that keeping unchanged the tariff on only whole products or finished products, will help the overseas exporters of these products. If some of these products are manufactured locally, these manufacturers will not gain any competitiveness in relation to their imported equivalents. As for raising the rate of tariff on some raw materials, the same happening will raise sharply the costs of production in these industries, barring the extent of relief to be enjoyed in relevant cases by the proposed withdrawal of the development surcharge. No matter whether these are oriented towards foreign markets or domestic ones, such enterprises will have to bear, in many cases, an extra burden and suffer some erosion as well in their competitiveness.
Local industries making consumption items with imported raw materials, these can only seek to compensate the extra production costs by raising the prices of their consumption goods. This, in turn, will increase the costs of consumption for consumers in many areas.
Revenues are needed by the government and the same are certainly needed in much greater amounts. But the search for greater revenues needs to be directed with prudence and hindsight. Businesses can be stimulated by fiscal policies perceived by them as favourable that may create incentives or increase the same for them to go for business expansion. This, then, would likely facilitate economic growth. The lack of such incentives will create the opposite undesirable results and consumer suffering.
There are other ways of improving revenue collection leaving the economy and the consumers largely unaffected. For example, the potentials of the income tax remain very largely untapped. There are at least 3.0 million potential income tax payers in the country and half this number do not pay any tax. The ones who do, pay taxes that do not wholly reflect their real income. Income taxes yield only about 20 per cent of the total revenues. By easing rules and rationalising matters relating to income tax, the aggregate revenue earnings can be augmented.
Thus, there is so much opportunity to increase revenue earnings by only ensuring payment of taxes in right proportion to income by the present payers of income tax and by bringing a large number of the current evaders under this net. Big increases can also be achieved in the collection of value added tax (VAT) by streamlining administration thereof. Similarly, higher revenue earnings is possible from streamlining the collection of other duties and charges.
Thus, revenue earnings should be increased. But doing of this should be attempted by going for increased collection from the sectors mentioned above while easing the pressure of tariff on sectors that directly involve production and consumption.