World Bank Policy Paper Series on Pakistan pk 21/12 January 2014

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F.4 Customs Duty

Tax expenditures for customs duty are estimated based on the Goods Declaration data compiled by the PRAL. The following steps were involved:

Data includes One- Customs data only
The total import value and duty collected under each SRO is calculated.
Effective rate is calculated by dividing the duty collected with import value
Duty under statutory rate applied to each tariff line within each SRO is calculated.
The difference between revenue collected at effective rate and revenue estimated at statutory rate is taken as tax expenditure.

The tax expenditure estimated through this methodology is as following:¹¹

Table 9: Tax Expenditure Estimates for Customs

Rs. In Billion

S.No.	SRO	Description	Tax Expenditure 2011-12
1	567-2006 (Non -Survey)	General & conditional exemption of CD (non-survey)	23.21
2	656-2006 (OEMs)	Exemption of CD for OEMs of Automotive sector	20.61
3	575-2006(Machinery)	Exemption from CD & ST on import of machinery	11.77
4	655-2006 (Vender)	Exemption of CD for vendors of Automotive sector.	13.58
5	565-2006(Survey Based)	Exemption of CD on import of raw material & components (survey based)	8.16
6	659-2007 (CHINA)	Concessionary import under various SROs from China	15.34
7	678-2004(E&P)	Exemption of CD & ST to exploration & production companies	3.00
8	450-2001 (Cus. Rules)	Customs Rules, 2001.	2.25
9	809-2009(Textile)	Exemption of CD for machinery and equipment imported by textile industrial units	1.03
10	1264-2007 (Malaysia FTA)		2.77
11	570-2005-SRI LANKA		0.25
12	1274-2006(SAFTA)		0.18
13	894-2006 (Pak-Iran FTA)		0.009
	Others		3.64
	SRO based Exemptions		105.80
	Exemptions under CH 99		14.41
	Specific Rate		7.85
	Total_____128.06'>Total		128.06

Almost 60% of the imports into Pakistan attract no tariff or preferential tariff provided under various SROs. During the FY 2011-12, against the total imports of Rs. 4.01 trillion, Rs. 2.39 worth of imports are duty free. Out of total 6808 tariff lines (8-digit), 3950 attract one or more notifications. Share of SROs in imports by value is indicated in the following figure:

Figure 2: Value of Import under concessional SROs
A further analysis of share of different sectors in exemption regime reflects that the automotive sector enjoys the major share in exemptions.

Amount of Tax Expenditure

Based on the estimates for individual taxes, the consolidated summary of the tax expenditure for fiscal year 2011-12 is given in Table 8. The overall tax expenditure for 2011-12 has been estimated to be around Rs. 508 billion¹². If tax expenditure on services is included, overall tax expenditure would increase to Rs.590 billion.

Table 10: Tax Expenditure Estimates for All Taxes

Rs. In billion

S. No.	Tax	Tax Expenditure 2010-11
1	Income & Corporate Tax	101.09
2	WHT	52.04
3	Sales Tax Import	58.40
4	Sales Tax Domestic	171.9
5	Custom Duties	128.06
	Total	511.49

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