18:53
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LAHORE: The manufacturing sector has appealed to the Federal Board of Revenue (FBR) to take the issue of under-invoicing and misdeclaration of goods seriously, which is crowding out domestic manufacturers from the market, while factory closures leave thousands of workers jobless.
“We support the principle of free market economy,” said leading industrialist Mian Anjum Nisar, adding “this means level playing field for all”.
Talking to The News, he said the under invoicing gives an importer a competitive advantage over a local manufacturer. Officially both local manufacturers and importers pay the same percentage of sales and income tax on goods.
However, “the importers pay import duty, which is imposed around the globe to protect domestic manufacturers,” saidNisar.
When an importer brings a product at much lower than its actual value he not only saves the duty but also 16 percent sales tax that is slapped on duty paid value and 6 percent advance income tax that is paid on the sales tax paid value of the goods, he added. Elaborating his point, he said that for instance an item is valued Rs100 with import duty of 5 percent, the duty paid value on it would become Rs105. The 16 percent sales tax on duty paid value would increase the value of imported item to Rs121.80, he added.
He said the 6 percent income tax on the duty and sales tax paid value would be Rs7.25 increasing the cost of imported item to Rs129.05. If the same item is imported at 25 percent of the original value which in this case comes to Rs25 the five percent duty would come to Rs1.25 and on duty paid value of Rs26.25 the 16 percent sales tax would be Rs4.18 while the 6 percent income tax on total value of Rs30.43 would stand at Rs2.04, he continued.
The total cost of the under invoiced item, he said, would come to Rs32.47 plus Rs75 that the importer paid to the exporter through hundi costing Rs3 per 100. Thus, the total cost of that item would come to Rs110.45.
Anjum said if we presume that a local manufacturer is as efficient as its competitors in foreign country, the cost of that item would remain Rs100 and on this he would have to pay 16 percent sales tax, which increases his cost to Rs116 while addition of income tax would take the price to over Rs123. He said the local manufacturing cost would be higher than the cost of under invoiced item.
Former Chairman Pakistan Association of Auto Parts and Accessories Manufacturers (Paapam) Syed Nabeel Hashmi said under invoicing is a curse that could be easily eliminated through sincere efforts.
He said the importers in their books dispose of their stocks at the under invoiced landed cost but the retail price of that item is three times the under invoiced cost and can be verified by FBR officials.
The retail price of imported under invoiced item would be slightly lower than the retail price of locally produced item, he added.
He said the importers thus ensure that locally produced items are booted out of market and industries close down.
Hashmi said as far as auto parts are concerned our custom authorities have come up with a novel solution to facilitate the importers.
He said auto parts are high precision instruments and costly. However, FBR charges duty on auto parts on the basis of weight. He said a carburetor or an electric fuel pump that is retailed at Rs8000-3000 per piece is imported at 50-70 US cents per kg but the customs show their vigilance by assessing the duty at $1.20 per kg (Rs115 per kg).
Even after levy of 50 percent duty and 16 percent sales tax the cost of under invoiced auto parts is much cheaper than locally made similar parts, he added.
Rana Saeed, an executive at a leading motorcycle tyre manufacturing facility, said that the customs officials are not bothered even if our company exports the tyres at five times higher price than the import price of Chinese and Indian tyres of same specifications.
He wondered as to why the Chinese and Indian tyre manufacturers fail to eliminate Pakistani tyres from markets like Turkey or Bangladesh if they are five times cheaper. “The factual position is that tyres in Pakistan are imported at highly under invoiced values,” he said.
“We support the principle of free market economy,” said leading industrialist Mian Anjum Nisar, adding “this means level playing field for all”.
Talking to The News, he said the under invoicing gives an importer a competitive advantage over a local manufacturer. Officially both local manufacturers and importers pay the same percentage of sales and income tax on goods.
However, “the importers pay import duty, which is imposed around the globe to protect domestic manufacturers,” saidNisar.
When an importer brings a product at much lower than its actual value he not only saves the duty but also 16 percent sales tax that is slapped on duty paid value and 6 percent advance income tax that is paid on the sales tax paid value of the goods, he added. Elaborating his point, he said that for instance an item is valued Rs100 with import duty of 5 percent, the duty paid value on it would become Rs105. The 16 percent sales tax on duty paid value would increase the value of imported item to Rs121.80, he added.
He said the 6 percent income tax on the duty and sales tax paid value would be Rs7.25 increasing the cost of imported item to Rs129.05. If the same item is imported at 25 percent of the original value which in this case comes to Rs25 the five percent duty would come to Rs1.25 and on duty paid value of Rs26.25 the 16 percent sales tax would be Rs4.18 while the 6 percent income tax on total value of Rs30.43 would stand at Rs2.04, he continued.
The total cost of the under invoiced item, he said, would come to Rs32.47 plus Rs75 that the importer paid to the exporter through hundi costing Rs3 per 100. Thus, the total cost of that item would come to Rs110.45.
Anjum said if we presume that a local manufacturer is as efficient as its competitors in foreign country, the cost of that item would remain Rs100 and on this he would have to pay 16 percent sales tax, which increases his cost to Rs116 while addition of income tax would take the price to over Rs123. He said the local manufacturing cost would be higher than the cost of under invoiced item.
Former Chairman Pakistan Association of Auto Parts and Accessories Manufacturers (Paapam) Syed Nabeel Hashmi said under invoicing is a curse that could be easily eliminated through sincere efforts.
He said the importers in their books dispose of their stocks at the under invoiced landed cost but the retail price of that item is three times the under invoiced cost and can be verified by FBR officials.
The retail price of imported under invoiced item would be slightly lower than the retail price of locally produced item, he added.
He said the importers thus ensure that locally produced items are booted out of market and industries close down.
Hashmi said as far as auto parts are concerned our custom authorities have come up with a novel solution to facilitate the importers.
He said auto parts are high precision instruments and costly. However, FBR charges duty on auto parts on the basis of weight. He said a carburetor or an electric fuel pump that is retailed at Rs8000-3000 per piece is imported at 50-70 US cents per kg but the customs show their vigilance by assessing the duty at $1.20 per kg (Rs115 per kg).
Even after levy of 50 percent duty and 16 percent sales tax the cost of under invoiced auto parts is much cheaper than locally made similar parts, he added.
Rana Saeed, an executive at a leading motorcycle tyre manufacturing facility, said that the customs officials are not bothered even if our company exports the tyres at five times higher price than the import price of Chinese and Indian tyres of same specifications.
He wondered as to why the Chinese and Indian tyre manufacturers fail to eliminate Pakistani tyres from markets like Turkey or Bangladesh if they are five times cheaper. “The factual position is that tyres in Pakistan are imported at highly under invoiced values,” he said.
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