Regulatory Duty on luxury items cuts import bill

ISLAMABAD - By imposing 15 percent Regulatory Duty on 373 luxury imported items, import bill on the said items has declined to $94 million from $233 million, speakers said in a seminar.
In Aug 2008, Government was facing severe Balance of Payment crisis and preparing for a rescue package from the WB and IMF, decided to impose 15 regulatory duty (RD) on 373 luxury imported items. Speakers said monthly revenues from these imports declined marginally from Rs.1.94 to Rs.1.81 billion due to 15 percent RD.
A seminar on Regulatory Duty on Luxury Imports and Revenue Generation was organized by Pakistan Institute of Trade and Development. Eminent economist Dr. Sajjad Akhtar, Director (Policy and Research) and Dr. Yasir Kamal PITAD, were the keynote speaker at the occasion.
Dr Sajjad during his presentation disclosed that isolating the impact of RD on luxury imports during this period became a challenging task as the period coincided with the rapid depreciation of Pakistan Rupee along with the contraction in domestic demand due to internal economic and non-economic shocks. Thus an empirical model is utilised to isolate the impact of RD from the price effect due to depreciation of the currency and income effect. The results from the model will enable the policymakers to draw lessons for calibrating the RD regime in terms of its duration life and coverage.
The fall in value of imports is mainly due to depreciation of rupee and lower GDP growth rather than to the imposition of RD. Depreciation of the Pak rupee contributed to stabilizing the trade revenues in an environment of falling luxury imports. However, at an aggregate level, imposition of regulatory duty dampened revenue collection.
The study was conducted on the basis of twenty-four month data from July 2007 to June 2009 (14 months prior to RD and 10 months after the imposition of RD) on imports, and import revenues from 373 luxury items was the data base for this investigation.
Later on, in the second session of the presentation, Director Academics Dr. Yasir Kamal in order to understand Pakistans exports flows; results from gravity model estimation, presented the major findings that emerged from his study. Addressing the audience, he explained his views about the literature which suggested that globalisation has positive impacts on international trade pattern, which is mainly attributed to ease in trade barriers (tariff and non-tariff), assimilating and globalising regulatory and customs duties and facilitating access to world markets.
Dr Yasir elucidated that according to the world trade organization the share of Pakistan exports in overall world exports is 0.128 percent (2007), which is far behind than its gravitated partners i.e., India 1.04 percent and China 8.72 percent whereas the Asian share in the world total trade stands at 29.61 percent.
It was also concluded that Pakistan has been losing its potential with neighbour countries i.e. India, China and Iran and performing well in case of Afghanistan, US and EU other than Italy.