ISLAMABAD - Policy Research Institute of Market Economy (PRIME) has welcomed the government of Pakistan’s latest move to unveil major reforms in the country’s tariff structure. These long-awaited reforms mark a promising shift towards simplifying Pakistan’s trade regime, encouraging investment, and reducing the cost of doing business—objectives that PRIME has consistently advocated for through evidence-based research and policy engagement.
The government’s initiative to phase out regulatory duties and additional customs duties, reduce tariffs and tariff slabs, and streamline the fifth schedule of the Customs Act aligns strongly with the core recommendations of PRIME’s recent studies, including the “Empirical Critique of the National Tariff Policy 2019-24” and the collaborative “PIDE-PRIME Tax Reforms Report (2024)”. These reports underline how complex and distortionary tariff structures have hindered industrial competitiveness, promoted rent-seeking, and led to mis-invoicing and smuggling. PRIME’s research has highlighted that 71% of customs duties are collected from just 10 product groups and that nearly half of all imports fall under exemption regimes—factors contributing to a narrow tax base and economic inefficiencies. The National Tariff Policy 2019-24, although well intentioned, failed in implementation due to lack of consensus between FBR and Ministry of Commerce. In contrast, the new tariff measures promise to reinstate policy coherence by minimizing exemptions, adopting cascading principles rationally, and promoting import liberalization to facilitate export-led growth.
Moreover, the PIDE-PRIME Tax Reforms Report emphasizes that lowering import tariffs—particularly on raw materials, intermediate goods, and capital goods—not only supports domestic value addition but also enhances government revenue by reducing smuggling and broadening the formal tax base. Import taxes in Pakistan (including GST, FED, WHT, CD, and other duties) are now at 46% compared to 5% world average. Countries such as Vietnam have successfully increased both trade volumes and customs revenues by following a similar trajectory. Appreciating this development, Dr Ali Salman, Executive Director at PRIME, remarked that “this is an important step towards an open and competitive economy, and I urge the government to institutionalize these reforms and make sure that progress is not reversed by other counter- measures.” He noted that “this was recommended in many reform reports and now it is the collective duty of reform champions to keep watch on the implementation.”