Argues removal of duty on smuggling-prone goods is no solution. PHOTO: FILE

LAHORE: A local tyre manufacturer has requested the Federal Board of Revenue (FBR) chairman to take measures to curb the smuggling of tyres into Pakistan, which is eating into government revenues and foreign exchange.

In a letter to the FBR chairman, General Tyre and Rubber Company CEO Hussain Kuli Khan stated that many local industries had either shut down or moved out of the country because of illicit trade, which caused the loss of jobs and foreign exchange.

Smuggled goods account for 59% demand across major sectors

“The same situation is being faced by the local tyre industry; smuggling is a termite that eats and hollows a country from within; it should not be allowed or tolerated for a second,” stated Khan.

Commenting on the suggestion by some sections of the industry to remove the regulatory duty on smuggling-prone items, he emphasised that it was not the solution.

“The imposition of regulatory duty to preserve foreign exchange by reducing imports has slashed the import of tyres, but not drastically,” he said, adding the data gathered by Pakistan Revenue Automation Limited (PRAL) showed that the import of tyres had only dropped by 11% on average after the imposition of the duty.

“Latest figures show that smuggling meets over 52% of the tyre demand; if we minus the 11% reduction in imports due to the regulatory duty, 41% of tyres are still being smuggled,” argued Khan.

He stressed that smuggling needed to be stopped as 41% was too large a figure to ignore. A large percentage of truck and bus radial tyres are imported from China. According to data, over 80% of the tyres were imported from China, which had 0% duty, Khan said, adding there should be no smuggling of tyres from China, but a majority of smuggled tyres were coming from there.

He said the government should frame manufacturing-friendly policies “so the industrial base of our country expands and we lessen our dependence on imported finished goods.”

“People should also be encouraged to invest in manufacturing tyres rather than importing forever. The government needs to clearly differentiate between importers and manufacturers in its policies,” he suggested.

At present, there were only a handful of tyre manufacturers competing with over 100 smuggled or heavily under-invoiced tyre brands, he added.

Published in The Express Tribune, November 13th, 2018