Five-year tariff reform plan approved to promote exports

Islamabad: In a major policy change, Prime Minister Shehbaz Sharif approved a comprehensive five-year tariff reform plan to be announced in the federal budget 2025-26, which aims to phase-in reductions in customs duties, additional customs duties, regulatory duties on raw materials and semi-finished goods, and overall tariff protections for specific industries.

The first phase of the reforms, which will be launched with the next budget, introduces a simplified customs duty structure with slabs of 0, 5, 10, 15, and 20 percent, reportedly. The existing 16 percent slab will be reduced to 15 percent, while the 11 percent rate will fall to 10 percent. The 3 percent slab will be abolished, and products will be shifted either to the zero-duty category or to a new slab of 5 percent.

The proposed tariff changes are set to eliminate the additional customs duty of 2 percent on 4,294 tariff lines in the upcoming budget. The plan also includes reducing additional customs duty on 545 tariff lines from 4 to 2 percent, from 6 to 4 percent on 2,227 tariff lines, and from 7 to 6 percent for all products subject to customs duty above 20 percent.

The government is set to reduce regulatory duty, which currently reaches 90 percent on various products, to a maximum of 30 percent. Federal Finance Minister Muhammad Aurangzeb has also supported a major change in tariffs to boost industrial production in the country.

Further significant cuts are likely in next year’s budget, while the last three years of the plan will see a gradual, but modest, reduction in tariffs.

According to estimates, the rationalization of this tariff is expected to increase exports by about $5 billion by the time the plan is fully implemented, strengthening Pakistan’s drive to make its global trade position more competitive.