Tariff policy is working, but GST is now the real barrier, analyst says
Pakistan's National Tariff Policy 2025-30 is meeting its core objective of shifting customs duty away from revenue collection and towards industrial policy, according to an assessment by the chief executive of the Prime Institute, an independent economic policy think tank. The contribution of import-based revenue to overall tax revenue has fallen from above 50% to less than 40%, the assessment states, even as import volumes and customs revenue rose and average tariff rates declined.
The writer points to provisional first-quarter export figures for fiscal year 2026-27 of $8.42 billion, up 10.84% year on year from $7.59 billion, with agriculture and food up 23%, manufacturing, mining and energy up 17%, and textiles and apparel up 6%. The assessment cautions that it is too early to establish causal links for a policy designed to run five years, but says the trend is broadly aligned with the policy's goal of 14% export growth through tariff reform by 2030.
The central argument concerns the structure of protection rather than its level. The writer contends that maintaining different rates of customs duty, regulatory duty and additional customs duty across sectors amounts to the state selecting markets and obstructing competition, and calls for a predictable, low and broadly uniform regime. The existing cascading structure, which applies higher protection at later stages of processing, is likely to preserve an inefficient economy even as overall rates fall, the assessment says, citing the mobile phone assembly policy as evidence that protection alone cannot build competitive advantage.
The writer also relays an industry argument made at a recent seminar: that customs duty is now less of a problem than the 18% General Sales Tax, which industry says gives a large advantage to the informal sector. The proposed remedy is not tariff protection but cutting GST to 5% across the board, which the writer argues would remove the incentive for firms to stay undocumented. Some sectors, including steel, are said to be adjusting well, helped by a significant reduction in the cost of capital and new sources of electricity.
The assessment is a policy argument rather than a news development, and its export and revenue figures are presented as provisional. It does not specify the source of the underlying data.
