Import Duties and Performance : Some Stylized Facts for Pakistan
This note discusses the role that import duties have in Pakistan’s economy, and their links with export competitiveness. Import duties play two key roles. First, they are a source of tax revenues for governments. Second, when imposed on a product,...
| Main Authors: | , , , , , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/226941591075288820/Pakistan-Economic-Policy-for-Competitiveness-Import-Duties-and-Performance-Some-Stylized-Facts-for-Pakistan http://hdl.handle.net/10986/33886 |
| Summary: | This note discusses the role that import
duties have in Pakistan’s economy, and their links with
export competitiveness. Import duties play two key roles.
First, they are a source of tax revenues for governments.
Second, when imposed on a product, they create a wedge
between its world price, and the price paid domestically (as
well as a wedge between its domestic price, and the price of
its substitute in the domestic economy). These wedges affect
the allocation of resources. They divert resources away from
export markets - in which firms will only fetch world prices
for the product - and into the domestic market, effectively
creating an anti-export bias. Thus, an import duty is
implicitly an export duty. When these duties are applied on
inputs that different sectors use to produce, the duty
induces firms to substitute away from that - now more
expensive - input, and into other substitutes, thus
affecting the otherwise optimal technological choice of
firms, as well as increasing their production costs. This
note is organized as follows: the first section presents a
snapshot of import duties in Pakistan. The second section
empirically examines the ways import duties induce an
allocation of resources that is different from the one that
will be obtained without the duty distortion. The third
section looks at the role of tariff policy in the context of
the COVID-19 (Coronavirus) pandemic. The fourth section
briefly describes the recent changes in the tariff policy
institutional arrangement. The fifth section concludes and
provides policy recommendations moving forward. |
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