High Import Duties Assure Continuation of Pakistan Tyre Smuggling

Much smuggling occurs in the open, and it is not rare, for example, for a cargo truck to leave Pakistan fitted with a set of worn out tyres and return sporting brand new ones, with the old tyres carried as freight. The smuggling activity is explained, if not condoned, on the grounds that the duty upon tyres in Pakistan, which was in 2005 reduced to 5 per cent, has become a serious cost barrier through the combination of rising global tyre prices and the devalued Pakistani rupee.

Vice president of the Lahore Chamber of Commerce and Industry Shafqat Saeed explained the 5 per cent import duty in reality translates into a 29 per cent increase in the original cost of imported truck tyres when all taxes levied at the import stage are taken into account. He claims the average cost of a legally imported tyre, which is currently around Rs8,000, would drop by Rs1,000 if the import duty were removed. Pakistani media source The News reports that almost 90 per cent of passenger car tyres on the market have been smuggled into the country, chiefly because the import duty on these products is 35 per cent plus sales tax and withholding tax. This duty was apparently introduced to protect Pakistan’s sole passenger car tyre manufacturer, however the company at present lacks the capacity to fulfil even a quarter of the country’s tyre production.