Pakistan Today – Tax foreign steel products if you want more revenue from local steel industry

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10 November 2015 - Under the current economic conditions, the steel industry in the country is struggling and FBR stands to lose approximately Rs 17 billion in revenue generation.

The Ship-breaking Industry, which is the largest formalized industry of Balochistan, contributed Rs 12.6 billion in total tax contribution for the year 2014-15. Currently, in the first quarter of 2015-16, the industry has only contributed Rs 400 million in taxes and revenue generation with a yearly outlook only of only Rs one billion for the current financial year.

“We are continually approaching the government to create a level playing field by increasing import duties and taxes on finished products so our industry can survive, since we are virtually on the brink of shutdown,” said Shoaib Sultan, owner of Horizon Ship Recycling and Executive committee member of Pakistan Ship-breakers Association (PSBA). “We have created thousands of jobs and if prompt action is not taken, the government will lose at least Rs 11.6 billion from our industry alone,” he continued.

Pakistan Steel Re-rolling Mills Association (PSRMA) has also approached FBR as the local steel sector is also under pressure. “Destruction of local industry through import of steel bar, angle, channel, girder beams (finished products) must be stopped,” the Association’s officials said. The association further noted that the federal government collects more than Rs 30 billion in revenue from the industry and has a steel re-rolling capacity of more than 6 million tonnes, but that the industry is shutting down.

The association has recommended that regulatory duty on finished steel products must be increased to at least 30 per cent and sales tax must be enhanced to 30 per cent from 17 per cent on imported finished steel products in order to provide a level playing field, resulting in an increased revenue collection of Rs 22,000/tonne on finished products.

As international steel prices of finished products have crashed, all local steel sectors are feeling the pinch. In the month of October, 20,000 tonnes of finished products have arrived and if the trend persists then FBR can easily gather an additional Rs 5.5 billion in revenue generation if it takes up the recommendation of PSRMA.

PSMA (Pakistan Steel Melters Association) has also been aggressively approaching the government to take immediate measures as inferior quality imported products are harming the local industry and will cause them to shut down.

Local manufacturers also point to the ‘low quality’ of the imported steel products as a reason why local industry needs to be protected. “The quality of the imported products is a serious concern for our national infrastructure since a lot of the material coming in our country is substandard,” said Agha Steel Industries Executive Director and member of PSMA Hussain Agha. “Unfortunately, our major cities lie on seismic fault lines and any inferior grade finished goods pose a direct threat to our national infrastructure,” he said.

“The government must take immediate measures to provide a level playing field for our domestic Industries. We are focused on providing quality products to ensure that our national infrastructure’s integrity is upheld and there must not be any compromise in that respect.” PSMA said.

Evidently, if the government does not take immediate action, it will lose around Rs 17 billion in collections from the steel industry. Many new investments within the industry will come to a halt resulting in irrecoverable job losses if remedial action is not implemented.

Under the IMF program, the government has been mandated to increase the revenue collection and this is the perfect opportunity to provide a level playing field for the nascent steel industry of Pakistan and increase revenue collection by at least Rs 17 billion for FBR.