Government unveils five-year tariff reform plan to cut import duties

The federal government has decided to move ahead with a significant reduction in import duties as part of the second phase of its broader tariff reform agenda aimed at stimulating economic growth

The federal government has decided to move ahead with a significant reduction in import duties as part of the second phase of its broader tariff reform agenda aimed at stimulating economic growth, improving market competitiveness, and lowering the cost of doing business in Pakistan.

As part of these efforts, authorities have prepared the National Tariff Policy 2025-30, a five-year roadmap designed to gradually rationalize the country’s tariff structure. The policy seeks to reduce customs duties, regulatory duties, and additional customs duties in phases, with the objective of creating a more open and competitive trading environment.

According to official documents, the average tariff rate is targeted to decline from the existing 20.19 percent to 9.70 percent over the next five years. While the proposed reductions are expected to result in an estimated revenue shortfall of Rs143 billion for the national exchequer, policymakers believe the long-term economic benefits will outweigh the immediate fiscal impact.

Government officials and parliamentary sources maintain that lower import duties will help reduce the cost of imported raw materials and industrial inputs, making domestic industries more competitive. The move is also expected to increase competition in local markets, potentially leading to lower prices and greater product variety for consumers.

Under the proposed framework, customs duties will be capped at a maximum of 15 percent within five years. In addition, the government plans to gradually eliminate additional customs duties, reducing the current maximum rate of six percent to zero over the policy period.

The reform package also includes changes to regulatory duties. Officials have proposed limiting the maximum regulatory duty rate to 20 percent initially, followed by a phased reduction aimed at eventually removing such duties altogether.

The Ministry of Commerce has stated that the policy is intended to modernize Pakistan’s tariff regime and align it more closely with international trade practices. The ministry believes a simpler and more predictable tariff structure will encourage investment, improve industrial productivity, and support export-oriented growth.

Meanwhile, the Engineering Development Board (EDB) has recommended introducing a more balanced tariff structure for the automobile sector. The proposal calls for narrowing the tariff gap between locally manufactured and imported vehicles, with the aim of creating a level playing field for market participants.

Under the new policy framework, authorities intend to provide equal opportunities for domestic manufacturers and importers while encouraging industries to improve efficiency and competitiveness. Supporters of the reforms argue that increased competition could drive innovation and enhance product quality across multiple sectors of the economy.

Economic experts, however, have emphasized the need for a gradual implementation process to ensure local industries have sufficient time to adjust to increased competition from imported goods. They also stress the importance of complementary measures, including industrial support programs and export promotion initiatives, to maximize the benefits of the tariff reforms.