ECONOMY OF PAKISTAN: AN OVERVIEW 5

aimed at broadening the tax base, bringing in tax evaders under the tax net,

minimizing personal interaction between tax payer and tax collector, eliminating

the multiplicity of taxes and ultimately reducing the tax rate over time. A massive

survey and documentation drive was undertaken to widen the tax base, extend

incidence to all sectors of the economy and develop the data for purposes of

assessment. Universal self assessment system has been introduced for tax

collection whereby the returns submitted by the tax payers are taken as final

settlement of their tax liabilities. Only a random sample of returns is picked up

for audit. This system has been welcomed by the tax payers. The Central Board

of Revenue (CBR) is being restructured to improve tax administration including

taxpayer facilitation.

Tariff Reforms

Pakistan made significant efforts in liberalizing its trade regime during the

1990s. The maximum tariff rate has declined from 225 percent in 1990-1 to 25

percent; the average tariff rate stands at just 11 percent compared to 65 percent

a decade ago. The number of duty slabs has also been reduced to four.

Quantitative import restrictions have already been eliminated except those

relating to security, health, public morals, religious and cultural concerns. The

number of statutory orders that exempted certain industries from import duties

has been phased out by June 2004 and import duties on 4,000 items were

reduced. These measures have brought down effective rate of protection,

eliminated the anti-export bias and promoted competitive and efficient industries.

A number of laws have also been promulgated to bring the trade regime in

conformity with World Trade Organization regulations. These include antidumping

and countervailing measures intellectual property rights.

Financial Sector Reforms

Financial sector has made the farthest progress by transforming itself into

a market oriented, private sector dominated sector performing efficient

intermediation. The regulatory and supervision functions of the State Bank of