Calculation
of total tax incidence (TTI)
Policy-makers,
including those from the National Board of Revenue (NBR), and policy
researchers will doubtless often need to calculate total tax incidence (TTI) on
imported components and raw materials. The following steps have to be followed
in order to calculate TTI. (Reference: First Secretary (Customs, NBR).
In this calculation, abbreviations used are: Assessment Value: AV, Cost and freight: C&F, Cost-Insurance-Freight: CIF, Customs Duty: CD, Supplementary Duty: SD, Value Added Tax: VAT (=15%), Advance Income Tax: AIT, Infrastructure Development Surcharge: IDS, Advance Trade VAT: ATV (=1.5%), Factory VAT: FVAT (applicable to industry, =15%). For the locally-engineered electronics products industry purchasing raw materials from component traders locally, no VAT rebate is possible, and FVAT has to be paid on the total traded price. FVAT has been included to calculate the TTI on the imported raw materials. Calculation of tax paid value/Tax incidence (e.g., VATI=VAT Incidence; CDI = Customs Duty incidence)
(i) A= AV=CIF(1+1%) = C&F (1+2%)
(ii)
B= A(1+CD%) : CDI= A x CD%
(iii) C=
B(1+SD%) : SDI= B x SD%
(iv) D=
C(1+VAT%): VATI= C x VAT% = C x 15%
(v) AIT
Incidence : AITI= A x AIT% = A x 3%
vi) IDS
Incidence : IDSI= A x IDS% = A x 4%
vii) ATV
Incidence (for traders) : ATVI= C(1+10%) x ATV% = C x 1.65%
(viii) E
= D+AITI+IDSI+ATVI =Total duty paid value
ix) FVAT
Incidence : FVATI = E x FVAT% = E x 15%
A) TTI on imported finished goods = CDI+SDI+VATI+AITI+IDSI+ATVI
B) TTI on imported electronic raw materials =
CDI+SDI+VATI+AITI+IDSI+ATVI+FVATI ‘D’ above contains both
VAT at 15% and ATV at 1.5% (increased further due to the
appropriate base).
FVAT at 15% is paid on the previously paid VAT and ATV.
*These calculations were checked with the First Secretary, Customs, NBR during December, 2005 and January 2006, when he (Mr. Syed Golam Quibria) was First Secretary, Customs at the NBR. He was a member of the Electronics Committee that had been appointed by the Ministry of Industries in December, 2005.
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