KARACHI - The Overseas Investors Chamber of Commerce & Industry (OICCI) has proposed that the rate of custom duty and income tax on import of diabetes medicines be declined in the upcoming budget 2010-211. This expectation is inline with the insignificant price revision from Ministry of Health and a significant depreciation of Pak rupees from PKR 61/ 1US$ in 2007 to PKR 85/ 1US$ in 2009 in the last two years. Currently diabetes drugs are subject to a customs duty of 10 per cent, income tax of 4 per cent and excise duty ranging from 0.80 per cent to 0.85pc at the import stage. The OICCOI in its document entitled Tax Proposals 2010-11' stated that rate of tax on import of vaccines should be reduced to one per cent again from four per cent given the fact that these are supplied to government institutions at very low margins. The OICCI suggested that in order to properly apply the transfer pricing rules in accordance with the OECD guidelines relating to transfer pricing, relevant amendments be introduced in the law so as to enable the sharing of parallel company information (e.g. bill of entries, drug analysis reports). It further insisted that the form of sharing should be made in a manner which helps in understanding the method used for valuation by the income tax department on one hand and ensures confidentially of records of other companies on other hand. According to OICCI, the assessments of pharmaceutical companies were amended on the issue of transfer pricing without the sharing of relevant information related to the competitors. The taxpayer was not provided any evidence to support the contention of the department that raw materials were imported by parallel companies at lower prices. Evidence was also not provided to prove that the parallel company drugs were of the same chemical composition/ efficacy/ quality as of the taxpayer. The tax department contended that it could not share confidential information relating to the parallel companies under section 216 of the Ordinance. As per the Trade (import) Policy, all pharmaceutical raw materials and finished and half finished products (drugs) imported must carry a remaining shelf life of minimum 75 percent at the time of its arrival in Pakistan. It is proposed that the 75 percent shelf life should be considered from the time of issuance of Bill of Lading / Air Waybill or the limit of shelf life should be reduced to 50 percent since several materials have very short shelf life and the difficulty is compounded when shipment is from Europe or US due to long sailing time, it said. Through the Finance Act 2008, customs duty on pharmaceutical raw materials was reduced to 5 per cent. However there are still many items that are not included in the list of duty reduction. It is hence suggested that all pharmaceutical raw materials should be added to Table III of SRO 567 of 2006, it added. The OICCI recommended changes in customs duty and withdrawal of sales tax for specific items justifying that there are various items on which there is custom duty at 10 per cent, 20 per cent, 25 per cent plus normal sales tax of 16 per cent. Most of these items are not manufactured locally and hence is proposed that the duty be reduced on them and brought to 0 per cent for items which have 10 per cent duty currently and 10 per cent for items which have 20 percent to 25 per cent duty currently. It also suggested that the requirement of NOC to be obtained by the exporters every time when pharmaceutical products are exported should be abolished in case a registered manufacturer holding a valid license is making the export because this results in unnecessary documentation for the company.