Papua New Guinea acceded to the World Trade Organization in 1996 and has liberalized its trade to conform to WTO standards, removing all non-tariff barriers to trade including quotas, bans, and license requirements. The government put a value-added tax (VAT) into effect in 1998 and intends to reduce all non-protective tariffs to zero using the VAT. Currently, there are import duty rates of 5%, 8%, and 11%. The protective tariff is 40% and there are higher rates applied to luxury items such as tobacco and liquor.
i have few questions in relation to the consequential effect of tariff reduction.
1. How was the government able to compensate for the losses incured from the import duty tariffs?
2. Are there any "specific" tariff rates applied or all tariffs are converted to "ad valorem"?
3. If there are "specific" applied rates, how was that possible during WTO accession negotiations?
please reply.
Harold