Highlighting the anti-smuggling measures at the National Assembly Standing Committee on Finance Thursday, he said out of approximately worth $4 billion to 5 billion annual smuggling, 75 percent of the illicit trade is carried out on the back of Afghan Transit Trade Agreement (ATTA). With the evasion of custom duty a chain reaction start resulting in sales tax, federal excise duty and withholding tax evasion. The accumulated revenue loss touches $2.5 billion per annum.
While sharing the statistics on smuggling, he said that it could be around 15 percent of the total national imports. Responding to a query, FBR Member Customs said that an important meeting of the anomaly committee would be convened on Friday (today) to finalise the changes in customs tariff removing the anomalies pinpointed by the business and trade community.
He said that the biggest problem being faced by the customs authorities' is the application valuation rules to accurately work out duties and taxes on imported items. "Whenever we change the valuation procedure of a smuggling prone-item or items subjected to under-invoicing or under-valuation, the item is shifted to the smuggling regime. It is very unfortunate that the customs department tries to apply the accurate customs values through valuation rulings. At the same time, the item has been shifted to the smuggling regime of the ATTA", he added.
Recently, customs department had enhanced the customs value of stainless steel. As a result of this measure, the import of this item has been reduced and it is now being imported under ATTA and being smuggled back into Pakistan. The smuggling of this item is evident from the fact that stainless steel imports under ATT have doubled in July-December (2009-2010) against imports in the whole fiscal of 2008-2009.
He said that the only way to check smuggling of goods under ATTA is to make it mandatory for the Afghan importers to open letters of credit in Afghanistan. It is a global practice that the letters of credit is being opened in the country, which is importing the transit goods.
Munir Qureshi said that restoration of anti-smuggling check-posts and mobile squads have substantially raised the quantity of goods seized by the customs department. The FBR has seized goods having value of Rs 2076.25 million in July-December (2009-2010) against Rs 804.24 million in the same period previous fiscal, reflecting an increase of 158.16 percent.
The government wanted to stop transit of all such goods where there is no consumption or requirement in Afghanistan. To check huge volume of smuggling, the government has started negotiations with Afghanistan for the revision of the transit trade agreement. In this regard, the government has placed a number of viable suggestions before the Afghan government.
It has been proposed to bring rates of customs duty at similar level on smuggling prone items in both the countries. Both Pakistan and Afghanistan should apply similar valuation method on such goods in both countries and duty should be collected at Karachi on goods imported for Afghanistan. The duty collected could be transferred to Kabul. There is a need of placing quantitative restriction on goods to check their actual consumption in Afghanistan. On the basis of quantitative restrictions, specific quota should be allocated keeping in view actual consumption of the Afghan goods.
So far, many measures have been taken to check misuse of the ATTA. For example, only containerised FCL cargo under customs seal is allowed transit from the points of entry (Karachi) to points of exit. The random examination/inspection of goods at Karachi and examination of all consignments at Torkham and Chaman is being done. The effective monitoring of transit route and reconciliation of cross border data online as well as manually are among these measures. Due to revival of anti-smuggling check posts, goods worth Rs 1306 million have been seized, most of which relate to Afghan transit trade.
He said that the major financiers of Afghan imports under ATTA are Pakistanis. The modus operandi applied by the financiers is to import goods for smuggling back into Pakistan with of their Afghan business partners.
He said that it is impossible to check smuggling at the porous Pak-Afghan border. Due to limited anti-smuggling manpower and long Pak-Afghan border, it is very difficult to control the smuggling of goods imported under the ATTA. Most of the anti-smuggling staff has been deputed at highways and on main roads.
About the smuggling of POL products, he said that it is difficult to check smuggling of Iranian petroleum products, as no local company is ready to set up POL station near Pak-Iran border. This is due to the fact that it is not financially feasible for local companies to open such stations near Pak-Iran border. FBR Chief Sales Tax informed the committee that the tariff rationalisation particularly reduction in customs duty on the import of major smuggling prone items would substantially reduce smuggling.
Member Customs said that despite the fact that the dutiable import value in rupees has decreased by -10.8pc, the revenue target assigned for customs duty has been achieved due to the constant focus on the revenue collection efforts. The FBR has surpassed target of customs duty over and above 101.5 percent.
Under the anti-smuggling measures, the FBR has granted powers anti-smuggling operations to Civil Armed Forces within 20-km of the border and outside the major cities under consideration. The list of notified items under section 2(s) for the purpose of section 156(I) of Customs Act has increased. Moreover, penalty on pilferage of transit goods is proposed to be increased.