Home »Business and Economy » Pakistan » ‘Trade misinvoicing deprives exchequer 11 percent of total revenue’
Trade misinvoicing is not only a major source of capital flight and reverse capital flight, but it also deprives the national exchequer of an amount equal to 11 percent of the total revenue generated through customs duties and export tax, said tax experts. It may be noted that Pakistan's trade sector is prone to a high level of misreporting. At the same time, the government incurs large losses in terms of potential customs duties and withholding tax on exports. Consequently, trade policies devised in the presence of misinvoicing are bound to be less potent. To make trade policies effective and to reflect the true picture, it is imperative that trade misinvoicing be reduced.

To this end, tax experts have urged the policymakers to take steps to discourage export over-invoicing by devising a policy under which all exporters are awarded concession credit without any discrimination. Pakistani customs should require the submission of a verified invoice from the customs of the partner country. High tariffs and NTBs encourage misreporting. Therefore, a policy of meaningful trade liberalization needs to be pursued.

Export rebates should be granted only to achieve export performance targets in nontraditional products. They should not be given under threat or pressure from the industry.

The government should also introduce proper scrutiny of products subject to the reimbursement of general sales tax and federal excise duty with an updated input- output coefficients system.

A tax expert Muhammad Shahid Baig said the government should also take punitive action against leading misinvoicers and scrutinize top exports and imports such as linen and undergarments. Scrutinize and enforce strict monitoring for all goods exported to or imported from countries identified as major sources of misinvoicing.

Bilal Ahmed, another tax expert, said fixed values such as standard values, minimum values and tariff values have been used by different customs administrations for curbing under-valuation and for simplifying the assessment process when the market price of certain goods fluctuates widely. Importance of a sound legal framework to tackle under-valuation can hardly be emphasized. The laws of a country must provide for declaration of the value as well as retention of documents for a reasonable period without which it would be difficult to investigate under valuation cases and sustain penal actions in courts of law.

Some others believe that establishment of a valuation database and customs modernization is inconceivable without adequate investment in information technology. Enormous amount of data requires be analyzing and comparing with the declared values, which can only be done by employing adequate computing resources. It is imperative that a customs administration wanting to tackle large value mis-declaration be adequately equipped with necessary computer hardware and software.

Valuation Frauds involve transactions across at least two countries and sometimes involve intermediate countries through which either the goods transit or in which invoices are raised. Tackling valuation frauds, therefore, requires co-operation between the customs and trade officials of importing, exporting and intermediate countries. Such can be enlisted through bilateral agreements, though a multi arrangement is obviously a far more desirable solution.

Copyright Business Recorder, 2019


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