Rs900 bn smuggling-prone 11 items cause Rs300 bn

MKRMS seminar on ‘Impact ofSmuggling on Pakistan’s Economy’

loss to national kitty

PM’s adviser says money earned through smuggling was being used
for terrorist financing in Pakistan; Pervaiz says smuggling can be curbed by slashing down higher tariff and tax rates; illegal trade of ephedrine stood at $1.5 bn, human trafficking $110m, arms trafficking $100m, kidnapping for ransom $10m per annum

ISLAMABAD: Total value of smuggling prone 11 items stands at $9 billion (about Rs900b), equivalent to 3.88 percent of Gross Domestic Product (GDP) and causing losses to national exchequer in shape of duty and tax evasion to the tune of $2.63 billion (about Rs300b) per annum, Adviser to PM on Revenues Haroon Akhtar Khan disclosed on Tuesday.

He presented these figures on the basis of latest study conducted by FBR on exact volume of smuggling during 2013-14 in a seminar titled ‘Impact of smuggling on Pakistan’s economy’ organised by Mir Khalil Ur Rehman Memorial Society (MKRMS) here at local hotel on Tuesday.

The money, he said, earned through smuggling was being used for terrorist financing in Pakistan so it was among top priority of the government to curb menace of smuggling.

Earlier, Federal Minister for Information and Broadcasting Senator Pervez Rashid said that the smuggling could be curbed through reducing incentives by slashing down higher tariff and tax rates. By reducing higher tariff, he said, the base could be expanded in order to avoid revenue shortfalls.

The minister shared some interesting episode of his personal experiences for throwing light on the causes of rampant smuggling in the country and said that the use of technology could help in curbing smuggling.

He proposed to use bar codes on products in order to resolve difficulties for differentiating smuggled goods. The tax authorities can make preference list of products for increasing usage of technology in order to discourage smuggling, he added. He said that the chip could be used into vehicles to detect non-customs paid vehicles.

Haroon Akhtar Khan said that the major smuggling prone items included tea, textiles, tiles, television sets/electronics, cigarettes, tyres, diesel, petroleum products, mobile phones, steel sheets and other items.

The impact of smuggling on Pakistan’s economy, he said, was quite evident from the example that if smuggling of tea abolished, three manufacturing plants of tea could be established in the country. Similarly, if smuggling of the cell phone is eradicated, a new plant of mobile phones could be set up with 2000 jobs opportunities.

It is a wrong perception that only customs department is entrusted with the anti-smuggling powers, he said and added that the FBR had given anti-smuggling powers to the Pakistan Rangers, Coast Guards, Frontier Cops and Pakistan Maritime Agency. It was observed that when strict commander of the agency was appointed, a drastic reduction of 50 percent in smuggling was witnessed for some time, he maintained.

He said that the government had given free hand to tax machinery as the FBR conducted raids and apprehended tax dodgers but they did not face pressure from any side. He admitted that the FBR was not doing enough to curb smuggling. The smuggling caused chain losses to formal economy.

Referring to the Afghan Transit Trade, he stated that smuggling under the ATTA has been considerably reduced due to the efforts of the Pakistani side.

The Establishment of Directorate General of Transit Trade serves to facilitate bilateral trade between Pakistan and its neighboring countries.

The anti-smuggling performance of the FBR has been improving as the data shows that customs have seized Rs7.4 billion worth smuggling items in 2013-14 as compared to Rs24.5 billion in 2014-15. The sudden increase in value of seized smuggled goods is due to confiscation of a big consignment of mobile phones.

The government, he said, was seriously considering establishing Customs Border Force (BSF) to effectively control smuggling at borders. The formal approval of Customs Border Force has yet to be taken by the government, but we want to raise the force as a key step to check smuggling.

About the functioning of the FBR, he said that a number of studies had been conducted in the FBR on reforms, analysis and research etc. Now it is time for implementation.

The FBR has made list of top ten priorities and actions and controlling of smuggling is the top on the list. The problem of under-invoicing is also directly related to the smuggling. We have to do a lot more to check smuggling, but we need to change the mindset of the taxpayers, who are not ready to voluntarily ready to pay taxes.

He said that it was unfortunate whenever we arrested someone big tax evader, the business community pressurised the FBR. The FBR had arrested a computer vendor and chambers of Islamabad tried to pressure us. “We do not want to harm businesses. But if we have irrefutable evidence and individual is not ready to pay taxes, the FBR has to arrest the tax evader as a deterrent for others,” he added.

However, former FBR’s member customs Ramzan Bhatti said that the estimated value of total smuggling stood at $15 to $20 billion on which the duty evasion would be standing at $4 billion per annum. Referring to FBR’s official study, he said that the value of 11 major smuggled items stood at $9 billion per annum.

The SDPI’s Executive Director Dr Abdul Qayyum Sulheri said that the illegal trade of ephedrine stood at $1.5 billion, human trafficking $110 million, arms trafficking $100 million and reported kidnapping for ransom $10 million per annum. Director Customs Intelligence Mohammad Saleem said that the volume of illicit trade around the globe stood at $1.5 trillion. Efforts are underway to reduce smuggling in Pakistan, he said and added that total strength of anti-smuggling outfit of Customs Intelligence was standing at only 460 people in all over the country.

Ms Rabia Asif, representative of Nielsen Pakistan, presented search on the challenge of Illicit trade in cigarettes.” According to the report 19.5 billion illegal cigarettes are sold in Pakistan per annum which causes a loss of more than Rs24 billion in duties and taxes to the national exchequer.

The seminar was addressed by Hanif Khalid and Wasif Nagi of Jang Group, MNA Myza Hammed, Customs Collector North Region Sarwat Tehira, SBP representative Amir Aziz and others.