MONEM FAROOQI
The Commerce Ministry has delayed the establishment of Electronic Data Interchange System (EDIS), especially used for eradicating under-invoicing and mis-declaration for imports, Commerce Ministry officials confirmed.
However, the officials could not give any certain timeframe for implementation of the system but said that Memorandum of Understanding (MoU) on EDIS would be signed any time next year with the Chinese counterpart.
Commerce Ministry spokesman Mohammad Ashraf was uncertain in mentioning any timeframe, however, told Pakistan Today that MoU would be signed soon. He said that all the modalities, agreed upon by both the countries, were finalized. ‘The EDIS would be operational by early 2017 as Federal Board of Revenue (FBR) and China’s Customs are agreed on modalities’, he added.
Pakistan and China are establishing electronic data exchange under Pak-China Free Trade Agreement (FTA) on transaction date of imports and exports to eradicate under-invoicing and mis-declaration. The sources said that there was a great discrepancy with the data figures with Pakistan and China. Both sides had agreed that a study may be conducted to find out the reasons for the discrepancy.
Pakistan’s exports to China have taken a dip to $2.1 billion from 2.34 billion. Pakistan has been facing a revenue loss of Rs 22 billion per annum following an imbalance in the first phase of the FTA with China signed in 2006.
Both countries are negotiating second phase of the FTA but no agreement has been reached so far as China backed out from its earlier commitment of concessions and moreover the major component i.e. EDIS was not implemented from Pakistan’s side which ultimately caused loss of billions of rupees to Pakistan’s national exchequer.
The sources said that EDIS was vital as it would enable Pakistan Customs to receive exports’ information, certificate of origin and other relevant data in real time electronically, averting any chances of mis-declaration, under-invoicing and forgery in certificates of origin. The mechanism would also help the Customs in reducing clearing up time and would be a step towards achieving end-to-end paperless cargo clearance.
The sources also said that both the sides had also agreed to establish the origin certificate verification and feedback sub-system in respect of information exchange under EDIS as Pakistan had expressed concerns over the verification feedback timeframe. Both countries are in agreement that they will exchange units of measurement on the basis of HS Codes.
Under-invoicing is a phenomenon which can be defined as provision of an invoice that states less price than the paid one. This may reduce the import duty on the product that will be collected by an ad valorem tariff. The favourite items which have high prices in the country and having high import duty and taxes are more prone to under-invoicing and considered major reason for revenue loss.
There are thousands of cases in which the importers declare less-value of the product and do under-invoicing which decreases import duty by 400-500 per cent.
The estimates indicate that the quantum of current under-invoicing by importers of Pakistan ranges from $5 billion to $7 billion. The data shows that total loss to the national exchequer stood around Rs 175 billion in 2015 only in Pak-China trade. The importers mainly focus on reducing Customs Duty (10pc), Sales Tax (16pc) and WHT (5pc).