- How a department helps rob the state
The current government, in its resolve to steer the nation towards economic viability and development on the basis of domestic revenue resources and debt servicing, has set a target of Rs 5500 billion for the Federal Board of Revenue in the current financial year. It is a herculean task for the FBR to achieve due to the inaction of the government against the rampant corruption, and incompetency of the bureaucracy within FBR on one hand, and on the other the government’s failure to listen to the genuine demands of the FBR officers. An attempt is made to find the reasons requiring immediate rectification or intervention in the Customs department due to which FBR is likely to miss its revenue target for the year.
Under invoicing: It can be defined as the act or practice of stating the price of a good on an invoice as being less than the price actually paid. Under-invoicing occurs if the importer and/or exporter wish to reduce a tariff or if a buyer and/or seller wish to reduce their apparent profits so as to pay less in taxes. One of the reasons of Pakistan`s negative trade balance is the under-invoicing of exports under which the exporter, in collusion with the officials of the customs department, declares a lower value of exports, enabling him or her to park the surplus undeclared profit offshore. This transaction is rarely unearthed due to the negligence of the commercial counsellors of the diplomatic corps. Thus the nexus between the exporter and the customs officials, with the negligence of the diplomatic corps, deprive the state of Pakistan of the much-needed foreign exchange realised against exports. The revenue target during the current financial year would remain a dream if this is ignored.
Under valuation: The appraisement collectorates in connivance with the importers tend to undervalue the goods imported by commercial importers for collecting duties and taxes lower than due on the goods imported. The same goods are sold in the market at very high rates without value addition. Needless to mention that the appraiser would not be rendering these privileged services to the importer without any consideration. The revenue target would remain a dream if this is ignored.
the assigned budgetary target can be surpassed for the current financial year if the government repair the dents and damages to the revenue inflicted by the officials of the Federal Board of Revenue in addition to real accountability of the corrupt and the inefficient
Under declaration: The appraisement collectorate under the WeBOC and One Customs system are found involved in the under-declaration of goods imported by an industrial undertaking, enabling them to avoid taxes due at the import stage and suppress production. This nexus between the importer industrial undertaking and the appraisement is doing double jeopardy to taxation. The revenue target would remain a dream if this is ignored.
Bonded Warehouses: A bonded warehouse is a building or other secured area in which imported dutiable merchandise may be stored or undergo manufacturing operations without payment of duty for up to five years from the date of importation. The officials of the Customs Department, in connivance with the manufacturers, release huge quantities of imported raw material stored in bonded warehouses. This is shown as either wastage or as kept in the stocks in trade in the balance sheet of the audited accounts of the manufacturer. The revenue target would remain a dream if this is ignored.
Misuse of Afghan Transit Trade: Pakistan has given transit facility to the imports and exports of landlocked Afghanistan. The goods in transit to Afghanistan are routed through Pakistan without payment of duties and taxes. The goods in transit under the Afghan transit trade agreement, in collusion with the officials of the Customs Department, are released to the markets in Pakistan without payment of duties and taxes. The shops in Karachi, Lahore, Quetta and Peshawar are full of goods imported under the Afghan transit agreement depriving the country of the revenue due in addition to helping the informal economy flourish. The revenue target would remain a dream if this is ignored.
Misuse of Green Channel: Green channel is a route followed by passengers at an airport who have no dutiable goods to declare. This facility is being misused by persons in connivance with the officials of the Customs Department, depriving the state of the duties and taxes due on the imports. According to Customs Intelligence reports, the goods imported under this facility were different than their declaration in the import GDs. The revenue target would remain a dream if this is ignored.
Import of vehicles: The government has permitted import of vehicles under personal baggage, gift scheme and transfer of residence scheme for Pakistani nationals living abroad, including dual nationals. The car dealers in connivance with the officials of the Customs Department misuse this facility by importing cars through the passports of overseas labourers who hardly earn enough to make their both ends meet. The passport for the purpose of import is obtained for Rs 15,000 and the amount for the purchase of car is remitted to Dubai through Hundi. The revenue target would remain a dream if this is ignored.
Auctions: It is defined as a public sale in which goods or property are sold to the highest bidder. The Customs Department is mandated to take cognisance of the movement of non-duty paid goods and confiscate them. The bidders in the auction of such goods is a ring which works in connivance with the officials of the Customs Department, purchasing goods confiscated at nominal prices and ensuring that no genuine buyer appear in the bidding process. The revenue target would remain a dream if this is ignored.
In a nutshell, the assigned budgetary target can be surpassed for the current financial year if the government repair the dents and damages to the revenue inflicted by the officials of the Federal Board of Revenue in addition to real accountability of the corrupt and the inefficient. The proposed rectifications would not only improve the balance of payment and balance of trade of Pakistan but would also ensure development through domestic revenue resources.
