The Auditor General of Pakistan (AGP) has rejected the claim of the Federal Board of Revenue (FBR) that the import figures of the United Nations Statistics Division for Pakistan (UNSDP) are not authentic, as the AGP has detected a massive shortfall in duties and taxes on imports using the UNSDP data.
Sources told Business Recorder here on Thursday that the AGP in its annual report for 2013-14 revealed a very interesting investigation conducted by the AGP to find out the actual reasons behind the massive evasion of duties and taxes at the import stage. The FBR has termed figures of the United Nations Statistics Division for Pakistan (UNSDP) as unauthentic whereas AGP declared that the figures of the UNSDP were quite reliable as the same were close to the figures of Pakistan Bureau of Statistics. The AGP concluded that massive shortfall in duties and taxes on imports are due to undervaluation, underinvoicing, misclassification, misdeclaration, inadmissible exemptions and concessions on imported goods.
According to section 18 of the Customs Act 1969, customs duty shall be levied at such rates as prescribed in the First Schedule or under any other law in force regarding goods imported into Pakistan, audit report said.
United Nations Statistics Division in its publications cited the figures of Pakistan's total imports valuing US $43,578 million and as per Pakistan Bureau of Statistics, the imports were of US $40,414 million, during the year 2011. Keeping in view the reported figures, Audit worked out that the total imports valuing US $43,578 million comprising imports of US $28,568 million were dutiable and imports of US $15,010 million were duty free which included POL products (excluding HSD), silk yarn, jute, raw cotton, fertilisers, insecticides, iron & steel scrap, wrought & worked aluminium and wood & cork. The rates of customs duty in this year were ranging from 5 to 50 percent on consumer goods and from 60 percent to 150 percent on luxury items. When a mean of rate of customs duty at the rate of 13.94 per cent was applied, the collection of customs duty and related taxes would be Rs 1,051,818 million and when compared with actual collection of FBR of Rs 579,617 million whereas exemption of duty and taxes of Rs 166,772 million granted for the same year, there was a huge shortfall of duty, and taxes of Rs 305,429 million. Further, if the revenue realised from sale proceeds of confiscated goods/vehicles and recovery of arrears gets excluded from actual collection of customs duty of Rs 185,000 million, the level of evasion would be much more, it said.
When the calculations were made on the basis of Pakistan Bureau of Statistic's figures, the level of shortfall of duty and taxes still come to Rs 183,223 million. Apparently it seems there is evasion, as the succeeding audit objections and previous audit reports significantly substantiate the viewpoint of Audit. However, the matter requires further investigation and there is a need to plug the loopholes in the system to curb evasion of duty and taxes.
The issue was raised in October, 2013 and discussed in a meeting on November 20, 2013 at FBR Islamabad. The department replied that the figures gleaned from United Nations Statistics Division for Pakistan were unauthentic. The average/mean of fifteen per cent rate of duty against all imports was not justified as out of 6,808 total tariff lines, 2,323 tariff lines were subject to five per cent rate of duty, 871 lines to ten per cent and 423 tariff lines were subject to customs duty at the rate of zero per cent. Further, the maximum tariff during 2011 was 35 percent except few commodities which were subject to higher rates of more than sixty per cent. In the meeting, the department provided two statements showing the effective rate of customs duty for the FY 2011-12. When perused, the rates depicted on those two statements differed from each other as in one statement the effective rate of customs duty was calculated at the rate of 10.89 per cent while in the other statement the same was shown as 14.1 percent for FY 2011-12. These two different rates could not be got verified during meeting. Audit was of the view that the figures of United Nations Statistics Division were quite reliable as the same were close to the figures of Pakistan Bureau of Statistics.
The issue had roots in under-valuation, under-invoicing, misclassification, misdeclaration, inadmissible exemptions and concessions on imported goods. Audit requires FBR to devise a mechanism and adopt measures to curb these ways of evasion of duty to ensure actual collection of revenue which would contribute significantly in improving tax to GDP ratio, it added.
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