11 major sectors: value of smuggled goods stands at $9 billion during 2013-14: Haroon

Haroon Akhtar Khan Special Assistant to the Prime Minister on Revenue Tuesday said the value of smuggled goods of top 11 major smuggling-prone sectors stood at $9 billion during 2013-14. Addressing a seminar on 'impact of smuggling on Pakistan's economy' organized here; Haroon stated that a study has been conducted on the smuggling in the country.
According to the estimates, the value of the smuggled goods is US $9 billion of 11 items during the said period. This amount comes to 3.88 percent of the Gross Domestic Product (GDP). If duties and taxes were imposed on the said 11 major smuggling prone items, the amount of taxes has been worked out at $2.63billion for 2013-14. He added that the money 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.
The major smuggling prone items are tea, textiles, tiles, television sets/electronics, cigarettes, tyres, diesel, petroleum products, mobile phones, steel sheets and other items. He said that the impact of smuggling on Pakistan's economy is evident from the example that if smuggling of tea is ended, three manufacturing plants of tea can be established in the country. Similarly, if smuggling of the cell phone is eradicated, a new plant of mobile phones could be setup and 2000 jobs could be provided to young professionals of the country.
Earlier, Federal Minister for Information and Broadcasting Senator Pervez Rasheed 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 technology to resolve difficulties for differentiating smuggled goods. The locally manufactured goods and smuggled items can be distinguished with the help of specific identification methods. 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. It is a wrong perception that only customs department is entrusted with the anti-smuggling powers. The FBR had given anti-smuggling powers to the Pakistan Rangers, Coast Guards, Frontier Cops and Pakistan Maritime Agency. It has been observed that when strict commander of the agency has been appointed, there is a drastic reduction of 50 percent in smuggling for some time, he maintained. Haroon Akhtar said that the Prime Minister and Finance Minister are very much serious to eradicate the menace of smuggling in the country. 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 neighbouring countries, thus converting Pakistan into a "land bridge" between South Asia and Central Asia. It is playing an important role to check smuggling in the country.
The anti-smuggling performance of the FBR has been improving day by day. It is evident from the data that customs seized Rs 7.4 billion worth smuggling items in 2013-14 as compared to Rs 24.5 billion in 2014-15. The sudden increase in value of seized smuggled goods is due to confiscation of a big consignment of mobile phones. Haroon Akhtar said that the government is seriously thinking to establish Customs Border Force 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 have been conducted in the FBR on reforms, analysis and research etc. Now is the time of implementation. The FBR has made a 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 voluntarily ready to pay taxes.
He said that it is unfortunate whenever we arrest some major tax evader, the business community pressurize 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. In the presence of undeniable evidence, if someone is not ready to pay taxes, we use the power of arrest as a last option.
Rabia Asif, representative of Nielsen Pakistan presented a recently published report titled "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 Rs 24 Billion in duties and taxes to the national exchequer. The increase in illegal cigarettes has come at the expense of the duty paid products which have decreased from 70.5 billion sticks in 2010 to 62.7 billion in 2014. The tax compliant industry thus also lost Rs 4 billion in 2014 due to this menace. Ms Rabia pointed out that the smuggled cigarettes that do not carry the Government mandated health warning, are brought in from Afghanistan and are a cheaper substitute to the duty evaded products for consumer due to their easy and wide availability
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 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.
The seminar was also addressed by Myza Hammed MNA, Sarwat Tehira Customs Collector North Region, SBP representative Amir Aziz, Head of Mir Khalil Ur Rehman Memorial Society, Wasif Nagi and others.