The World Bank review mission has observed that the Post-Clearance Audit (PCA) authorities of the Federal Board of Revenue (FBR) are merely relying on tax scams unearthed by FBR Directorate General of Intelligence and Investigation for checking evasion of duties and taxes by importers.
Sources told Business Recorder here on Saturday that the WB review mission has submitted a report to the FBR on the working of the Directorate General of Post-Clearance Audit (PCA). According to the WB report, no information was readily available showing the amount of additional revenue actually realised as a result of investigations conducted by the PCA, using imports data. "The full extent of identified additional customs revenue uncovered by customs post-clearance activities is achieved by also taking into account the results of investigative activities currently undertaken by the DG Intelligence and Investigations", the WB commented.
It said: "There is a significant difference between total additional revenue detected and those that are actually collected. No further analysis is available at this stage of the composition and stage of this additional revenue debt, as FBR Directorate General of Intelligence and Investigation is not responsible for debt recovery, and hence does not track identified debt through to case closure."
The WB review mission said that the Directorate General of PCA was initially established at Karachi and became operational in December 2008 and a similar Directorate became operational in Lahore in June 2009. In February 2010, national responsibility for the PCA Directorate was centralised in Islamabad. The national staff complement of the PCA Directorate is seventy-eight (78) persons. The Karachi PCA Directorate has 39 staff, of which 21 are available for audit-related work. This comprises six senior auditors, three principal appraisers, seven appraisers, three examiners, and two managerial staff. Each audit team comprises three persons plus a deputy collector as the team leader.
The WB report further said that the bulk of PCA work to date has consisted of transaction verification and sector-based desk audits. Five "enterprise audits" have been undertaken since commencement of activities, with three audits in Karachi and two in Lahore. Four of these "enterprise audits" were Duty-Free Shops, and the other was associated with refunds.
Post-clearance audit training has been provided in Japan by Japan Customs Administration to 20 Pakistan customs officials. This was funded through Japan International Cooperation Agency (JICA). A further 20 officers are scheduled for overseas training in PCA, through JICA, in February/March 2011.
About the key issues in the working on DG PCA, the World Bank said that the PCA Directorate does not have a presence in either of the two western regions of the country. The PCA is an integral part of any modern customs administration. It operates as the fiscal safety net for the effective implementation of risk management based facilitation initiatives and is critical to the integrity of the overall cargo clearance environment. It cannot realistically exist in isolation from frontline operations and should be expanded to all regions as soon as possible.
The continuing priority given to developing a post-clearance audit capacity is appropriate. The Customs understanding of the full post-clearance audit concept and staff ability to perform such PCA functions effectively is indispensable. It is an essential element to effectively materialise the organisation's transition from intensive physical controls to more selective, risk-based interventions. However, PCA is not yet seen as an integral component of customs risk management based facilitation initiatives for clearance of international freight. Retraining in PCA concepts is therefore required to adequately impart that knowledge.
The WB has recommended to the FBR to expand the PCA Directorate to the two western regions as soon as possible. Secondly, the FBR should retrain PCA staff to adequately conduct this type of audit, and to better understand the critical role of PCA in supporting effective risk management initiatives. The FBR should further expedite expansion of intelligence-led targeted "enterprise" audits of large traders who account for the bulk of customs revenues, and incorporate such audits into an annual audit plan approved by the FBR Board.
The FBR should consider integrating customs post-clearance audits of major traders, with LTU audits to better facilitate comprehensive "revenue at risk" audits of a trader's entire international trading history, WB review mission added.