The chairman Federal Board of Revenue (FBR), Shabbar Zaidi, has reiterated the difficulties in plugging all tax loopholes, including smuggling and mis-declarations which, he stated, are not possible without the connivance of customs officials. He added that once goods get clearance from any entry point - be it at Karachi port or be it at Torkhum border post - it is not possible to raid shops on suspicion of mis-declaration and added that "we are seriously working on this issue."
Imported goods that have not been properly declared are made possible through three main routes. First, products enter the country at ports that are manned by customs officials but who, as Zaidi pointed out, connive with the importers, in return for money and/or products, thereby allowing large parts of the consignment entry into the country without paying any duty.
Second, Pakistan has porous borders of thousands of miles with three neighbouring countries, Afghanistan, Iran and India, with by now well-established smuggling routes that, as Zaidi claimed, require complicity with law enforcement agencies to enter the country. Be that as it may, Zaidi should be aware of the dangers that surround those customs officials who are honest. An example is that of Deputy Collector Customs Quetta Dr Abdul Quddus Sheikh who died earlier this month after being severely beaten by smugglers. He was attacked at Gahi Khan Chowk when he was returning home after seizing smuggled goods during an operation in the Kolpur area of Quetta.
Additionally, the likelihood of manning the entire length and breadth of thousands of kilometres of our border presents a huge challenge which has implied that even if the existing well-established smuggling routes are plugged due to added vigilance by law enforcement agencies, this illegal activity is unlikely to stop altogether because profits are too high.
The Afghan Transit Trade Agreement expired in 2017 and the draft of a new treaty submitted by Pakistan to Afghanistan remains unapproved by the Afghan government. However, in response to concerns of smuggling into Pakistan of goods destined for Afghanistan (offloaded in Pakistan or goods going over the border only to return into Pakistan) did have a number of safeguards which were not easy to implement and included: tracking devices on trucks, banking guarantees and special bonded carrier licences for transit trucks, vehicular tracking systems, and container security deposits.
Third, goods enter the country as personal luggage through entry points at airports, sea ports and dry ports. Goods clearly more in number than could possibly be used by an individual/family need to be declared.
To conclude, smuggling cannot be curtailed by the FBR officials alone especially in border areas and law enforcement agencies' involvement is required. However, to ensure that the staff of these agencies are not lured by the smugglers it is critical for the government to give them: (i) a salary commensurate with the dangers as well as the prospect of money they may make if they become complicit; (ii) frequent changes in the officials manning the post; and last but not least (iii) a tax structure that does not make products produced by Pakistani manufacturers more expensive that make smuggling of goods across our borders economically viable.