ISLAMABAD, March 10: Pakistan’s customs has yet to develop an effective deterrence for checking the rampant fake invoicing and tax frauds causing harm to local industries following the implementation of the WTO agreement on Customs Valuation.

Pakistan implemented the new GATT Code of valuation on January 1, 2000, which deals with the bona fide trade, but ignored the reality of rampant fake invoicing that is being practiced by Pakistan’s private sector.

Well-placed sources in the Central Board of Revenue (CBR) told Dawn on Thursday that following the implementation of the new code of valuation, the customs officials have so far failed to conduct post importation audits, or to develop an effective mechanism against trade defence measures or to prepare the reference value guide and fixation of minimum value during the last five years.

Similarly, the CBR also failed in providing adequate computerization of the functions of the customs valuation department along with post clearance audit (PCA) during the period under review.

It was observed that the occasional discrepancy in valuation of identical goods cleared from north and south cities of Pakistan was another area of concern for traders. According to them, there have been instances where identical goods cleared from Karachi were assessed at a value different than at Lahore due to lack of networking among the collectorates.

Interestingly, the CBR has appointed a full-fledged director general valuation in November 2004 with a huge task to prepare a local mechanism for countering the menace of group under-invoicing, speedy clearance of goods and uniformity in value for duty purpose at all collectorates.

The WTO agreement on customs valuation is said to have a weak mechanism to reject the understated value through manipulated invoices at the clearance stage. Similarly, the mechanism has been described as insufficient in checking cases where there was group under-invoicing. In such situations, there was no evidence of higher values available to question the declared value, the sources added.

According to the sources, to check fake invoicing in Pakistan, the CBR would have to introduce effectively the concept of post clearance audit (PCA) allowed for speedier clearance of goods with the audit being performed subsequently at the importer’s premises.

The main purpose of the audit is to ensure that there was no indirect payment or any unaccounted payments made to the seller on account of the imported goods. It would also ensure that the importer was not providing any free services or raw materials to the foreign seller for the manufacturing of goods subsequently bought from the seller.

They, however, said the successful implementation of PCA in Pakistan required effective enforcement and provision of trade facilitating measures and simplified procedures in cargo processing and valuation and record keeping.

“This is not a positive signal as the whole system may collapse if the record-keeping is not ensured and the resistance continues in the foreseeable future,” they said.

According to the sources, the government should also set up separate units for industrial and commercial imports at Karachi for undertaking PCA.