ISLAMABAD, Jan 19: The Supreme Court was informed on Wednesday that the country had suffered a whopping loss of Rs19 billion to Rs37 billion over the past four years because of pilferage of containers which entered the Pakistani territory in the name of Afghan Transit Trade (ATT). A comprehensive report submitted to the court by Federal Tax Ombudsman Dr Shoaib Suddle termed the scam just the tip of the iceberg.

A Supreme Court bench, headed by Chief Justice Iftikhar Mohammad Chaudhry, had taken notice of the import of contraband items under the garb of food supplies meant for the International Security Assistance Force (Isaf) in Afghanistan.

The chief justice observed that the scandal involving the customs department had caused a huge loss of about Rs37 billion. He said the court had gone through the comprehensive report on smuggling of foreign goods in the name of ATT.

The report deplored that the successive governments in general and the Federal Board of Revenue chairmen in particular lacked the will to muster enough political backing for tax compliance, especially in cases involving “big fish” which let tax evaders to buy their way out.

If the tax-to-GDP ratio did not increase significantly, the country could not be governed effectively, essential public services could not be delivered and high inflation was inevitable, the report warned. It suggested that the tax administration reform should be the single most important economic task of the government.

It said that consumption of a large number of items imported under the garb of ATT was negligible and limited in Afghanistan. These included cigarettes, fabrics, black tea, diapers, electronic items, tyres, tubes, crockery, ball-bearings, telephone sets and LCD TVs.

“Cigarettes and auto parts are on the negative list of Afghan transit through Pakistan, but these are imported into Afghanistan either through mis-declaration or through Iran or other neighbouring counties and smuggled back to Pakistan,” the FTO report said, adding that truckloads of smuggled goods kept entering Pakistan both through regular and irregular border crossings.

“The fact that per capita import of Afghanistan is 72 per cent higher than that of Pakistan despite the fact that the former’s per capita income level is almost one-third of the latter’s clearly substantiates that Afghanistan imports goods far in excess of its genuine requirements,” the report said.

It called for using RFID (radio frequency identification) tags in containers and GPS-(global position system) enabled capability to monitor content tampering of cargo. No carrier should be allowed to transport transit cargo unless it has licence of a bonded carrier with valid bank guarantee deposited with the customs to cover the risk of pilferage.

The National Logistic Cell started ISAF transit in May 2002 but did not ensure scanning and tracking mechanisms on transport being authorised by it to private transporters for transit cargo. “Indeed, the existing precautionary measures are too porous to be effective against organised fraud and manipulation.”

The report highlighted the presence of an environment where dubious customs officials, clearing agents and businessmen colluded with each other. “In a world dominated by white-collar crime, the syndicates use expertise, knowledge, financial resources and contacts to hatch plots to loot the biggest bank of the country -- the state treasury. Once partnerships, rights, obligations, roles and responsibilities are decided, it is time for unleashing a new scam,” the report said.

It said that the first step towards controlling scams in the customs must be to strike at the roots and dismantle the ‘group system’ of customs -- a breeding ground where all ‘schemes’ were hatched. The way forward is automation where machines make decisions instead of ‘groups’.

The report said it was surprising that senior officers both in the customs administration and the FBR knew prior to May 2010 (ISAF container scam) that a large number of containers in transit to Afghanistan were actually being pilfered within Pakistan, but they remained complacent.

It alleged that the FBR had become the “most loosely-monitored organisation” in the country. “While the lifestyles of FBR employees are envied, the citizens and businesses loathe pervasive corruption, non-transparency, too much discretion and lack of accountability of tax collectors.”

The report said that a culture of corruption, where officials considered illicit gratification their inherent right and forced law-abiding people to adopt tactics of the unscrupulous in order to survive, had become the norm of the land. The poison of ‘speed money’ has ensured that government departments have a vested interest in deliberately being inefficient, and in creating and enforcing non-transparent, cumbersome, time-consuming and complex laws and processes.

The court directed the FBR chairman to assist it in effecting the service of notice along with copies of the report upon bureau’s former chairpersons holding the charge from Jan 1, 2007, to Dec 24, 2010, all members (customs), collectors of Karachi Port and Port Qasim, collectors in Quetta and Peshawar, secretaries of commerce and finance, director general of customs (intelligence and investigation) and the director general of NLC holding the charge during the period mentioned above.

The court order also required the FBR chairman to identify any other officer, prima facie, involved in the scam, to be summoned later. A list of these officers will be submitted by the FBR’s counsel by Thursday after which notices would be issued to them through the bureau.

“However, notice upon the NLC director general shall be served by the court office itself. The officers/officials to whom notices are issued are directed to file their comments, particularly in respect of the period during which they were holding the charge of the above posts,” the order said.