ISLAMABAD, Nov 15: The World Trade Organization (WTO) agreement on customs valuation has failed to check the rampant fake invoicing and tax frauds causing harm to the local industries of the developing countries including Pakistan.

Officials told Dawn on Saturday that 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 practised by Pakistan’s private sector.

The agreement 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 officials added.

To check fake invoicing in Pakistan, the officials elaborated, the customs authorities introduced 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 officials, 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.

They further said as far as record keeping for PCA was concerned, the experience showed that there was no problem of record maintenance in the case of large enterprises, multinationals and local industries. However, in the case of small and medium enterprises, there was a general reluctance to this requirement.

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

It, however, might be pointed out the PCA was not part of the WTO agreement but an indigenously developed procedure, which has been further streamlined to make it more practical, the sources said.

“There is need for comprehensive compilation of reference value database. Such a value reference guide can be very useful tool for the assessing officers and it will also help in maintaining uniformity of assessment at all customs stations.”

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.

Under the provisions of WTO agreement on valuation developing countries could apply to WTO for maintaining for certain period minimum values for certain imported items. This is legal recourse to check under invoicing and would protect local industry.

Pakistan has applied to WTO for this facility for several times, however, the request has not been accepted by WTO so far, the officials added.