KARACHI, Jan 24: In place of invoice based valuation of imported goods the customs authorities in Pakistan are continuing with notional valuation method to determine the rate and amount of duty liable on imports.

The notional valuation method gives authorities leverage to assess the value of goods on criteria, which is not very transparent. To move towards full implementation of transactional values system the government may start with goods with lower customs duties.

Here the revenue impact would be nominal but it will reduce the work load on Customs by around 50 per cent. It has been five years but the CBR has yet to shift to the agreed criterion of evaluation.

The country accepted to adhere to the new code of valuation in 1999. Accordingly the CBR should have adopted the GATT Code of Valuation and should have started assessing the value of imported goods under Article XII of the code on transactional values.

There is marked difference in the valuation methods of two systems as the Brussels Definition of Valuation (BDV), which should have been scrapped by the CBR on December 31, 1990, is based on notional valuation system and allows the customs authorities to assess the value of imported goods for imposing customs duty and are not bound to evaluate duties on declared value.

Contrary to this the GATT Code of Valuation which is invoice-based bound the customs officials to impose duties on declared value. This method reduces the discretionary powers of the authorities and almost eliminates the possibility of corruption and arms twisting of an importer.

Unfortunately no organized attempt has been made so far to implement the transactional valuation system. Experts attribute reluctance on the part of custom officials to the fact that it would curtail powers of some 2000 custom officials who in many instances exercise them to flees importers. An estimated value of misappropriation is said to be in the range of Rs70 million annually.

Some importers and analysts suggested that the government may adopt a gradual approach to ward off the resistance. It could start assessing all goods, which have lower custom duties in the range of 5 to 10 per cent on transactional values and not on notional values.

By doing so the government would not lose much revenue and will facilitate trade which should be allowed to grow and flourish for creating robust economic activity in the country.

The data compiled by Pakistan Revenue Automation Ltd (PRAL) for customs appraisement, Karachi supports the views of independent trade analysts. During first half (July to Dec 2004) of current fiscal total import value stood at Rs235,068.87 million and total duties realized stood at Rs23,204.63 million.

The declared value of these goods stood at Rs227,062.36 million against this assessed value at Rs235,068.87 million giving an impact of Rs8,006.50 million only.

When working on goods having lower customs duties of 5 per cent with zero sales tax is worked out for the period under review it shows that the transactional value of goods declared stood at Rs27,105.80 million whereas assessed value by the customs was Rs27,603.68 million showing a difference of Rs497.87 million or 1.83 per cent enhancement.

In term of revenue impact a duty of Rs24.89 million which is 0.1072 per cent of the total duty realized i.e. Rs23,204.63 million. Similarly, goods imported with 10 per cent customs duties and zero sales tax during this period has revenue impact of Rs52.11 million on account of enhanced value.

The total transactional value of these goods stood at Rs25,903.23 million and assessed value at Rs26,382.11 million showing a difference of Rs521.12 million or 0.2245 per cent of the total duty realized.

Revenue collected on goods with customs duty at 5 per cent and sales tax at 15 per cent the duty collected on account of enhanced value stood at Rs43.84 million which is 0.1889 per cent of total duty realized during this period.

The transactional value of these goods was Rs49,584.51 million and assessed value by customs authorities was Rs50,461.32 million showing a difference of Rs876.81 million only or 1.76 per cent enhancement over the invoice value of these goods.

Furthermore, the CBR collected only Rs69.83 million in duty enhanced value of Rs698.30 million or 0.30 per cent of total duty realized during this period (July-Dec) on goods with customs duty at 10 per cent and sales tax at 15 per cent.

Total transactional value of these goods was Rs38,258.04 million and assessed value by customs stood at Rs38,956.34 million. Total revenue collected on all the four categories stood at Rs190.67 million which is 0.82 per cent of total revenue collected as duty during this period.

Total number of documents filed under these categories were 56,130 as against total number of documents filed stood at 116,594 for home consumption, ex-bond and special type of goods declared.

It would, therefore, be appropriate if the transactional value could be imposed on at least these four categories and their declaration should allowed without processing by the customs officials which will directly reduced the work load of the customs by around 48.14 per cent as per PRAL's own estimates.

It has been also suggested that all government imports, autonomous bodies imports, multinational imports, industrial imports, import by commercial importers from multinational exporters should be kept under post-clearance audit system (PCA) and only commercial imports from third party exporters be kept under vigilant checking.