Smuggling causes a loss of approximately Rs5 billion per annum to national exchequer despite presence of the customs intelligence, the customs collectorates, the police, the Frontier Constabulary, the Frontier Corps of Balochistan and the NWFP, the Pakistan Coast Guards, Punjab and Sindh Rangers and the Karakoram force.
The seizure of smuggled goods by the customs has declined from Rs4 billion in 1998-99 to Rs1.19 billion in 2001-02. Interestingly, the value of seizures made by the customs department at main highways are available but there is no record of such goods relating to other agencies at borders and other areas. Efforts at both levels, provincial and federal, proved futile in curbing this menace.
Despite the government campaign against Bara markets, the Shah Alam Market in Lahore, and the Bara market of Rawalpindi are thriving, thus proving the government failure in arresting the growing problem. The flow of smuggled goods into the NWFP or Balochistan markets is due to the porous Western borders, but the flux into Lahore and Pindi markets indicates of other channels, as well. Will the committees and seminars help in combating such a complex and monstrous problem? Certainly not. This kind of problem needs a political will, well organized and disciplined agencies and well-equipped forces.
The government has recently constituted another committee on at least 18 specific items of smuggling, causing a net loss of Rs262 million, annually. Besides, the transit mafia in Afghanistan and the tribal areas of Pakistan too, flood local markets with illegal goods. The government has prohibited the import of 24 items under the Afghan Transit Trade (ATT), while there are another 32 items prone to smuggling which are yet to be banned. These re-enter Pakistan through the porous borders between Pakistan and Afghanistan.
The ban on 17 items under the ATT in 1996 proved successful as the local production of refrigerators soared to 2,50,000 units in 2001-02 from 1,68,000 in 1996 and local television production increased to 4,50,000 from 72, 573 sets.
The ATT growth declined by 50 per cent to Rs4.113 billion in 1995-96 against Rs8.138 billion in 1994-95. The value of the 17 items prohibited was Rs3.443 billion. Of these around Rs528.89 million worth airconditioners were imported under the ATT, and Rs1.371 billion worth television sets and parts. The well organized bazaars of smuggled goods available to people at cheaper prices are Landi Kotal, Khyber Agency (the NWFP); Karkhano market, Hayatabad Peshawar; Bara market, Raja Bazzar, Rawalpindi; Shah Alam market, Lahore; Yaru, 30km off Quetta Chamman Road, Balochistan and Ashiana market, Clifton, Karachi, which are yet to be brought under tax net. Who is responsible for this failure on their part. Would the military government take any concrete action against those responsible for running these markets? One apparent action the government has taken for reducing the flow of smuggling by reducing the customs duty on the import of raw materials in the budget 2002-03. This step, it is hoped, would make smuggling unattractive.
The analyst said that the enforcement strategy should also be linked to the documentation of the economy and the levy of sales tax at retail stage which will offset the major advantage available to smugglers in the shape of 15 per cent sales tax and 6 per cent withholding tax at import stage. The documentation will bring the smuggling business in the income tax net and this is likely to dampen this illegal goods activity to a large extent.
It is necessary that the government takes note of the involvement of agencies in the prevention of this unlawful trade. Though, those involved in such operations are delegated to exercise anti-smuggling in the areas of their jurisdiction but none appear ready to take the responsibility of the failure. Whereas, in few instances multiple agencies are at work at one spot, thus overlapping the responsibilities which in return hampers normal duties. Cases in point are those of the Pakistan Coast Guards and the Pakistan customs operating at the Karachi Port.
Therefore, it is suggested that the government should come up with a policy to distribute the powers and areas among the agencies involved, and question the responsible in case of failure. Moreover, to counter the smuggling under the garb of the ATT, a senior customs official stated: “The ATT agreement needs to be renegotiated with Afghanistan and its government should be persuaded to import only those goods which are actually required. In this regard, a positive list of items along with the quantity should be drawn.
It is also proposed to the Afghan government to levy customs duties on the transit goods at the rates equivalent to our tariff on the arrival of goods at Karachi, and Pakistan customs should be authorized to collect the same. It is also recommended that the monitoring and control of transit goods at Karachi, Peshawar, Torkhum and Chamman should be improved to eliminate the possibility of mis-declaration of quantity and value.
The major chunk of dinner sets, toys, cheap textiles, textile products, electric bulbs and tubes, sanitary fittings and crockery are imported from China, Thailand and other Far Eastern countries by under-invoicing to avoid the government taxes. These products have flooded local markets thus inflicting loss to local industries. The government despite the presence of countervailing ordinances is reluctant to pursue the cases against the exporting countries to counter the menace. To counter the deficiency, the government should impose countervailing duties on those items which are dumped in the local market on account of heavy under-invoicing. The government ought to restrict the import of sub-standard and cheap, or counterfeit products, which at the same time necessitates the enactment of copyrights laws. The government, it is advised, should actively work on the implementation of fiscal laws in the Federally Administered Tribal Areas (FATA), Provincially Administered Tribal Areas (PATA), Northern Areas and Azad Kashmir.
According to a customs official, we follow the GATT valuation code, which is importer-friendly, it is basically the product of developed world which is against all trade barriers which hamper the normal flow of goods in international markets. The developed world wants to sell their products with minimum interference through the customs barriers. The GATT valuation code was drafted in the above perspective and has taken away the discretionary power of the customs to suspect the valuation of imported goods.
The government needs to come up with a concrete policy for curbing the menace of smuggling. For example, it should use mobile scanning machines at ports, as well as on highways, hi-technical vessels and boats for patrolling in high seas, implementation of fiscal laws across the country in non-tariff areas, reduce the number of unnecessary check posts and fix the responsibilities of the agencies involved in this menace.