Pak incurs $2.63b losses per annum as smuggling through secret maritime routes goes unabated | Pakistan Today

Pak incurs $2.63b losses per annum as smuggling through secret maritime routes goes unabated

  • Total value of smuggled goods much higher than additional taxes levied by govt in July last year

Investigation into the country’s major smuggling scam has revealed that smugglers are using Afghan Transit Trade (ATT) containers through secret maritime routes to ship goods into Pakistani markets, Pakistan Today has learnt.

The value of these smuggled goods has been put around $9.1 billion by the investigators, according to a report complied last year by Collector Preventive, Karachi (Pakistan Customs) SM Tariq Huda along with other authors.

The government is, due to this smuggling of around eleven goods, losing a huge sum of $2.63 billion in revenues each year.

Although the Federal Board of Revenue (FBR) had earlier approved this investigative report titled, “Ascertain the Market Demand of Goods Prone to Smuggling – Establishing the Volume of Smuggling”, it later on termed the same as ‘strictly confidential’.

Many high-profile government functionaries would have been in hot water if the FBR top management had initiated action instead of putting the findings of the report to rest.

While a lot of the influentials is allowed to make billions through illicit trade with connivance of the top economic managers, the poor and middle class segments of society are being milked by the government to pay multiple-layered taxes.

Nevertheless, the report details the trail of smuggling networks from year 2012 to 2014 and also provides future measures to plug the gaps in its anti-smuggling strategy.

Interestingly, the total value of the smuggled goods is much higher than the additional taxes the government levied in July last year through its second budget.

Out of 32 commodities that were analysed, eleven commodities were originally short-listed, but after meetings with the DG Intelligence, Preventive Collectorate Lahore and other Customs officials two more commodities were added to the list totaling thirteen commodities that were to be focused upon for the project including tyres, tea, auto parts, mobile phones, fabric, cigarette, plastic granule, television, steel sheet, POL (diesel), and vehicles.

Out of the $2.63 billion losses, the Revenue Department incurred a loss of $1.1 billion from the smuggled mobile phones. The estimated value of these smuggled phones was $4.4 billion and they met 59 per cent of the market demand.

The $2.7 billion smuggled diesel was the second item that caused $874 million losses, as the country met 33 per cent of its total demand through smuggled diesel. The losses would go even higher for the current year as the government is charging an abnormally high rate of 51 per cent general sales tax on diesel.

Smuggled plastics caused $222 million losses and captured 11 per cent of the market demand. The smuggled auto parts caused $186 million losses, capturing 57 per cent of the market. The smuggled vehicles caused $175 million losses and captured 12 per cent of the market. The smuggled tyres caused $118.5 million losses, meeting 59 per cent of the market demand. Moreover, smuggled vehicles worth Rs 9 billion were seized in Quetta.

The smuggled steel sheets got hold of 10 per cent of the market and caused $112.6 million losses. Fifty-nine per cent of the market needs were met by smuggled tea, causing $77 million losses. Three per cent of the market needs were met from smuggled cigarettes, causing $27 million losses to the government.

Similarly, the smuggled television sets captured 57 per cent of the market, causing $9 million losses while smuggled garment products captured 17 per cent of the market, causing $2.5 million revenue losses.

The investigation revealed a significant increase in the number of containers that transmitted through Pakistan under the ATT banner from 2012 to 2014 with an exponential increase in fabric, cooking oil, and a significant increase in tyres could not be justified by economic growth or an increase in market demand for these commodities in war-stricken Afghanistan.

The continuously higher levels of black tea coming into the country could not be justified for a country where the demand for green tea is significantly higher.

“According to the United Nations, Pakistan has about 57 vehicles for every 1,000 people. If the population is estimated to be about 210 million people, the number of vehicles in Pakistan would equal about 11.97 million. When compared this to the number of vehicles in Afghanistan, we see that Afghanistan has 28 vehicles per 1,000. This is roughly half of the number of vehicles in the same ratio, which are present in Pakistan,” the report says.

Same pattern was witnessed in import of television sets in Pakistan when compared to Afghanistan. According to Pakistan Economic Survey 2013, there are 13.96 million television sets in Pakistan. An estimate of the number of televisions in Afghanistan is difficult to determine, but it should be significantly lower compared to Pakistan, since only 100,000 television sets were present in Afghanistan in 2003 compared to Pakistan’s 13.1 million television sets. Interestingly, the import of high-end name brand television sets to Afghanistan is significantly larger compared to Pakistan.

According to research, Pakistan is the fifth largest consumer of black tea in the world, while the only sector of society that uses black tea in Afghanistan are the Afghan refugees who have moved back to Afghanistan from Pakistan. This group represents about 10 per cent of the total population. It was found by investigators that 153,741 million tonnes of tea was imported into Pakistan while 94,410 million tonnes of tea was imported into Afghanistan during the year 2013.

According to the Pakistan Tea Association, the consumption of tea per annum is about 240,000 million tonnes. The import numbers for the two countries put together is 248,151 million tonnes for 2013.

The report suggests the government to take immediate measures to secure the maritime routes which are being used by smuggling networks.

“Curbing smuggling through sea is the responsibility of Maritime Security Agency or the Coast Guards that have also failed to perform their duties,” says the report, adding that the border areas were almost entirely manned by the Frontier Constabulary (FC) with no checks on the misuse of Customs Powers delegated to them.

The report also underlined that the need for “enforcement remains the biggest policy option Pakistan Customs needs to pursue” to curb the smuggling. By curbing smuggling, the country can increase its tax-to-GDP ratio by another 3.9% to 15% within a year. Compared to India’s smuggling to GDP ratio of only 0.43% and Bangladesh’s 0.04%, Pakistan’s ratio is incredulously high, largely owing to involvement of the FBR officials, FC, Coast Guards and Maritime Agency, the report concluded.

Mian Abrar

The writer heads Pakistan Today's Islamabad Bureau. He has a special focus on counter-terrorism and inter-state relations in Asia, Asia Pacific and South East Asia regions. He can be reached at [email protected]

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One Comment;

  1. neutral said:

    Investigators found 9.1bn US$ loss to the exchequer due to this smuggling and the report was pushed under the carpet ! What else can they do where the FBR is the biggest hurdle in controlling the losses ? And the loud talking Mr Dar may have read this report who is finding excuses to tax on food items. Pakistan is begging for million US$ and this loss ?? This is equivalent to Over-seas Pakistanis' remittance.

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