Leakages in transit trade badly hurt economy

FBR chief says by end of FY24, 90-95% of imports will be cleared via green channel

Salman Siddiqui November 28, 2019

KARACHI: The misuse of Afghan transit trade still remains the biggest issue that is badly hitting Pakistan’s economy but the government is working on a plan to clear about 90-95% of imports without physical inspection by 2023-24.

“If you ask me what is the biggest problem for me as a law enforcer in Pakistan, I will say it is the abuse and leakages in the Afghan transit trade,” Federal Board of Revenue (FBR) Chairman Shabbar Zaidi said while speaking at a seminar on “Pakistan: The Economy of an Elitist State” on Wednesday.

Traders resorted to under-invoicing in the name of Afghan transit trade, “which has badly impacted Pakistan’s economy and the collection of taxes,” he said.

Traders had been importing auto parts by weight. “We have changed the whole system of valuation. By the end of 2023-24, about 90-95% of imports will be cleared through the green channel,” he said.

Afghan transit trade ‘hurting Pakistan's economy’

The consignments would not be opened for physical examination but would be checked through scanners and there would be no human interaction between the FBR officials and importers for clearing the consignments, he said.

World Bank programme

The FBR is working with the World Bank to increase revenue collection. One of the main parts of the World Bank programme is to simply tax laws to make them understandable for the businessmen and common citizens.

“I have been auditing firms for about 30 years and still face difficulty in interpreting the laws. How can we expect SMEs (small and medium-sized enterprises) to interpret the laws correctly,” he said.

Admitting that people did not come into the tax net as they felt that they would be harassed by tax officials, Zaidi said there was no need to fix the 21,000 officers, nor was there a need to fix the system. Instead, “we are working to make the FBR faceless.”

“If you ask me what is the future of the FBR. There is no solution other than the use of technology and automation of processes and minimising or almost avoiding personal interaction between the FBR people and the people in market,” he said.

The FBR has automated the process of registering sales tax payers. “We are going to do the same thing with the issues of certification next year. We are going to launch a faceless e-wallet system where you would not know who would be auditing your accounts in the FBR,” he said.

The FBR is also working to build an independent databank of taxpayers to double-check whether the information they have provided in the tax returns is true.

He pointed out that the manufacturing sector had remained overburdened. “It is paying over 70-80% of total taxes. However, the other three sectors namely agriculture, retail and services are contributing almost nothing in taxes. We need to lessen the burden on the manufacturing sector.”

Zaidi was of the view that the withdrawal of zero sales tax facility from the five leading export sectors and the collection of CNIC copy on the purchase of goods worth over Rs50,000 in wholesale and retail had changed the entire philosophy of the tax system. “We have taken such measures in the right direction,” he said.

Speaking on the occasion, Adviser to Prime Minister on Institutional Reforms Dr Ishrat Husain said the elitist culture in almost each and every institution widened the gap between the rich and poor in the country.

Afghan transit trade from Gwadar port to begin soon

“Influential people misuse the system for their vested interests. Governments have been issuing SROs to benefit them,” he said.

“Thirty-nine per cent of the population, which is a very large number at around 60-70 million, is living below the poverty line,” he estimated.

“On the other hand, 1% people have 45% of the income,” he said. “We have to change our mindset.”

Husain said the elite had been misusing the system for over two decades and it seemed that the elitist culture would prevail in the time to come.

Published in The Express Tribune, November 28th, 2019.

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