Import of smuggling-prone items halves under Afghan transit trade

Imports of top five smuggling-prone items under the Afghan transit trade (ATT) have dropped by more than half in the current fiscal year, which increased tax collection besides protecting domestic industries from the injurious effects of illegal trade.

Imports of black and green tea, tyres, textile and electronic goods under ATT fell by Rs86 billion or 51% during first five months of the current fiscal year, according to a presentation recently given to Prime Minister Imran Khan by the Federal Board of Revenue (FBR).

During July-November 2020, Afghanistan imported Rs82.5 billion worth of five types of goods as against Rs168 billion in the same period of last year. Stringent enforcement measures played a role in reducing the smuggling of these items from Afghanistan to Pakistan.

However, it was not clear how much of the reduction was on account of exchange rate depreciation as the value was given in rupee terms.

Benefits of the adverse impact of Covid-19 on global trade were also not known.

Pakistan has long been complaining about damages to its economy and revenue due to smuggling of goods that are first imported under ATT and are then smuggled into Pakistan.

Being a landlocked country, Afghanistan is entitled to use Pakistan’s territory and seaports for imports under international laws.

Last year, the FBR had sought the army chief’s help following up to 600% increase in smuggling of certain goods, which were subject to regulatory duties.

Before the imposition of duties, these goods were imported but after the levy of duties, their imports shifted to the ATT regime.

More than half of the reduction in imports under ATT has led to a corresponding increase in imports by Pakistan, according to the FBR’s statistics.

Official data showed that during July-November of current fiscal year, the value of five imported goods meant for Pakistan stood at Rs333 billion, which was up by Rs119 billion or 56% than the previous fiscal year.

Resultantly, the duties and taxes collected from these five items jumped by 48% or Rs31 billion to Rs93.7 billion during the fivemonth period.

Stringent measures were adopted to stop the reverse flow of transit trade, which resulted in a decline in the value of smuggling-prone items in transit trade, said a senior member of Pakistan Customs.

Data showed that the import of black tea under ATT reduced by 65% while its import for Pakistan increased by 35%. This helped the FBR to collect an additional Rs5.1 billion in import duties on black tea, higher by 42%. Similarly, the import of tyres under ATT reduced by nearly twothirds and there was 268% increase in imports of tyres by Pakistan.

This increased FBR’s tax collection from tyres at the import stage by Rs10.3 billion, up by 234%.

The tyres and black tea were the two most smuggling-prone items after Iranian oil. The import of textile products under ATT reduced by 62% and resultantly there was an increase of 57% in regular imports of textile goods for Pakistan. Electric goods’ imports fell by 40% under ATT.

The FBR also shared details of reduction in smuggling of Iranian oil and diesel with the prime minister, who appreciated the role of Pakistan Customs.

FBR officials said that the local industry was also gaining ground as the seizure of smuggled goods had increased drastically during the current financial year.

About $2 billion worth of mobile phones smuggling has also been controlled with the introduction of Device Identification Registration and Blocking System (DIRBS), he added.

A 2016 study by the FBR said that Pakistan was losing a staggering $2.63 billion worth of revenue a year due to smuggling of just 11 goods that were making their way through porous borders and, more alarmingly, through high sea and containerised cargo with full support of the state machinery. By curbing smuggling, the country can increase its tax-to-GDP ratio by another 4%.

Authored by incumbent Member Customs Dr Tariq Huda, the report said, “Considering the border as the primary source of smuggling would be a devastating mistake … the goods are coming in from multiple sources including the high sea and in containerised cargo with officials fully aware and involved in their transport.”

The report also identified that a large quantity of smuggling was due to the Afghan Transit Trade Agreement (ATTA) cargo.

An official statement issued by the FBR on Friday stated that smuggled goods valuing at Rs29 billion were seized during first half of the current year, showing a 37% increase in comparison with the seized smuggled goods in the previous year.