FBR warns OMCs of fine, imprisonment

Directs four firms to remove smuggled goods from their retail outlets

Shahbaz Rana September 21, 2021
Federal Board of Revenue. PHOTO: AFP


The Federal Board of Revenue (FBR) has directed four oil marketing companies (OMCs) to remove smuggled goods including cigarettes from their retail outlets or else their officials would be vulnerable to fines and jail term of up to six years.

The warning has been issued by the Customs department over the weekend amid growing smuggling in the country despite seizing about Rs58 billion worth of goods in the last fiscal year that ended in June.

The Customs department has directed Pakistan State Oil, Shell, Hascol and Pak-Arab Refinery Company (Parco) after it found smuggled goods were being sold at retail outlets of these companies.

The Customs department has made the licenser responsible for the illegal activities of the licensee.

It is for the first time that the FBR has decided to invoke legal powers that authorise it to take administrative and punitive measures against retail outlets involved in selling smuggled goods.

Parliament had introduced an amendment to Section 2(s) of the Customs Act to place retailers under the scope of the law. The FBR has cited the new punitive section in its warning letters to the OMCs, asking them to remove the smuggled goods.

It said that all those persons who possessed and dealt with smuggled goods would be vulnerable to penalties equal to 1,000% of the value of the goods.

Where the value of smuggled goods exceeds Rs300,000, the person will further be liable, upon conviction by a special judge, to imprisonment for a term not exceeding six years and to a fine not exceeding 10 times the value of such goods.

The Collectorate of Customs Enforcement had conducted an exercise in which it found that illicit and foreign-origin cigarettes were being sold at retail outlets of the OMCs. Smuggled goods other than cigarettes were also found at these outlets.

The Customs department has asked the marketing companies to remove the smuggled goods from all the minimarts and outlets to avoid anti-smuggling operations.

Smuggling has become a chronic issue and despite focus of Prime Minister Imran Khan and Chief of Army Staff General Qamar Javed Bajwa, the smuggled goods are available even at the Constitution Avenue retail outlet.

Five years ago, the country’s first-ever comprehensive report on smuggling had estimated the revenue loss in the form of duties and taxes at $2.6 billion.

In September 2019, the FBR decided to inspect large retail markets to check sales of smuggled goods but it subsequently retreated due to the absence of legal powers and the backlash from retailers.

Former FBR chairman Shabbar Zaidi also sought the army chief’s help following up to 600% increase in smuggling of certain goods in 2019, which were subject to regulatory duties.

Before the imposition of duties, these goods were imported but after the levy of duties, their import shifted to the Afghan Transit Trade regime.

During the last fiscal year, smuggled goods worth Rs57.7 billion were seized as compared to the value of Rs36 billion in July 2019 to June 2020, showing an increase of 58%. The FBR also seized 8,754 cartons containing 87.5 million cigarette sticks during the last fiscal year.

There was also a need to beef up security at border posts to curb smuggling. PM Khan approved a detailed plan two years ago to curtail smuggling. But it could not be fully implemented due to delay in hiring the staff needed to man the border posts and routes that are commonly used to smuggle goods into the settled areas.

Smuggling and cheaper imports under free trade agreements are the two key challenges to the growth of domestic industries. The cost of smuggling and imports in many industries is lower than the cost of production.

Published in The Express Tribune, September 21st, 2021.

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