PM task force urges overhaul of trade data systems

A panel of the civil-military task force on tax matters, on Wednesday, recommended negotiating with regional trading partners to obtain value-based data after it established that Pakistani systems were not fully capturing the true value of its trade.

The findings revealed that Pakistan's systems—WEBOC and Pakistan Single Window—were not fully capturing international trade data, reaffirming concerns about significant under-invoicing of imports to evade taxes. Another panel from the prime minister's task force on the digitalisation of the Federal Board of Revenue (FBR) also proposed bringing traders into the tax net by utilising approximately Rs20 trillion in transaction data from non-registered wholesalers and retailers.

The initial findings of the task force, headed by Minister of State for Revenue Ali Pervaiz Malik, suggest that the body has made a good start, and the government now requires strong political will to implement these recommendations. Prime Minister Shehbaz Sharif constituted the task force, co-chaired by the minister of state for finance and a serving major general, with a mandate to broaden the tax base and digitise the FBR.

Tania Aidrus presented a trade data-sharing interface with trading partners, stating that the true value and quantity of trade data are not captured in the WEBOC and Pakistan Single Window Customs systems, according to an FBR press statement.

This is a concerning finding against the World Bank, which funded the Pakistan Single Window—an initiative launched to integrate Pakistan's trading system. People were hired on private-sector salaries to perform a task that any bureaucrat should handle without additional benefits.

At Aidrus's request, the task force appointed Ghazi Akhtar as the new head of the working group, replacing her.

The working group, which made this finding, also recommended that the government address the issue of under-declaration of trade values with regional countries, with a particular focus on China.

There is a persistent multi-billion-dollar discrepancy in bilateral trade due to Beijing's reluctance to share transaction-wise data. Pakistan and China have a free trade agreement and have signed various protocols for data sharing, but these have not been fully implemented.

Currently, China shares data for goods covered under the bilateral Free Trade Agreement (FTA), which accounts for only one-third of the total imports from China, according to Customs officials. About 10 months ago, former FBR chairman Malik Amjad Zubair Tiwana briefed the Senate Standing Committee on Finance regarding an ongoing investigation into an $8 billion discrepancy between trade figures reported by four trading nations to the International Trade Centre (ITC) and Pakistan's own statistics. The then-FBR chairman explained that China reported $17 billion in exports to Pakistan to the ITC, while Pakistani data showed $13 billion in imports, indicating a $4 billion gap. This was the second meeting of the task force, during which it received the first batch of information from various working groups established in the initial meeting.

Another working group, headed by Ghazi Akhtar on supply chain automation and the Track & Trace System (TTS), recommended using the withholding transactions data collected under section 236G, related to wholesalers, and section 236H, concerning retailers, to bring traders under the tax net.

The meeting was informed that about Rs20 trillion worth of trade transactions are carried out, and the FBR has data on approximately 150,000 wholesalers and another 600,000 retailers that can be used to broaden the tax base. In the budget, the government imposed a 2% to 2.5% withholding tax on non-filer wholesalers and retailers as both a revenue-raising and documentation measure.

The working group emphasised the need to utilise the already available data to bring wholesalers into the tax net and make the track and trace system more effective in collecting due taxes from the relevant sectors, according to the FBR statement.

The state minister for finance and revenue stated that the task force is mandated to develop practical recommendations to transform the FBR into a modern and digitalised organisation to achieve sustained growth in national revenues.