Irregularities in invoicing: Variation in trade statistics a grave issue
Will cause huge revenue losses if not rectified in time
PHOTO: FILE
LAHORE:
Discrepancy in trade statistics shown by the Pakistani and Chinese customs authorities need to be addressed by implementing a transparent, coherent and fully integrated global customs valuation system with strict check on over and under invoicing, said Pak-China Joint Chamber of Commerce and Industry (PCJCCI) president Shah Faisal Afridi.
“Values and prices are altered via false-,over- and under-invoicing and smuggling, and according to some official reports, under-invoicing worth around $4.4 billion is being carried out in imports from China,” he said.
Under-invoicing, according to Afridi, not only deprived the state of huge revenues but also damaged domestic industries which are denied a level-playing field.
He asserted that the establishment of a valuation database and customs modernisation was inconceivable without adequate investment in information technology. “Enormous data requires analysis and comparison with declared values, which can only be achieved by employing adequate computing resources,” he added. “This rampant over- and under-invoicing can have significant tax implications.”
“An exporter who over-invoices the value of goods he ships may be able to significantly increase the value of export tax credit or value-added tax (VAT) he receives. Similarly, an importer who under-invoices the value of goods he receives may reduce the value of import duties he pays,” explained Afridi, terming both cases an acute means of trade-based money laundering and abuse of the tax system.
Afridi claimed that thousands of industrial units had been rendered sick, due to the availability of smuggled goods in open markets. “The most glaring example is the Afghan Transit Trade which is the main source of smuggling into Pakistan and its annual volume has been estimated to be about $5-6 billion dollars, about 70% of the total smuggling, causing a revenue loss of about $2.5 to 3 billion annually.
He suggested a number of practical steps to be taken to improve the capacity of national authorities to address the threat of trade-based money laundering, including training programmes to better identify trade-based money laundering techniques, effective information sharing between competent authorities at the national level, and mutual assistance agreements to strengthen international cooperation.
Published in The Express Tribune, August 7th, 2015.
Discrepancy in trade statistics shown by the Pakistani and Chinese customs authorities need to be addressed by implementing a transparent, coherent and fully integrated global customs valuation system with strict check on over and under invoicing, said Pak-China Joint Chamber of Commerce and Industry (PCJCCI) president Shah Faisal Afridi.
“Values and prices are altered via false-,over- and under-invoicing and smuggling, and according to some official reports, under-invoicing worth around $4.4 billion is being carried out in imports from China,” he said.
Under-invoicing, according to Afridi, not only deprived the state of huge revenues but also damaged domestic industries which are denied a level-playing field.
He asserted that the establishment of a valuation database and customs modernisation was inconceivable without adequate investment in information technology. “Enormous data requires analysis and comparison with declared values, which can only be achieved by employing adequate computing resources,” he added. “This rampant over- and under-invoicing can have significant tax implications.”
“An exporter who over-invoices the value of goods he ships may be able to significantly increase the value of export tax credit or value-added tax (VAT) he receives. Similarly, an importer who under-invoices the value of goods he receives may reduce the value of import duties he pays,” explained Afridi, terming both cases an acute means of trade-based money laundering and abuse of the tax system.
Afridi claimed that thousands of industrial units had been rendered sick, due to the availability of smuggled goods in open markets. “The most glaring example is the Afghan Transit Trade which is the main source of smuggling into Pakistan and its annual volume has been estimated to be about $5-6 billion dollars, about 70% of the total smuggling, causing a revenue loss of about $2.5 to 3 billion annually.
He suggested a number of practical steps to be taken to improve the capacity of national authorities to address the threat of trade-based money laundering, including training programmes to better identify trade-based money laundering techniques, effective information sharing between competent authorities at the national level, and mutual assistance agreements to strengthen international cooperation.
Published in The Express Tribune, August 7th, 2015.