The massive decline in government revenues due to smuggling

From Shamim Ahmed Rizvi, Islamabad
Dec 20 - 26, 1999

The talks between Pakistan and Afghanistan on redefining the Afghanistan Transit Trade (ATT) by adding of 44 items to the negative import list have broken down. The Afghan trade mission has left for home without reaching any decision. Both the parties have, however, agreed to meet again in the near future. So the prospects of curbing smuggling of foreign goods into Pakistan via Afghanistan have turned bleak at least for the time being.

Besides reduction in customs tariff, another major reason for constant decline in government revenues is the massive smuggling of all types of goods into Pakistan mainly under the cover of Afghanistan Transit Trade (ATT).

According to a latest report of the Central Board of Revenues (CBR), a duty loss of about Rs. 5.0 billion has been recorded during five months of the current fiscal year, on account of only those items which have been exempted under ATT. The loss on non exempted items is more.

Bara Markets which have mushroomed all over the country are flooded with smuggled goods mainly brought into the country under the cover of ATT. National Assembly was informed in January last that effects of Bara Markets which have increased more than 100 times during the last 10 years, are multidimensional and were causing almost 40 per cent revenue losses to the exchequer.

The large scale smuggling of foreign goods worth billions of rupees into Pakistan has continued unabated down the years, causing incalculable loss to the national exchequer and leaving disastrous effect on overall national economy. Most of the smuggling is being done through Pak-Afghan border, the FATA areas dominated by influential Maliks and the vastly stretched porous mountainous routes. The foreign goods thus smuggled, apart from being sold in sprawling markets in the Tribal Areas find their way to what have come to be known as Bara Markets which have mushroomed in almost all big cities in the country.

Last year on the recommendation of the Central Board of Revenue the Ministry of Commerce put on the negative list the import of cigars/cigarettes, tyres and tubes, yarn, refrigerators, airconditioners, televisions and parts, soap and shampoo, auto parts (all sorts), timers/capacitors, ballbearing, vegetable ghee, cooking oil, chemicals, PVC/PMC tape, polyester metalised film, artsilk fabrics and black tea under the ATTA with the purpose to preempt the penetration of these items into the local markets.

The Ministry of Commerce during the present talks wanted further expanding its negative list with the identification of another 44 smuggling-oriented, damaging the local industry and during recent marathon meetings with the Afghan officials, the ministry has asked them to stop the import of newly-identified items.

Independent analysts, are however, of the view that further ban on 44 new items will also be so futile exercise