. .

Anti-smuggling drive: No results?

The proposed ordinances are still awaited

From Shamim Ahmed Rizvi,
Oct 30 - Nov 05, 2000

Despite all rhetoric and tall claims, Government's anti-smuggling drive seems to have fizzled out after an initial success and the smuggled goods are now freely available in most of the markets.

After a crackdown on loan defaulters in November 1999, the present government announced strict action against the traders of smuggled goods. April 30, 2000 was fixed as the deadline for the disposal of smuggled items. It was further announced that after the deadline the shopkeepers would have to pay a fixed duty on the illegally imported goods and dispose them of within six months.

Federal Interior Minister Moinuddin Haider said goods worth Rs. 150-200 billion were smuggled into the country depriving the state of Rs. 70-90 billion in revenue. He further said that entry points for the smuggled goods had been identified, which would be monitored to arrest the smugglers.

Initially, the warning was taken seriously as shopkeepers hurried to dispose of the smuggled goods stocks before the April 30 deadline. The arrival of smuggled items in the markets also declined as shopkeepers were afraid to keep smuggled stocks.

On hue and cry and even threats from powerful outlaws in the NWFP who largely control the smuggler mafia in the country, the Interior Ministry made an agreement with the representatives of the Bara Markets on April 30 that it would allow the smuggled goods traders to sell their existing stocks by July 31. The traders had also agreed to pay duty on leftover and further stocks of smuggled goods at fixed rate on per shutter basis. According to this agreement, all shopkeepers, dealing exclusively in smuggled goods anywhere in Pakistan, were to be required to pay a fixed tax of Rs.10,000 for a cabinet, Rs. 115,000 for a shop with one shutter and Rs. 40,000 for a shop with double shutter. Tax of Rs. 20,000 per shutter was to be levied on every shop with more than two shutters. Wholesalers and composite shops like establishment dealing in both local and smuggled goods, were to be required to pay concessional duty at 25% of normal tariff on their stocks of smuggled goods.

The C.B.R. and Ministry of Finance objected to idea of taxation on per shutter or size of shop basis. According to them it was not in accordance with taxation laws prevailing in the country and could lead to legal complications at a later stage.

Bara markets

In the first week of September last, the government decided to bring the sprawling Bara Market under the purview of Custom Act instead of imposing shutter tax on their shops as earlier agreed between the representatives of bara markets and the Ministry of Interior. The decision was reportedly taken on the directive of the Chief Executive to bring Bara Markets into tax net and extend the on going tax survey of business to the smuggled goods markets all over the country. The survey teams will start visiting the smuggled goods markets commonly known as bara markets, from October, in the second round of the survey form distribution. The C.B.R. has already announced the extension of survey to smaller towns of the country after completing it in 13 major cities, but no bara market has been touched so far.

A visit to Bara Markets in the twin city of Pindi/Islamabad revealed that sale and purchase of smuggled items is going on as usual without any fear or panic. You find all sorts of smuggled goods from household appliances and toiletries to spare parts are available in abundance. According to reports in NWFP and Balochistan even smuggled cars and petroleum products are easily available.

Central Board of Revenue had since long identified six major items, which are brought in the country mostly through smuggling. These items include tyres and tubes, auto-parts, watches, crockery, electronics and sanitaryware. Market study reveals that there is absolutely no check on the smuggling of these items. With regard to autopart, it was found that there was no change in the level of smuggled autoparts. In fact, there are certain items, which are exclusively available through smuggling channels only. Spark plugs used in all motorcycles, auto-rickshaws, scooters, petrol cars are smuggled in millions every year. The import of these items was almost nil during the past decade. The only spark-plug factory established in the private sector has since long gone out of production as it could not compete with the price offered for smuggled plugs.

In tyres and tubes, the production of local bus and truck tyres is negligible as the smuggled foreign brands of superior quality are available at much lower rates. The Customs authorities are well aware of the modus operandi adopted by the smugglers to bring smuggled tyres in the country but have failed to take any action against the culprits.

Rampant smuggling of watches has led to fake imitations of genuine brands finding way into the market. Ordinary customer cannot differentiate between genuine and fake models and most of the time ends up paying very high price for fake watches. The shopkeepers do have the expertise to recognise a fake watch, which they buy at very low rates to mike heavy profits.

Television, refrigerators and air conditioners were the main electronic items which two years ago were smuggled in larger quantities than local production or legal imports. Smuggling of these three items declined after import duties on these products were substantially reduced. It was found that smuggling of television was again on the rise after increase in its import duty in the current budget.

Almost all other electronic items are smuggled into the country. These include mixers, grinders, juice extractors, hair dryers, vacuum cleaners and radios. In fact, local radio assembling industry has been wiped out of the market by the smuggled radios.

As far as crockery is concerned, the official imports are negligible while the markets are flooded with smuggled crockery of all types be it glassware, Chinaware or plastic. It was found that the payment for the smuggled items is made by the smugglers through Hundi. These smugglers pay the amount in Pak Rupees while the hundi operators arrange the transfer in equivalent dollars to the required destination through telephonic transfer (TT) from Dubai.

Two weeks back the government announced that it will soon promulgate two new laws to comprehensively strike at the scourage of smuggling. One of the two new laws will deal with legitimisation of smuggled goods in Bara Markets, making owner of the stocks to pay duty and taxes within a given period of three months. The second law will enable various government agencies to control smuggling of all things including the POL, wheat and electrical goods more efficiently. The proposed ordinances are however still awaited.