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New customs amnesty scheme for Bara traders

Let it be the last chance for the Bara bonanza.

Feb 12 - 18, 2001

After having failed in numerous earlier attempts to bring Bara Market into some sort of tax net, the Central Board of Revenue (CBR) has proposed a new customs amnesty scheme for Bara traders with 15 per cent custom duty on every item.

Despite all rhetoric and tall claims to eliminate smuggling and bringing Bara Market thriving business of smuggled goods into normal tax net, the present government could not achieve any success during its tenure of over 15 months. Different plans of action were announced by the authorities warning traders to declare their stock of smuggled by specific date and get their business legalised by paying duties on confessional rates or face arrests and trial, but all of them fizzled out. No trader declared the stocks nor paid any tax. Neither any body was arrested nor any trial took place and the business in Bara Market is thriving uninterrupted. Now in the Summary to the Ministry of Interior, the CBR has proposed exemption of sales tax and withholding tax on the sale of smuggled stocks, within a stipulated period of six months.

The CBR has formulated a Customs General Order (CGO) on the customs amnesty scheme along with an action plan for post-amnesty operations, and submitted to the Interior Ministry for further consideration. The proposed amnesty scheme would remain valid for 6 months i.e. from March 1-August 31,2001. This amnesty would be the last opportunity for the Bara traders to regularise their smuggled stocks, otherwise the government would launch a countrywide crackdown against all Bara 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. While making this announcement, Federal Interior Minister Moinuddin Haider conceded that 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 stock 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 has 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 confessional 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.

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 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 were to start visiting the smuggled goods markets commonly known as Bara Markets from October in the second round of the survey form distribution. However none of these decisions materialized.

One hopes that in drawing another plan of action for the elimination of rampant smuggling through the Bara and other avenues, the CBR has taken into consideration the almost certain resistance by the traders and the possibilities ensuing from it. It goes without saying that the deadliest threat to the country's economy comes from the cumulative strength of the paralleled economy, as growing from non-documentation and largely unchecked smuggling operations. CBR is said to have identified a number of avenues of large-scale smuggling operations in the country and also formulated effective measures for its elimination. What needs to be promptly ensured now is that the exercise is neither delayed nor weakened on any consideration. Let it be the last chance for the Bara bonanza.