June 20 - 26, 2005

The Central Board of Revenue (CBR) has recommended various measures to curb smuggling through land routes from Afghanistan, Iran, China and India, which has, according to an official study, swelled to $ 6 billion annually causing serious dent in revenue collection. Besides reducing custom duty on a number of smuggling prone items, the CBR has proposed replacement of the Afghanistan transit trade (ATT) with bilateral convention.

Simultaneously, legal changes in the Customs Act, 1969, Prevention of Smuggling Act, 1977, and withdrawal of illegal taxes collected by Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA), are also in the offing.

Official sources revealed that the transit trade agreement between Afghanistan and Pakistan, signed in 1965, did not contain any provision to curb the flow of these goods back into Pakistan, after reaching Afghanistan. A World Bank (WB) study confirmed that over 80 percent of the goods allowed transit to Afghanistan are smuggled back into Pakistan.

According to CBR, there is a need to replace the transit trade agreement with a bilateral agreement with the neighbouring countries for active cooperation in exchange of information and stoppage of smuggling across the borders, as per 'revised Kyoto Convention,. At present, the neighbouring countries, including Afghanistan, consider the smuggling of goods from these countries to Pakistan as part of bilateral trade through the non-notified routes. The CBR has pointed out that there was need to revise the transit trade agreement on the lines of the agreement between Nepal and India.

On the issue of definition of 'smuggling' given in Customs Act, 1969, the CBR said that the term is defined under section 2(s) of the Customs Act, 1969, read with the provisions of Prevention of Smuggling act, 1977. This definition is confusing as well as complicated, and the judicial fora have interpreted this definition in a way where existing provisions of law can no longer be considered as a deterrence against the menace of smuggling. The CBR has proposed to re-draft the legal provisions pertaining to anti-smuggling to create an effective deterrence against smuggling.

The Prevention of Smuggling Act, 1977 empowers attachment, seizure and confiscation of all types of property held in the name of smugglers or their relatives. Since the promulgation of this act. there has hardly been such a case. There is need to conduct a study to introduce suitable amendment in the Act for the enforcement of the provisions.

The CBR further said that the scope of Customs Act, 1969 was extended to FATA and PATA long ago. However, the Political Agents, who have been entrusted with customs powers, hardly enforce the same in FATA/PATA.

Besides, the CBR has recommended custom duty cut on smuggling prone items w.e.f. 01-07-2005. It has identified about 100 such items after a careful comparison of Afghanistan and Pakistan duty structure. The CBR is trying to identify items where there is a handsome gap in tariffs, which lures Afghan importers to import these goods and subsequently sell them to Pakistani buyers, fetching high prices. The CBR will reduce duty on certain items keeping in view the policy to protect the domestic industry. The analysis said that Afghanistan is charging duty from 5 percent to 10 percent on most of these items, whereas Pakistan has levied higher rate of duty on the same. This has resulted in large scale smuggling of these commodities from Afghanistan. The major items prone to smuggling also include banned items.

According to official estimate, the total estimated value of smuggled goods into Pakistan from China, Iran, UAE, India and Afghanistan ranges between 5 to 6 billion dollars per year. The annual value of smuggled goods from Afghanistan is between 1.5-2 billion dollars; Iran, 0.5 to 1.0 billion dollars; UAE, 1.0-1.5 billion dollars and value of smuggled goods from China and India is around 1.5 billion dollars.

The figures revealed that the anti-smuggling agencies have totally failed to tackle the menace of smuggling. The official said that the first major route of smuggling is through Afghanistan. Items like matches, vegetable ghee, cement, cosmetics; crockery, fabrics, stationery and petroleum products are smuggled back after claiming rebate of the customs duty and refund of sale tax. Over 25 percent of the value of Pakistani goods exported to Afghanistan are smuggled back.

Another important source of smuggling is the UAE were sea is used as a route for bringing foreign goods into the Pakistani territory. From the UAE, smuggling of gold bullion, jewelry, liquor, watches, cloths, electronic appliances and cigarettes is taking place. The estimated value of these goods is about 1.5 billion dollars per annum. Large scale smuggling of gold is taking place from the UAE despite levy of nominal rate of the customs duty, as people do not have legal money to finance their import or they want to remain in the undocumented sector.

In case of Iran, a number of items are smuggled into Pakistan, including cars, tyres and tubes, petroleum products, arm and ammunition, plastic products, cloth, scrap, woolens, carpets, jerseys and food items. The Iranian smuggled goods cater the entire demand of the Balochistan province and remaining products are supplied to other parts of the country. It has been estimated that the value for such goods is not less than 1.0 billion dollars, the official added.