Customs goes anon

Every June, when the government presents its budget, there is a debate on how unnecessary imports can be reined in. Since 2022, when Pakistan was on the brink of default with its foreign exchange reserves fast depleting, economists were of the view that the nation should be given a reality check: they could not drain the reserves at the expense of their luxuries. Last year, the PML-N-led government decided to introduce even more stringent measures to increase its tax revenue and declared that besides modifying tax laws, it would also revamp the tax structure in the country. The introduction of faceless customs assessment last month (currently active in Karachi and likely to be fully functional next month) is part of the many reforms the government intends to introduce to bring tax dodgers into the tax net. The FBR faced a significant tax shortfall of Rs386 billion from July to December. The revenue collection stood at Rs5,623 billion in the first six months of the current fiscal year, falling short of the desired target of Rs6,009 billion. Prime Minister Shehbaz Sharif now wants the system to be implemented countrywide. This faceless customs assessment assigns goods declarations to assessing officers at locations remote from the port of import. Under the initiative, customs officials responsible for checking goods that enter the country will not know who the importer is. This makes the process faster, fairer, and harder for anyone to bend the rules.

Since officials do not know who the importer/exporter is, it reduces the chance of favouritism. This method also improves transparency as authorities have access to a digital trail that ensures accountability, and decisions can be reviewed if needed. As processes become more transparent, they could attract more trade and investment. Irregularities in the customs department have always been an open secret and unregistered businesses have made a fortune selling premium products at relatively affordable prices – courtesy the duties they avoid paying at the time of import. Over the years, successive governments wilfully allowed Pakistan to become reliant on imports. At a time when the world shifted towards making high-quality, domestic products, we kept turning a blind eye to the degeneration of the industrial and manufacturing sectors here.

The government should also work towards bringing cultural change. Both traders and consumers rationalise tax evasion because the products have a good market here. India’s approach towards promoting domestic products deserve a mention. The country first worked on providing good alternatives of premium brands to allow domestic market players to capture a thriving market of price-sensitive products. India has its own version of popular foreign confectionery items, making it difficult for foreign products to compete. In China, too, local mobile phone manufacturers have given a tough time to a brand like Apple that used to dominate the smartphone market. There has to be a behavioural shift if we are to progress as an economically strong nation.