Tax authorities initiate study on Afghan transit facility misuse

KARACHI: Tax authorities have begun a study to ascertain the economic impact on the country caused by the misuse of Transit Trade facility to neighboring Afghanistan.
“Yes, we are going to unveil a study to ascertain exact losses being faced by the country’s economy because of smuggling (through Afgan Transit trade) in the next few days,” Nisar Khan, Member Customs told The News.
Pakistan Afghanistan Joint Chamber of Commerce and Industry earlier said informal trade between the two countries has been “thriving due to flawed economic policy specifically the duty differentials between the countries and weak enforcement of law at borders.”
“The size of informal trade between the two countries is $2.5 billion; in other words equal to the size of formal trade, the joint chamber said. “It is not possible to provide any breakdown of the informal trade of $2.5 billion into smuggling of transit goods and informal bilateral trade.”
The Afghanistan Pakistan Transit Trade Agreement was renewed in October 2010 for five years. The APTTA will automatically renew for a further period of five years thereafter subject to such modification as may be agreed upon unless terminated by either contracting party.
A business advocating organisation estimates smuggling of the transit goods is causing Rs50 billion losses to the national exchequer annually. It is also estimated that at least 200 to 250 trucks cross over every day from Afghanistan into Pakistan, loaded with smuggled goods.
“Pakistan’s share in APTTA has been reducing as the number of containers in transit trade via Chaman saw a decline of 20-30 percent over the past four years,” said a Customs clearing agent.
However, an official of the Overseas Investors Chamber of Commerce and Industry (OICCI) said in the last few months illegal imports through Pakistan have been reduced, consequentially reducing misuse of APTTA.
“The reason for above is the increase of cost of doing illegal imports through Afghanistan after the implementation vehicles’ tracking system,” the official said. “Secondly, after the Salalah Check post incidence, smugglers have also started using the port of Bandar Abbas for importing goods into Afghanistan, which are then brought into Pakistan.”
The OICCI proposed some steps to reduce the misuse of the APTTA, include: agreeing quantitative limits based on genuine Afghan needs and the size of its population, harmonizing duty and tax rates to remove the incentive to evade the legal levies, and establishing a basis of collecting this at the point of entry into Pakistan for the account of the Afghanistan government.
“Whilst we appreciate the effort FBR is making to improve enforcement, the more sustainable solutions are a combination of quantitative limits and harmonized duty and GST rates with Pakistan Customs having the power to collect the latter on behalf of the Afghan government.
All three of the aforementioned steps are necessary,” the official said.