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SMUGGLINGDefinition:To import or export without paying lawful
customs charges or duties
Smuggling severely harms the economy of a country in
multidimensional ways. Itundermines the local industry, discourages
legal imports and reduces the volume
of revenues collected from duties and levies by the state.
Unfortunately a parallel
underground economy has taken roots in Pakistan. A major
proportion of the
revenue to be collected by the Government is being lost, over
and above the
adverse impact that the smuggled items cause to our industry.
Obviously this can
not be done without connivance of the corrupt officials
including those in the law
enforcement agencies and every one is aware of it but no action
is being taken.
Markets and Shops across the country are flooded with smuggled
goods of any and
all descriptions. Smuggled items through the borders of Iran,
Afghanistan, China,
and the Afghan Transit Trade form a major part of the informal
economy volume ofwhich ranges between 50 to 60 per cent of the
formal economy. Smuggling has
assumed an alarming proportion and turned out to be a parallel
economy, which is
depriving the country of its rightful levies including excise
and customs duty worth
hundreds of billions of Rupees. Thousands of industrial units
have been rendered
sick, due to the availability of smuggled goods in open markets.
Afghan Transit
Trade is the main source of smuggling into Pakistan and its
annual volume has
been estimated about five to six billion dollars, about 70% of
the total smuggling
causing a revenue loss of about 2.5 to 3 billion dollars
annually (which has been
almost tripled during 2008-2010) to the national exchequer.
Afghan imports under
Afghan Transit Trade are actually arranged for back smuggling
into Pakistan with
the help of Afghan traders. It is not possible to determine the
precise amount ofrevenue loss and size of black money or shifting
of money abroad. Revenue loss on
account of smuggling of Afghan transit trade alone, as estimated
by the World
Bank, amounted to US$ 35 billion during nine years from 2001 to
2009. Smuggling
has now become a routine part of all economic activities in
Pakistan which hardly
raises any eye brows nor stirs the slightest fear of the law.
Pakistan is facing the
challenge of measuring and countering enormous revenue leakages
and black
money its size estimated to be three time the regular economy.
People are
bringing in Pakistan petroleum products from Iran which is
cheaper than in
Pakistan. The volume of this trade is estimated to about rupees
two billions. Even
improvised explosive devices are being smuggled via Afghanistan
are contributing
to a climate of fear. Smuggled materials help militants prepare
suicide jackets,explosive-laden vehicles and other sorts of
explosive bombs. Involvement of
Pakistan customs officials in this smuggling racket cannot be
ruled out. With their
connivance the containers registered in the name of NATO
containing alcohol,
expensive spices and other contraband items are also offloaded
in Pakistan.
Another gateway for smuggling i.e. Afghan Transit Trade through
Wahga Border
has been opened by the present regime which would result in a
big chunk of
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Indian goods destined for Afghanistan would ultimately land in
our domestic
market, which would damage the national economy of Pakistan
which is already
dwindling because of the impact of the war on terror and Afghan
transit trade.
It is no secret that Pakistani tax evaders have been
transferring to Swiss banks
huge amounts of money generated through illegal activities by
some politicians,bureaucrats, terrorist networks and businessmen to
Swiss banks. White-collar
crimes are also responsible for facilitating transfer of capital
towards informal
economy either from the black market or the formal economy with
the connivance
of FRBs officials. Due to Pakistans low productivity resulting
from massive
exemptions, poor administration, low threshold, and lack of
transparency and
enforcement, the country faces a massive challenge of balancing
low revenues and
the avaricious politicians, corrupt bureaucrats, and greedy
businessmen, who are
mostly crook, corrupt and tax evaders, succeed to remit this
black money to their
hidden accounts in Switzerland and other European countries.
On the one hand parallel economy in Pakistan is growing at an
alarming rate of 20percent per annum and on the other hand,
according to an estimate, the money
lying in Swiss banks of Pakistanis has reached to the tune of US
$200 billion. The
volume of black money generated in the year 2008-09 alone has
been measured
by the independent sources which is not less than $ 40 billion.
The rent-seekers
and beneficiaries of loan write-offs in Pakistan have also
shifted funds worth
billions of dollars to Switzerland.
To curtail the existing high volume of smuggling through Afghan
Transit Trade
Pakistan needs to revise the transit agreement. Both the
countries should also
reach on a uniform taxation mechanism on imports. Anti-smuggling
and anti-
corruption laws need to be strengthened and their implementation
in letter andspirit through a dedicated staff should be ensured.
Pakistani policy-makers must
realize that a sound development strategy seeks to reduce the
size of the informal
economy and bring into the open resources that lie in the form
of black money.
FBR should remove distortions from the economy, bring all the
sectors and
taxpayers in the tax net, curtail smuggling, curb parallel
economy, and take all the
stakeholders into confidence and make it business friendly. At
the same time, it
should rationalize the taxation system to attract the
influential industrialists to
pay taxes. Measures should also be taken to discourage
under-invoicing and
proper documentation of economy should take place to bring the
informal
economy under the tax net. According to an estimate, presently
tax evaders in
Pakistan annually deprive the country of revenue of over US $20
billion inaggregate but the government, instead of putting them
behind bars, encourages
their unlawful activities.
After signing Avoidance of Double Taxation Treaty with
Switzerland, it is now
possible to retrieve the looted funds if the government under
its Article 25(1),
Pakistan should also seek information regarding Pakistanis
maintaining accounts
in Switzerland as has been done by many other countries in
recent past. A good
