In Pakistan, an ongoing struggle against illicit cross-border trade is paired with a silent menace—under-invoicing imports disguised as legitimate trade. This dual challenge is causing significant economic losses to the nation and its manufacturing sector.
The interim government, in a concerted effort to curb rampant smuggling through the Afghan transit trade route, has introduced a pivotal decision. Islamabad has strengthened the transit regime by imposing a ban on the import of specific items passing through its territory. These prohibited items, including tyres, black tea, cosmetics, vacuum flasks, home appliances, fabrics, and dry fruits, are increasingly making their way into Pakistani markets, often circumventing traditional trade channels.
To bolster control, a 10 percent fee has been applied to certain imports such as chocolates, footwear, machinery, blankets, and garments. Additionally, a new requirement demands bank guarantees equivalent to the duties and taxes on imported goods under the Afghan Transit Trade Agreement (ATTA). These guarantees can be forfeited if the imported goods fail to reach their intended destination in Kabul, serving as a deterrent against misdirected shipments.
However, the challenge of illegal cross-border trade is not the sole threat to Pakistan’s economy and manufacturing industry. Under-invoicing of imports at the country’s airports and seaports, under the pretext of legal trade, is a significant area of concern, inflicting substantial losses on the manufacturing sector.
The Pakistan Business Council (PBC), referencing data from the International Trade Centre (ITC), has pointed out a staggering $7.5 billion disparity between the export values declared by four countries—China, Singapore, Germany, and the UK—when compared to the corresponding import values reported by Pakistan Customs in 2022. This glaring gap has led to an estimated tax revenue loss ranging from Rs579 billion to Rs964 billion at prevailing exchange rates due to the undervaluation of imports from these countries.
Furthermore, it is believed that the under-invoicing of imports, particularly high-end items such as branded watches, designer purses, and luxury perfumes, originating from Dubai and other Gulf countries, surpasses that from the aforementioned four countries. Unfortunately, the exact value of under-invoiced imports from Gulf nations remains elusive as these countries do not share trade data with the ITC.
The battle against illicit trade, encompassing cross-border smuggling and under-invoiced imports, remains a pressing concern for Pakistan, necessitating comprehensive measures to safeguard the nation’s economy and manufacturing industry.
