Measures proposed to curb under invoicing by commercial importers

Measures proposed to curb under invoicing by commercial importers

KARACHI: Pakistan Business Council (PBC) has recommended the authorities to take additional measures to stop massive under invoicing by commercial importers.

In its proposals for the budget 2021/2022, the PBC said that across the board massive under invoicing and dumping of imported products has been increasing.

Information regarding values at which various custom check posts clear import consignments is not publicly available.

This encourages unscrupulous importers to under-declare the value of consignments to evade government revenues.

There are massive leakages in the Afghan Transit Trade (ATT) and smuggled goods are being openly sold in all major shopping centers of the country.

Customs however is not willing to act against smuggled products citing lack of cooperation from local authorities.

The PBC recommended the following:

a) Values at which import shipments are cleared through PRAL or CARE need to be publicly available.

b) The Government of Pakistan must insist of Electronic Data Interchange (EDI), for both FTA and non-FTA imports from China. In future the requirement of EDI should be made compulsory for imports from FTA / PTA partner countries.

c) Depending on industry, the Import Trade Price (ITP) be fixed e.g. on the basis of country of origin, weight, volume etc. after discussion with stakeholders. ITP’s may be fixed for most items prone to mis-declaration such as consumer goods and margins of commercial importers be monitored to assess the value of subsequent supply of imported goods. A certificate to this effect should be issued by auditors of commercial importers.

d) For items, prone to under invoicing and mis-declaration, FBR should designate one or two ports (including the dry ports) for clearing of import consignments. This will allow better monitoring of the import consignments where chances of mis-declaration are on a higher side.

e) Additionally, the old Customs General Order 25 needs to be revived with a provision that local manufacturers be given the option to buy at a 15% premium, any consignment which appears undervalued.

f) Taxes and duties deposited by local manufacturers and commercial importers should be published.

g) The rate of tax collected from commercial importers be increased by at least by 2%. Presently, tax collected from commercial importers is treated as Final Tax.

In order to avoid burdening of genuine commercial importers, we would recommend that the income tax collected at import stage be treated as an advance tax.

h) In order to allow commercial importers to claim adjustment of taxes deducted at import stage, commercial importers should be asked to present certificate from auditors that at least 70% of imported items have been exported or sold to registered manufacturers. This will also help increase the overall tax base.

i) Monthly sales declared by commercial importers should be matched with sales declared in annual income tax return as well as the credit entries in all business bank accounts. In case of any discrepancy, a reconciliation with justifiable reasons should be submitted by the commercial importers

j) Online CREST system must be amended in a way to trace sales along with value addition thereon of person to whom supplies were made by Commercial importers.

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