Measures proposed to tackle under-invoicing by commercial importers

Measures proposed to tackle under-invoicing by commercial importers

The Pakistan Business Council (PBC) has proposed several measures to the Federal Board of Revenue (FBR) in order to tackle the problem of under-invoicing by commercial importers.

Firstly, the PBC in its proposals for budget 2023-2024, recommends that the FBR should verify the sales and income returns submitted by commercial importers by matching their monthly sales with the sales declared in their annual income tax return and credit entries in all their business bank accounts. If there is any discrepancy, the commercial importers should submit a reconciliation with justifiable reasons.

The PBC also suggests that taxes and duties deposited by local manufacturers and commercial importers should be made public, and that commercial importers should present a certificate from auditors stating that at least 70% of imported items have been exported or sold to registered manufacturers in order to claim adjustment of taxes deducted at the import stage. This would help to increase the overall tax base and prevent massive under-invoicing and dumping of imported products.

The council highlights the lack of publicly available information regarding the values at which various custom check posts clear import consignments, which encourages unscrupulous importers to under-declare the value of consignments to evade government revenues. The PBC recommends that values at which import shipments are cleared through PRAL or CARE need to be made publicly available, and that the government should insist on Electronic Data Interchange (EDI) for both FTA and non-FTA imports from China. The requirement of EDI should be made compulsory for imports from FTA / PTA partner countries in future.

The PBC proposes that the Import Trade Price (ITP) be fixed depending on the industry, e.g., on the basis of country of origin, weight, volume, etc., after discussion with stakeholders including local manufacturers. ITPs should be fixed for most items prone to mis-declaration such as consumer goods, and margins of commercial importers should 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. The Customs Act should be amended to allow local manufacturers to participate in fixing the ITP, as mere representation from commercial importers poses a risk of biased decisions that will hurt overall tax/duties collection as well as the local manufacturing industry.

Finally, for items prone to under-invoicing and mis-declaration, the PBC suggests that the FBR should designate one or two ports (including 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. 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 that appears undervalued.

PBC proposes massive tax burden on non-filers in upcoming budget