BEIJING: Trade statistics variation have shown by Pakistan and Chinese customs authorities needs to be addressed by implementation of transparent, coherent and fully integrated global customs valuation system with a strict check on over and under-invoicing,” the President of the Pak-China Joint Chamber of Commerce and Industry, Shah Faisal Afridi said in a statement on Thursday.
He said the values and prices were altered through false-invoicing, over-invoicing, under-invoicing and smuggling. “Some official reports say some $4.4bn under invoicing is being committed in imports from China. Under-invoicing not only deprive the state of huge revenues but the practice also hurts the domestic industries, which are denied level-playing field because of under-invoiced products, he said adding that this practice should be monitored with strong political will.”
He asserted that establishment of a valuation database and customs modernisation was inconceivable without adequate investment in information technology. “Enormous amount of data requires be analysing and comparing with the declared values which can only be done by employing adequate computing resources. It is imperative that a customs administration wanting to tackle large value mis-declaration be adequately equipped with necessary computer hardware and software.”
He explicated that over- and under-invoicing of exports and imports could have significant tax implications. An exporter, who over-invoices the value of the goods that he ships, might be able to significantly increase the value of the export tax credit or value-added tax (VAT) rebate that he receives. “Similarly, an importer who is under-invoiced for the value of the goods that he receives may be able to significantly reduce the value of the import duties (or customs taxes) that he pays.”
He termed both of these cases as the acute means of trade-based money laundering and abuse of the tax system and claimed thousands of industrial units had been rendered sick, because of the availability of smuggled goods in open markets. “The most glaring example is Afghan Transit Trade which is the main source of smuggling into Pakistan and its annual volume has been estimated about five to six billion dollars, about 70 percent of the total smuggling causing a revenue loss of about 2.5 to 3 billion dollars annually,” he added.
He suggested numerous practical steps to be taken to improve the capacity of national authorities to address the threat of trade-based money laundering, which includes training programs to better identify trade-based money laundering techniques, effective information sharing among competent authorities at the national level, and greater recourses to memoranda of understanding and mutual assistance agreements to strengthen international co-operation. He warned, “If the government fails to control manipulation and alteration in customs value, it will not only cause a continuous revenue loss but also create a hostile trading environment for honest traders by distorting the market.”
