ISLAMABAD: Pakistan economy has facing a huge losses due to under invoicing of imports from China and in first financial year of present regime national exchequer has face a loss of Rs 92 billion due to under invoicing of imports from china.
This was disclosed in Auditor General of Pakistan report which was submitted to finance ministry for presenting in the National Assembly.
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Auditor Genral of Pakistan observed that in case of violation, maximum penalty should be imposed to curb the under invoicing.
AGP said in his report that, Under invoicing means the provision of an invoice that states price as less than is actually paid. This might be done on an import in order to reduce the amount that will be collected by an ad valorem tariff.
Pakistan and China entered into a treaty on 24.11.2006 under which Pakistan allowed exemption and concession on import of 5909 items being produced and manufactured in China. A comparison of United Nations Statistics Division’s figures of imports by Pakistan from China and corresponding figures of exports from China revealed that the goods imported from china were consistently under invoiced by the importers to gain illegal financial benefits. Resultantly, the national exchequer had to sustain revenue loss of Rs 92016 million approximately in three years.
AGP observed that, the issue was raised in Oct, 2013 and discussed in a meeting on 20th Nov, 2013 at FBR Islamabad. The department replied that the difference between the imports reported by Pakistan and exports reported by China could not be as much as observed by Audit as other countries like India, USA and China also had variation in their mutual import and export figures. Further, there was also a difference of viewpoint regarding recording of imports and exports. Anyhow, FBR was cognizant of the need for assessing the goods at fair value. The initiatives like developing of valuation gateway, developing valuation data base of imports from various countries and regions, issuance of valuation rulings to curb both individual and group under invoicing had been taken.
Report further said that, FBR directed the Director-General, Valuation to ensure that imports from china are brought under focus and rulings may be issued to check under invoicing. Audit requested FBR to provide a copy of instructions issued to Directorate of valuation Karachi. Audit is of the view that the issue has roots in violation of law by the importers and lenient treatment of violations by the customs authorities. Variation in the figures is of least concern.
Audit requires FBR to devise a mechanism to verify the actual price of the imported commodity directly from the manufacturers and suppliers of the major trade partners and invoices of huge value may be referred to respective embassies of Pakistan especially where free trade agreements had been signed. It is also recommended that availability of invoices in the containers may be ensured that in case of violation, maximum penalty may be imposed to curb under invoicing. This will surely help in improving tax to GDP ratio.
