ISLAMABAD: In what appears to be a last resort, Pakistan Customs has linked curbing the menace of under-invoicing by the country’s importers to the inking of an Electronic Data Exchange (EDE) agreement with the United Arab Emirates (UAE).

Over the past few years UAE ports have emerged as a leading source of under-invoicing for Pakistani importers who declare their products at lesser value there in order to reduce their tax payments. The issue of under-invoicing among others was raised at the Federal Board of Revenue (FBR) Policy Board meeting chaired by Finance Adviser Dr Hafeez Shaikh on Thursday.

A well-placed source privy to the meeting told Dawn that Indian goods are also being routed via UAE ports to Pakistan with change in origin. This is a major issue of concern for Pakistani authorities, the source added.

Pakistan has suspended its trade relation with India in reaction to India’s decision to revoke Article 370 of its constitution that granted occupied Kashmir a special status in August 2019.

The FBR Policy Board was briefed over the steps so far taken to control the menace which also include Pakistan’s request to the Emirati authorities for signing the agreement. “We have already requested the UAE authorities in this regard,” the source said. However, no response was received so far, the source added.

Pakistan’s commercial imports excluding oil from UAE stood at $1.6 billion.

The source said Pakistan Customs has requested the Ministry of Finance to take up the issue diplomatically with the Gulf nation for signing of the EDE.

On the income tax side, the FBR has also approached the UAE finance ministry for provision of information on those Pakistanis who have sought iqama (work permit) under the residence by investment scheme in a bid to hide their illegal wealth.

According to the source, under-invoicing from China was minimised to an extent following the electronic exchange of date on import value between the two countries. As a result, the valuation tables of products were also updated.

The valuation tables and other measures will be completed by March 31, 2021, to control under-invoicing, the source said. The existing system will also be upgraded further while the Customs Department will also include Artificial Intelligence in the Customs clearance process by end June 2021, the source added.

An official statement issued after the meeting said that Member Customs Operations Tariq Huda made a detailed presentation on Customs Valuation (under-invoicing) and highlighted measures which would be taken to plug in gaps and enhance the department’s revenues in future.

He informed the meeting that the FBR has issued Valuation Rulings and entered into EDE agreements with China, Iran, Afghanistan, etc to address the issue of under-invoicing of imports effectively. These agreements have yielded positive results, he claimed.

The finance adviser stressed the need to evaluate the clearance time with reference to the regional trading partners in order to make the FBR more competitive.

The policy board meeting was also attended by Minister for Privatisation Mohammad Soomro, Special Assistant to the Prime Minister on Revenue Dr Waqar Masood, Adviser to the PM on Institutional Reforms and Austerity Dr Ishrat Husain and Minister for Industries and Production Hammad Azhar.

Published in Dawn, December 4th, 2020