ISLAMABAD: The prime minister’s recent decision to dismiss over two dozen top officers from Pakistan Customs and the Inland Revenue Service (IRS) following allegations of compromised integrity and competence by intelligence agencies has sparked widespread discontent among the officers.

The officers are now voicing concerns over the alleged harassment and media trial, warning of its detrimental impact on achieving revenue targets just two months before the close of the fiscal year.

The crackdown targets Grade 21 and 22 officers, identified in reports from three intelligence agencies as key figures in a system allegedly facilitating extensive smuggling and revenue loss.

It was finally concluded at the highest level that any strategy to counter smuggling cannot succeed in the presence of Customs’ institutionalised money collection from across the country.

PM’s initiative to tackle Customs corruption will succeed only if FBR’s covert corrupt practices are consistently exposed

The government has now sidelined all senior Customs officers suspected of having been involved or associated with the racket facilitating smuggling and massive under-invoicing, which caused alarming revenue losses. The intelligence agencies finally uncovered the secret mechanisms of moneymaking and revenue losses in the FBR field formations.

Three members of Customs (operations) have been thrown out of their offices in a row. Such members have been traditionally at the highest level of a mechanism that entailed organised revenue machinery from the ports to borders covering Customs collectorates and stations.

The members of Customs operations have traditionally been building teams of puppet officers for the top moneymaking positions in Karachi, Quetta, and Peshawar, and they have been capitalising on each moment of their tenure at the position without any oversight or monitoring mechanisms. The rampant corruption of three Customs collectors in Karachi, which has been taken cognisance of in the recent past, was the result of this unchecked greed at the highest level in the FBR.

Going forward, if the government fails to institute oversight mechanisms for these top Customs slots after the present shakeup, all the efforts made to counter smuggling and revenue evasion facilitated by Customs collectors chosen by the members for the task are likely to go down the drain.

The tax evading importers are known to be paying heavy amounts at scores of Customs checkpoints on the highway from Karachi to the urban centres of Punjab to keep the hands of Customs officers deployed on the highway off their misdeclaration and under-invoicing frauds committed at Karachi ports with the active connivance of Customs collectors and their chosen teams.

There are two points from which signals for all this re­venue fraud emanate — the offices of member Cus­t­oms (operations) and the director general of Customs intelligence, both situated among power corridors in Islamabad.

The position of DG Customs intelligence has always been a posting won by the senior Customs officers through a stiff competition between the aspiring officers’ political connections and their business community networks. The DG does not owe his posting to the FBR chairman or member Customs operations. He bypasses the member Customs operations and reports directly to FBR chief, who is normally an IRS man.

This administrative arrangement gives the DG Customs intelligence a big leverage to run a parallel Customs state. Instead of collecting intelligence on Customs collectors’ potential connivance in promoting smuggling and valuation frauds and the legal and procedural flaws leading to massive revenue leakages, the DG himself can jump into the revenue loss game because he faces intense pressures from the supporters of his posting to return the rewards.

On a deeper investigation, intelligence agenc­ies may find that the formations of Customs intelligence scattered across the country have become a prominent licensor of smuggling and tax evasion.

The offices of Customs intelligence leave their actual and vital job of intelligence collection on the mechanisms and methods of the promotion of smuggling and tax evasion. Instead, they resort to “selective” anti-smuggling actions by seizing the goods of petty persons and by receiving mutually agreed-upon heavy monthlies from the actual and big smugglers. This helps them build fictitious performance figures.

The black sheep in the FBR’s Customs department extort heavy amounts of money for not registering FIRs and thus minimising the heavy costs of smuggling in the cases in which the Customs law requires them to register FIRs.

Customs officers posted at points of clearance of imported goods extract big sums in return for allowing the provisional release of imports at under-invoiced values. The provision of Customs law dealing with the provisional release of imported goods is one of the greatest routes to riches for Customs officers.

The smuggling of transit goods destined for Afghanistan back into Pakistan provides the Customs department a superior and sought-after opportunity to make billions of rupees every month. There is, interestingly, a positive correlation between the quantum of transit imports in Karachi and the moneymaking inclinations in the offices of member Customs operations and the director general of Customs intelligence. One side of the correlation proves the other.

The prime minister’s fresh initiative to make the Customs department realise that the government knows and is looking at its misdeeds is likely to deliver dividends only if secret mechanisms of corrupt practices in the FBR and its field formations are secretly monitored and continuously busted.

However, to cut the tax department’s pervasive corrupt culture from its roots, an out-of-the-box solution is to replace, to begin with, Customs officers of Grades 21 and 22 sitting in the positions of member Customs operat­ions, DG Customs intelligence and the chief collectors of Customs with the Pakistan Administrative Service officers chosen based on integrity. This could bring up the needed surprise in revenue collection in the country.

Published in Dawn, May 2nd, 2024