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FBR to minimise chances of tax evasion, issue ruling for valuation

FBR to minimise chances of tax evasion, issue ruling for valuation

ISLAMABAD: Federal Board of Revenue is identifying several import items that are prone to under-invoicing in a move to assess their actual value for levying customs duty and allied taxes, senior official of FBR have said.

Wrong declarations and under-invoicing result in a significant loss of revenue.

FBR Chairman Tariq Bajwa has said that products at high risk of being under-invoiced are being identified. FBR, he said, has already given a presentation to Finance Minister Ishaq Dar for formal approval of the FBR’s proposal.

The declaration of low value by importers for assessment of duty and taxes results in a huge revenue loss to the national exchequer. This not only helps importers save customs duty, but also 17 per cent sales tax that is slapped on the duty paid value, and the six per cent advance income tax that is paid on the sales tax-paid value of goods.

FBR is going to issue a ruling on values of under-invoiced products. The ruling can be issued under section 20A of the Customs Act. The rulings will help the customs department create a reference book of values for all products.

While, for the customs department, the increase in the value of imports is a matter of raising revenue; for the industrialists, cheaper under-invoiced goods are equally a serious issue. These goods are crowding out domestically manufactured goods from the domestic market. This menace is believed to be one of the reasons for closure of local industries, which has left thousands workers jobless.

The importer disposes his stock at under-invoiced landed cost, but the real retail price of that item is much higher than the under-invoiced cost. This works out to a competitive advantage for the importer of a commodity, and to the detriment of the locally manufactured product.

In the last five years, no other case was finalized for tariff protection. However, some customs officials believe that increasing the value of imported products for duties and taxes may make these goods attractive for smuggling. The usual channel that has been used for dumping smuggled goods into the domestic market is the Afghan Transit Trade.

Much of the goods imported under the transit trade, either through Iranian or Pakistani ports, ultimately land in the Bara market of Peshawar.

Tackling under-invoicing does not appear to be a simple issue. There is a need to carefully study it and then come up with an approach to enforce the true valuation of imported goods. FBR will have to fine tune its policy of value assessment while keeping in view the constant global price fluctuations, and also improve its governance accordingly; fully implement its trade-defensive laws like anti-dumping and countervailing duties; provide a quick remedy to the domestic industry against cheap imports and restructure the tariff commission.