Government severely under-reporting official import figures

Under-invoicing and mis-declaration of imports is causing major loss to the national exchequer

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LAHORE: A significant disparity has been reported between trade figures of imports by Pakistan and the corresponding figures of exports to Pakistan as shared by top ten partner countries for 2016, according to a Pakistan Business Council (PBC) report.

According to PBC, there is always a chance of marginal discrepancy being reported in freight on board (FOB) and cost insurance and freight (CIF) prices, but their analysis reveals a high level of variance between the two figures as revealed in the chart below:

Image Credits: Pakistan Business Council

The variance figure in Pakistan’s reported imports and export figures shared by trading partners above have a major deviation. For example, the variation as per PBC’s evaluation shows a 29.89 percent disparity in reported figures of Pakistan and Germany, which stands at the highest level.

Although, Germany is not amongst Pakistan’s largest trading partners, but with China the figure is reported at around 26 percent, followed by Malaysia 23.88 percent, 12.02 percent with South Korea, 9.61 percent Thailand, Canada 5.55 percent, 4.7 percent USA and 0.93 percent Indonesia for 2016.

With India it stands at -3.15 percent and Japan -1.52 percent. Considering China is amongst Pakistan’s largest trading partners, this percentage of 26 percentage translates into $3.5 billion in nominal terms.

Comparing figure of imports made by Pakistan from China and vice versa exports from the latter by PBC revealed an extraordinary difference. During the year 2016, apparel import from China were recorded at $60 million compared against reported exports by China of $329 million.

A similar pattern can be seen in the data reported by other trading partners mentioned above in the chart as China’s reported figures are five times higher than Pakistan’ volume of imports simultaneously.

Image Credits: PBC

It shows major under-invoicing and mis-declaration of imports is happening at Pakistan’s end. Textile imports from China are coming into Pakistan without paying the actual amount of duty, causing massive losses to national exchequer and also destroying the domestic industry.

This anomaly highlights that Pakistan urgently needs updating of its reporting mechanism to restrict the mis-declaration of imports, which is also robbing national exchequer of precious tax collection during customs.

Furthermore, the disparity in synthetic fibre and garments imported from China by Pakistan for 2016 were recorded at $269 million compared to exported figures in same period of $739 million by China. This translates into Pakistan’s reported imports of synthetic fibres from China are just 36% of the figures reported by China as exports to Pakistan.

Image Credits: PBC

According to an e-commerce expert, items ordered from AliExpress, a popular e-commerce website based in China irrespective of value are mostly under-invoiced to avoid custom duties and stated as gifts when couriered to Pakistan.

So, a $20 item, could be under-invoiced to $3 for example and this disparity in figures of goods actual value, deprives Pakistan of major duty surcharges which could be collected at the port.