Federal Board of Revenue detects $2bn in under invoicing between Pakistan and China

Federal Board of Revenue on Tuesday admitted a discrepancy of $2 billion in values of goods imported from China in 2011 owing to under-invoicing, which according to experts have caused revenue loss to exchequer.

“The issue of disparity in the trade figures of the two countries –Pakistan and China — in addition to the element of under-invoicing is attributed to different accounting periods and methodologies,” said .

Importers declare value of the products lower than the actual one to legally evade payment of duty and taxes as Customs Department charge duties and taxes on declared value of goods.

Official trade figures posted on the website of International Trade Centre (ITC) the value of China’s exports to Pakistan during 2011 was $8.4 billion. Pakistan imports were $6.4 billion. The discrepancy was thus of only $2 billion.

Mr Shaikh rejected the claim that under-invoicing amounting to $8 billion as reported in different trade meetings.

He further informed that disparity in trade figures of China is not unique to Pakistan and such variations also exist between trade figures of China and some of its other trading partners.

Pakistan Customs has taken up this matter with China Customs in the past also and the matter is being again attended to, he added.

A source in directorate of customs valuation told Dawn on Tuesday that share of Chinese imports in Pakistan’s total imports stood at 17 per cent.

The customs valuation department has determined values for 12 per cent importable products from China leaving only five per cent products value for which will yet to be determined.

According to the source, the determination of value in such a large quantity leaves a small margin for under-invoicing.

Majority of the items, values for which were determined included art silk cloth, electronics, electrical goods, cosmetics, cutlery, crockery and miscellaneous items.

According to the source, the discrepancy in import value is because of imports via a third country. The Chinese export figures only show the final destination irrespective of the country used for transit, while Pakistani imports figures are based on LCs opened with the State Bank of Pakistan, claimed the source.

The imports from China via a third country did not reflect in State Bank figures, the source further clarified.

Contrary to this, economic survey 2011-12 also reported approximately Rs14 billion revenue losses because of customs duties exemptions given on Chinese products imports under the free trade agreement.

According to FBR statement, the undesirable fact of under-invoicing cannot be denied and Pakistan Customs has in the past and at present also taken legal and administrative measures to address this problem.