PM seeks input on proposed autonomous Federal Board of Customs

ISLAMABAD: The Prime Minister has sought input from the Chairman of the Federal Board of Revenue on the proposed autonomous Federal Board of Customs (FBC), sources revealed on Monday.

According to the sources, the caretaker government has proposed to establish a separate customs division under the Ministry of Finance with an autonomous Federal Board of Customs (FBC).

The incumbent board in council, having a majority of Income Tax officials, lacks the legal mandate and necessary representation from other ministries to deal with issues related to trade facilitation, border protection, and market control, so there is a dire need for an autonomous FBC.

The proposed board shall be headed by the Chairman of the FBC, who shall also be the de facto Secretary of the Customs Division.

The board shall have eleven members, five of whom shall be from concerned ministries, including the Ministry of Commerce, Ministry of the Interior, Ministry of Industries and Production, Ministry of Foreign Affairs, and Ministry of Maritime Affairs, with the objective of creating a technologically advanced agency that facilitates trade, promotes industrial growth, raises revenue, protects Pakistan’s environment, health, food security, cultural heritage, and contributes to internal enabling Pakistan to be a partner of the global community.

Over time, the Customs’ role in trade facilitation has superseded that of revenue mobilization. “70% of WCO’s member countries have re-organised their customs administration as an entity separate from the countries’ revenue authorities,” sources added.

Sources further said that a reformed Customs shall be able to efficiently perform its multiple critical roles of prime importance for the country, thus leading Pakistan to actualize its growth and prosperity potential.

There is a prevalent agreement that Pakistan Customs has been unable to perform at its optimum in functions of critical importance like countering smuggling, trade facilitation, intellectual property rights enforcement, transit trade, internal security, and food security.

Instead of focusing on domestic revenue mobilisation, Pakistan has a misplaced burden of tax revenue on international trade, which has adversely affected trade facilitation, stymieing export-led growth in the country.

Sources said that Pakistan has not been able to participate in emerging trends such as global supply chains and re-exports of intermediate inputs due to its high taxes on international trade, while adding that Pakistan has significantly brought down customs duties on imports over the years, but the overall incidence of para tariffs is still much higher, adding burden to international trade.

Pakistan’s bias towards import tariffs is acting as a tax on its exports, thus frustrating the goal of increasing exports.

Moreover, trade taxes have unintended effects on economic activities; for instance, increased trade taxes can be the source of smuggling (estimated at $7 billion according to a recent survey) and evasion of taxes, in addition to opening ways for IPR infringement and the flight of foreign direct investment.

This has further exacerbated the problems of loose market controls, over-invoicing, and corruption.

Whether the plan is executed with the same zeal with which it was started has yet to be seen.

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