AGP identifies irregularities worth Rs. 78 billion in customs duty

ISLAMABAD: The Auditor General of Pakistan (AGP) has identified tax evasion and irregularities of worth Rs. 78 billion in customs duty evasion.

Of the total monetary value of audit observations, the recovery of Rs39.41bn was pointed out in the audit, according to the AGP’s Audit Report 2016-17.

The report will soon be placed before the Public Accounts Committee (PAC). It was already introduced in the National Assembly.

Tax experts say the dodging of this magnitude was not possible without the connivance of officials who must have aided people to evade duty and taxes by allowing use of non-assessment, short-assessment and non-realisation of duty in several hundred cases.

The report estimates a blockage of revenue estimated at Rs27.992bn due to non-encashment of financial instruments. It was recommended to pursue the court cases, finalise the adjudication process.

The revenue loss to the tune of Rs11.87bn was reported in the report due to non-imposition of fine and penalty.

In 51,319 cases, 13 field offices of FBR either did not impose fine or failed to recover the penalty despite the fact that as per import documents like invoice, packing list, examination reports, the importers/exporters committed offences such as mis-declaration of weight, quantity, value, description and origin of imported goods.

Besides, a loss of Rs4.39bn was incurred due to misclassification of imported goods. In 5,511 cases, 14 field offices of FBR cleared imported goods under incorrect Pakistan Customs Tariff (PCT) headings attracting lower rates of duty instead of correct PCT headings with higher rates.

Another loss of Rs3.64bn was detected due to allowing unauthorised exemptions/concessions. In 1,190 cases, Model Customs Collectorates Islamabad and Appraisement (East), Karachi allowed exemption of customs duty and allied taxes to exploration and production companies, their contractors and service providers on imported plant, machinery and equipment.

A loss of Rs3.411bn was occurred due to non/short realisation of withholding tax. In 86,725 cases, examination of goods declaration/shipping bills reveal that 14 field offices of FBR either did not collect withholding tax on imported/exported goods or collected it at lower rates than leviable.

Moreover, in 2,444 cases 14 offices of FBR did not dispose of confiscated goods/vehicles including perishable goods with reasonable expenditure. This resulted in blockage of government revenue due to non-disposal of confiscated goods/vehicles worth Rs4.47bn.

A loss of Rs3.35bn short-realisation of revenue due to grant of inadmissible exemption of customs duty under the 5th Schedule. The imported goods specified under this schedule are liable to customs duty at the rates specified under the table of the schedule.

The report for the year 2016-17 unearthed non-realisation of duty and taxes from the export-oriented units at Rs2.74bn. Another case of short-realiation of regulatory duty on imported goods was estimated at Rs1.32bn.

The audit report show short-realisation of revenue Rs1.14bn due to inadmissible exemption, Rs763.98m blockage due to non-clearance of unclaimed imported general manifests, another Rs620m loss due to under-valuation of imported goods, loss of Rs666.29m due to grant of inadmissible benefit of SRO, Rs576.44m due to non-realisation of duty and taxes plus warehousing surcharge on overstayed goods and Rs533.582m due to inadmissible exemption of customs duty under SRO.

The blockage of revenue due to non-disposal of wastage and factory rejected was estimated at Rs467.37m, another Rs1.2bn due to non-recovery of adjudged government dues, Rs382.78m due to non-realisation of value addition tax, Rs343.13m short realisation of sales tax due to grant of inadmissible exemption under a SRO, Rs332.57m due to non-realisation of duty and taxes on disposal of machinery/spares, Rs88.65m due to non/short recovery of assessed government dues, Rs196.46m due to non-realisation of additional customs duty on imported goods.