The import trade black market in Pakistan refers to the illegal trade of goods that are imported into the country surpassing the proper customs procedures or paying the necessary taxes and duties. The major loop holes used by the import trade black market in Pakistan are:
- Smuggling
- Under Invoicing
- Misclassification of goods
- Bribery and corruption
Smuggling of goods by importers
Goods are brought into the country through unofficial channels, such as across the border from neighboring countries or through illegal sea routes. These smuggled goods passes through no legal doors which puts a huge burden on tax collection volume. As a result of smuggling, importer wins and state losses, all we need a win-win approach to pump up the economy.
Under invoicing
Importers declare lower values for the goods being imported, in order to pay lower taxes and duties. This allows them to sell the goods at a lower price and undercut legitimate importers. The tax enforcement agencies mostly involved in this category.
Misclassification of goods by custom department
Importers misclassify goods to pay lower taxes and duties. For example, they may declare a luxury item as a basic necessity to pay lower taxes. Misclassification of goods resembles somehow with under invoicing but still has a huge difference. This strategy benefits the elites only which means it has the potential to fill-up the tax packet.
Bribery and corruptions in government departments
Importers may bribe customs officials to avoid inspections or pay lower taxes and duties. The most common way to seek exception in our country which is so illegally allowed in major part of the country.
It is important to note that engaging in the import trade black market is illegal and can have serious consequences. It harms the economy by depriving the government of revenue and creating unfair competition with legitimate importers.
Effects of black market on Pakistan’s currency
The import trade black market in Pakistan, and the methods used by those engaged in it, can have a huge impact on the currency value. Some potential effects on Pakistan’s currency due to points as mentioned at the start of the article are:
Smuggling
Smuggling can result in the influx of foreign currency into the country, which can de value Pakistan’s rupees. This is because when people exchange their foreign currency for Pakistani rupees, there is an oversupply of the rupee in the market, leading to a decrease in its market value.
Under-invoicing
Under-invoicing can lead to a loss of revenue for the government, which can impact the country’s foreign exchange reserves. Reserves retention is one of the major challenges of the country due to imbalance if import and export goods. If the government has less foreign currency to support the value of the Pakistani rupee, this can lead to a decrease in the currency’s value
In the current time, Pakistan’s currency is rapidly sinking down due to less foreign reserves.
Misclassification of goods
Misclassification of goods can also result in a loss of revenue for the government, which can impact foreign exchange reserves and the value of the Pakistani rupee.
Bribery and corruption
Bribery and corruption can lead to a loss of trust in the government and can negatively impact foreign investment in the country. This can lead to a decrease in the value of the Pakistani rupee.
The most common tactic used to take salvation of tax burden by importers which is basically a slow poison for country’s economy.
How to control Pakistan’s black market?
Pakistan import trade black market modulation and control requires a multifaceted approach. Here are some most effective approaches to control the black market of Pakistan:
- To control smuggling, the government needs to invest in better border security measures to prevent the entry of smuggled goods. This can include increasing the number of checkpoints, using technology such as scanners, and increasing the training and capacity of border security personnel.
- To control under invoicing, the government can increase penalties for importers who are caught under-invoicing, as well as increasing enforcement efforts to identify cases of under-invoicing. The government can also improve its auditing and inspection procedures to identify potential cases of under-invoicing.
- To control the misclassification of goods, the government can improve its customs procedures and invest in better technology and training for customs officials to identify and classify goods correctly. The government can also increase penalties for importers who are caught misclassifying goods.
- To control bribery and corruption, the government needs to improve transparency and accountability in its customs procedures. This can include increasing the use of technology such as online systems for customs clearance, reducing the discretion of customs officials, and increasing the penalties for corruption.
Overall, controlling the import trade black market requires a coordinated effort from the government, customs officials, and other stakeholders. The government needs to invest in better technology, training, and enforcement efforts to ensure that customs procedures are transparent, efficient, and effective.
How to make custom more effective in Pakistan?
Improving the effectiveness of customs in Pakistan requires a multiple approach.
Technological upgradation
Customs can be made more effective through the use of technology. Pakistan can invest in modernizing its customs systems and procedures, such as implementing electronic filing and payment systems, online tracking of shipments, and advanced risk management systems to identify and target high-risk shipments for inspection.
Capacity building of custom enforcement agencies
Training and capacity building programs can help to improve the skills and knowledge of customs officials in Pakistan. This includes training in areas such as risk management, valuation, classification, and enforcement. Additionally, Pakistan can invest in hiring more customs officials to increase the capacity of the customs service.
Transparency and accountability in the system
Improving transparency and accountability in customs procedures can help to reduce corruption and increase trust in the customs service. This includes implementing measures such as public disclosure of regulations and procedures, increasing the use of technology to reduce discretionary decision-making, and creating a mechanism for complaints and grievances.
Cooperation and coordination with the public
Collaboration and coordination between customs and other relevant agencies, such as law enforcement agencies, can help to improve the effectiveness of customs in Pakistan. This includes sharing information and intelligence to identify and target high-risk shipments, and developing joint strategies and operations to address smuggling and other illegal activities.
Simplification of procedures to follow
Simplifying customs procedures can help to reduce the time and cost of customs clearance for legitimate traders. This includes reducing paperwork, streamlining procedures, and implementing a risk-based approach to customs inspections.
Value of PKR if all suggestions goes in the right direction
The implementation of the measures to control the import trade black market and to improve the effectiveness of customs in Pakistan can have a positive impact on the value of the Pakistani rupee. some effective ways to improve value of money are:
Increased revenue
By reducing smuggling, under-invoicing, and misclassification of goods, the government can increase revenue from imports, which can boost foreign exchange reserves and support the value of the Pakistani rupee.
Increased confidence
Improving the transparency and accountability of customs procedures, and reducing corruption, can increase confidence in the Pakistani economy among foreign investors and traders. This can lead to increased foreign investment and a stronger Pakistani rupee.
Improved efficiency
By simplifying customs procedures, using technology, and increasing capacity, the time and cost of customs clearance for legitimate traders can be reduced. This can lead to increased trade and a stronger Pakistani rupee.
Reduced inflation
By reducing the smuggling of goods, the availability of smuggled goods in the market can be reduced, which can help to reduce inflation and stabilize the value of PKR.
Overall, the implementation of the measures to control the import trade black market and to improve the effectiveness of customs in Pakistan can help to uplift and strengthen the value PKR. However, the impact on the value of the currency would depend on various factors such as the level of implementation, the efficiency of the measures, and the overall economic and political stability of Pakistan.
