Lack of accurate data on illicit trade hampering decision making

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INACCURATE figures regarding the magnitude of illicit trade in Pakistan have become a major obstacle towards effective economic decisions and policymaking.

Important decisions related to the economy require that these decisions be based on accurate and unbiased researches.

The non-availability, in most industries, and incomplete statistics on illicit trade are becoming a means of obscuring the on-ground realities faced by legal industries and businesses.

Although it is a fact that many sectors are adversely affected by illicit trade which is not only denting the documented sector but also hurting Government’s revenue collection but it has been observed that contradictory claims are being presented by different factions on the size of illicit trade.

AmnaSaleem, representative for Stop Illegal Trade (SIT), an advisory forum for fighting against illicit trade in the country, said “It is of primary significance to conduct a research on Government level to identify the magnitude of illicit trade in the country.”

“Federal and provincial governments to establish accurate and unbiased estimates so that national decision-making and policies to document the economy can be made effective,” she added.

Amna termed illegal trade as a threat to Pakistan’s economy and national security and said that important decisions related to the economy need to be based on accurate and unbiased statistics.

“Tyres and cigarettes are among the sectors where tax-evasion, smuggling and under-invoicing are creating problems for the legal industry as well as becoming a source of huge losses to exchequer,” she highlighted.

Amna said that efforts to eradicate illicit trade in cigarettes and tyres have not been fruitful due to inaccurate and incomplete statistics being spread by civil society organizations.

According to the local tyre industry, the annual consumption of tyres in Pakistan is 10 million, of which the local industry meets 20% of the demand.

Around 15% of the demand is met by legally imported tyres, while 65% of tyres consumption is met by illegal invoicing and smuggled tyres by under-invoicing.

On the other hand, Pakistan Tyre Importers and Dealers Association declared annual consumption of passenger car tyres in Pakistan around 4.25 million out of which consumption of 1.7 million tyres met by imported tyres while locally produced tyres fulfil demand of 1.19 million tyres annually.

According to the association, the remaining consumption of 500,000 tyres is met by smuggled tyres.

Similarly, illicit non-tax paid cigarettes constitute a major share of the cigarette market.

According to former chairman FBR Shabbar Zaidi, the market share of illegal cigarettes in Pakistan is almost 40%, which coincides with the figures issued by international research institutes.

Prime Minister Imran Khan has also, on multiple occasions, acknowledged that 40% of the market share of cigarettes is captured by illicit non-tax paid cigarettes.

On the other hand, the market share of these illicit non-tax paid cigarettes is being estimated at 9% by certain civil society organizations, which is far less than the estimates issued by credible research institutions.

She said that it is beyond any reasonable comprehension as to why these groups are presenting inaccurate and incomplete statistics to undermine the share of market of these illicit non-tax paid cigarettes.

The impact of the inaccurate statistics can be gauged from the fact that the Social Policy Development Institute, one of the leading economic research and advocacy institutions, also presented its analysis and recommendations based on these misleading statistics of illicit cigarette trade.

“Decisions based on inaccurate statistics are actually benefiting illicit trade in Pakistan.

Because of these inaccurate statistics, the government and policy makers are opting for increased tax measures instead of cracking down on illicit trade, or bringing these illicit non-compliant products into the tax-net,” she reasoned.

She said that it is the responsibility of the federal and provincial governments to identify the motives of those who provide inaccurate and misleading statistics and to take disciplinary action against such factions so that important economic decisions are based on accurate and verified statistics.

The issue will not be resolved and accurate counter measures against illicit trade and smuggling cannot be ensured until and unless Government and relevant authorities conduct a comprehensive research to identify the size of illicit sector, its beneficiaries and supporters.