KARACHI: The government is suffering huge revenue losses due to massive under invoicing, evasion and misdeclaration on the goods imported from United Arab Emirates (UAE), which resulted in lower prices of such products in local markets comparing other global economies, said a report released by Pakistan Business Council. The PBC report said that under-invoiced and mis-declared imports from UAE are considered to be worse since they have an advantage of formal customs clearance documents that allows them to feed into the formal economy. Earlier, FBR said that the country losses around 150 billion rupees each year due to under-invoicing on imports of goods. It is part of the 600 billion rupees which lost each year due to tax evasion and misuse of concessionary duties. In addition to the industry’s concerns, the government of Pakistan loses revenue owing to reduced duty, sales tax and income tax collections at the import stage. It said, “Large differentials between UAE and world prices from one year to another without any plausible explanation or a subsequent increase in demand would appear to indicate discrepancy in valuations at customs.” Such discrepancy in prices are seen in sectors such as machinery and electronic equipment, dyes and other chemical agents, plastics, products of base metals such as iron and steel, and parts of vehicles. The PBC analyzed that no direct correlation between prices and market share was found along products that showed differentials between UAE and world prices. However, inferences from this study suggest that the impact of such invoice discrepancies in imports from the UAE are in many cases difficult to ascertain and may even be exaggerated. It is also mentioned that the low volume of imports from the UAE and only a small portion of those imports showing distortion in price valuations, the adverse impact of these discrepancies is nominal. The Council report said that country has suffered losses to revenue mainly from exemption of duties under the Pakistan China Free Trade Agreement (FTA) (0.23 billion dollar in 2012) or under the Afghan Transit Trade (ATT) (estimated to be 2.5 billion dollar). In addition, China’s share in Pakistan’s non-petroleum imports nearly doubled to 24 percent from 13 percent between 2006 and 2012 after the implementation of the FTA in 2007. Trade diversion toward China may also have resulted in reduced share of UAE in Pakistan’s non-petroleum imports. The following selected products from top UAE imports to Pakistan that demonstrate marked differences in prices are included: Pakistan’s Imports of degras and residues from UAE is only eight percent of country’s total imports of this product, however prices are consistently lower comparatively to the world prices as of 60 dollars per ton since 2005. The PBC said, “Market share was a mere six percent in 2010 the same year that the highest differential in prices is recorded.” Similarly, UAE prices are significantly lower than world prices for food preparations- the differential exceeding in some years as much as US$1,000 per ton. “Despite this significant difference, UAE’s share in Pakistan’s total imports of this product is only one percent in 2012, coming down from five percent in 2006,” analysts said. The council said that UAE’s share in Pakistan’s total imports from the world increased from 11 percent in 2005 to 51 percent in 2012. For minerals and chemicals, world and UAE prices had remained similar with little differences in year 2005-2012, when world prices fell by 73 percent in 2012, UAE prices fell by almost at the same rate. Whereas, with that parallel drop there was a sudden increase in import share of UAE which was almost double in share in Pakistan’s total imports during the time period. However, the price differences of ethyl acetate ranges from 100 dollar to 200 dollar per ton between UAE and the rest of the world. In fact during that time period no imports were recorded in 2009 and 2010 from UAE. “While imports from the world have fallen since 2009, the share of imports from the UAE has increased from one percent to 20 percent between 2009 and 2012,” the PBC said. It had been witnessed that UAE prices were reportedly higher than world prices prior to 2007. It added, “UAE’s share in imports increased significantly in 2011 and 2012 once the price differential moved in favor of imports from the UAE.” The PBC said that UAE’s imports share was recorded four percent for pharmaceuticals possibly due to the price differential as small quantities were imported in 2007 and 2011 when UAE prices were shown to be marginally higher than world prices. There is a noticeable difference in prices in 2008 and 2009 when UAE decreased its prices by 40 percent while world prices were increasing. However, import prices for non-anti biotic hormones from UAE and the world had witnessed fluctuations over the time period of 2005 and 2012. “Medicaments are an example where there is a major price differential between UAE and world prices. In 2005, countries other than UAE were charging 30,000 dollars per ton more than UAE but Pakistan’s imports from the UAE were a mere 1.1 percent of its total imports. UAE’s market share decreased to 0.1 percent in 2012,” report of PBC said. Prices are extremely incongruous. From 2005 to 2007, UAE prices were ¼th of the world prices, which are later shown to have increased matching world prices in 2011 and 2012. The council said that share of imports of prepared driers, pigments from UAE increased from one percent to 21 percent in the period 2005 and 2011. This share was maintained in 2012 even though UAE prices increased by about $1,000 per ton. Imports from the UAE appear to have sustained their market shares at the increased prices. “Since UAE is a net importer of non-refractory surface preparations for facades, walls, floors, ceilings, it is likely that Pakistan’s imports are being routed from other sources through the UAE,” the PBC report said. The council said that UAE is a net importer of perfumes and shampoos while import prices from the UAE remained largely similar to world prices between 2005 and 2009, which were much lower between the period of 2010 and 2012. However, till 2008, UAE had more than 20 percent market share in import of perfumes by Pakistan. This is when imports from UAE cost the same as other sources. Similarly for hair shampoos, price differential between UAE and the world were the highest in 2011 and 2012- about $500 and $800 per ton respectively- but UAE’s share in the Pakistani market was only two percent. Overall Pakistan’s imports have been increasing in both these categories. The report of PBC said, “UAE is a net importer of beauty or make-up preparations; sunscreen or sun tan preparations, so price changes cannot be attributed to a reduction in production costs. Market shares also decreased to eight percent in 2008 and three percent in 2012 when price differential between UAE and Pakistan’s other import sources was the highest i.e. $500 and $1300 per ton.” UAE was an expensive source of room perfuming and deodorizing preparations products from 2005 to 2007 where it held average market share of 15 percent along the mentioned time period. This share fell to seven percent and 13 percent in 2010 and 2011 even though UAE prices fell by a margin of $600 per ton. However, change in prices appears to have had little or no impact on demand. When the price differential was the highest in 2010, UAE’s market share was seven percent while it was 17 percent in 2012 when UAE cost the same as other sources of this product. The report said that UAE prices as compared to world prices have remained much lower for finishing agents since 2005. Differential was almost $1,000 per ton in 2007. UAE prices have displayed much larger fluctuations than world prices- rising and falling more rapidly while world prices have been steadily increasing as UAE’s share decreased from five percent in 2005 to one percent in 2007. The report said that import prices for Polymers for UAE as compared to world prices have shown a significant drop between 2008 and 2010. While world prices have steadily increased, UAE prices have significantly decreased. From a peak differential of $1,100 per ton in 2010, UAE prices have stabilized and since 2011 maintaining a price differential of $500 per ton in 2011 and 2012. Conversely, market share in 2005 was significantly high which was 53 percent but rapidly fell to 19 percent in 2006 and five percent in 2009. Curiously, the lowest market share is recorded at 0.01 percent in 2010 where UAE and world prices had the highest differential throughout the time period. It is noticed that UAE and world prices for polyvinyle chloride were close until 2008 when UAE prices suddenly jumped by 30 percent. From 2009, UAE prices had dropped significantly and in 2012, UAE imports were $1,100 per ton cheaper. In contrast, market share had managed to decrease from one percent in 2006 to 0.3 percent in 2007. Even though UAE prices fell as compared to world prices in 2011 and again in 2012, market share remained 0.5 percent. “This product is another interesting case wherein UAE imports were costlier in 2006 and 2007 until 2008. Thereafter, UAE prices fell by 1,000 dollars per ton till 2010. Market share in this year was only one percent and in fact, market share between the years 2005 and 2012 oscillated between one percent and two percent,” report said. The PBC report said that import of non-cellular film and sheets of polymers from UAE were costlier than other sources from 2005 to 2007.However, UAE prices were seen to fall after 2007 maintaining a differential of as high as $700 per ton with the world. Market share however fluctuated between two percent and five percent. However, non-cellular sheets of plastics showed that UAE prices remained below world prices, maintaining on average, a differential of $200 per ton between 2006 and 2012. The UAE’s market share has gone up from six percent to 18 percent between 2010 and 2012. However, it was also witnessed that import of sacks and bags made of plastic from the UAE were slightly expensive between 2005 and 2009 as compared to world prices. A differential of about $500 per ton was seen in 2011 which increased a little in 2012. However market share remained two percent in both years. “Share of UAE imports in Pakistan’s total imports from the world has decreased since 2005 from seven percent to two percent in 2010 and remained constant,” report said. In 2012, UAE’s share in Pakistan’s imports from the world stood at 51 percent for sanitary rolls and 58 percent in cartons and boxes. However, sanitary rolls of paper and cartons/boxes of paper cost between 800 dollar to 1200 dollar per ton. UAE import prices of both these products are marginally lower than world prices but maintain the same pattern of growth rates as world prices. Uncoated paper used for printing and writing imported from UAE has shown consistently lower prices since 2005 compared to world prices. In 2011 prices have been leveled. This is low value product and even 200 dollar per ton price differential translates into a 30 percent to 35 percent price difference. In this case, even due to lower prices the UAE have failed to translate into a higher market share in Pakistan’s imports. The report indicated that waste and scrap show similar market shares patterns. For waste and scrap, market share was 16 percent when UAE prices were only marginally lower than world prices but rose to 25 percent when UAE and the world charged the same price. In 2011, when the price differential was the highest where UAE was charging about $150 per ton less than other sources, market share was merely 13 percent. This shows that changes in prices are not impacting demand. Similarly for ferrous waste and scrap, market was 11 percent in both 2005 and 2011 even though price differential between UAE and the world was much higher in 2012 than in 2005. Pakistan is a net importer of cold rolled iron and steel from the world but UAE is not a major source of this product. Its market share has remained less than one percent between 2005 and 2012. However, UAE has been charging marginally less than other sources. Prices for casings, tubing and drill pipe for oil drilling have shown significant highs and lows for both UAE and other suppliers. On the other hand, UAE’s share in Pakistan’s market is seen to decrease from three percent in 2005 to 0.3 percent in 2007 and again in 2012. According to report, in 2007, when UAE prices fell by 23 percent while world prices increased, market share for UAE hit its lowest of 0.3 percent. Such discrepancy continues throughout the time period. Even though UAE prices have remained lower than the world for Pakistan’s import of tubes, pipes and hollow profiles of iron and steel, it is not a top supplier of this product. Its market share was five percent in 2005 which became one percent in 2006, 2008 and 2009. After 2009, UAE and world prices both increased. However, price differences also increased reaching a differential of about 100 dollar per ton in 2011. This is the year where market share increased from two percent in 2010 to 12 percent in 2011. It appears that UAE’s fall in prices legitimately led to greater demand. Pakistan’s imports of bars and rods of aluminum from UAE were 66 percent of its total imports of the product in 2005. This is the year where UAE was charging the same as other sources. This share reached its lowest at seven percent in 2007 where UAE and other sources of imports charged about the same. However, UAE prices appeared to have fallen since, where UAE was charging about 1,300 dollar per ton less than the world in 2009. Market share in this year was 20 percent which is a major step down from a share of 66 percent recorded in 2005. However this share improved to 50 percent in 2012. There may or may not discrepancy in invoicing along this product. Screwdriver bits and lapping tools is an interesting product to study with regards to Pakistan’s imports from the UAE. In 2005, when UAE prices were significantly lower than world prices (3,000 dollars per ton), market share for UAE was only 0.4 percent. This share increased to nine percent in 2006 even though UAE prices appeared to have rapidly increased by 119 percent within a year. “Similarly in 2010, when UAE was apparently charging about 1,500 dollar per ton less than other suppliers, market share fell from two percent in 2009 to 0.4 percent,” the PBC report said. Import of parts of purifying machinery apparatus from the UAE remained less than five percent of Pakistan’s total imports from the world between the years 2005 and 2012. UAE’s market share was three percent in 2005 when UAE charged the same as our sources of the product as well as in 2012 when UAE charged more than 10,000 dollar per ton less than the world. Similar to other products selected in the study, UAE is one of the major suppliers of parts of boring and sinking machinery. Its share in Pakistan’s market is 24 percent in 2005, 25 percent in 2007 and 26 percent in 2011. UAE prices have more or less followed the same pattern as world prices. The year 2006 saw a significant difference of 7,000 dollar per ton between UAE and Pakistan’s other sources of this product. Market share however, fell from 24 percent to 12 percent in this year. Similarly, in 2012, market share fell to seven percent from a high of 26 percent even though UAE prices did not have a significant increase as compared to world prices. UAE is not a major supplier of parts of machines for Pakistan. In 2005, it was contributing merely 0.5 percent to the Pakistan’s market even though it was cheaper by a margin of 4,000 dollar per ton compared to other countries. This share since increased to three percent in 2009 and five percent in 2010. UAE prices remained low throughout the time period leveling only in 2011, which did not lead to any significant decrease in UAE’s market share from five percent to four percent, the report said. Even though UAE prices fell by 21 percent in 2012, market share did not increased but remained four percent. UAE prices of boards and panels were at their peak in 2005 costing about 20,000 dollar per ton more than the world. They fell by 56 percent in 2006 and again increased in 2007. In contrast, whereas UAE market share increased from 2005 to 2006 due to a fall in its prices, the share further increased in 2007 despite an increase in prices- costing about 10,000 dollar per ton more than other sources for the same product. UAE prices were much lower in 2008, 2010, 2011 and 2012 when market shares were four percent, three percent, five percent and three percent respectively. This shows that a fall in prices or cheaper product from the UAE did not necessarily result in higher market share. Valuation of imports from the UAE was lower for insulated wire of copper in 2005, 2008 and 2011. This discrepancy between the valuations for imports from the UAE versus valuations for imports from other sources was as high as 1,000 dollar per ton. Imports from the UAE have started to rise since 2010 when the market share was 25 percent, up from negligible levels in 2009. In 2012, imports from the UAE constituted 44 percent of Pakistan’s imports in this category. Lower prices ought to have attracted greater market demand but such is not the case. Similar to insulated wires of copper, insulated wire also shows lower valuations for imports from the UAE in 2005, 2006, 2008, 2009 and 2012. The price differential ranges $300 per ton to 1100 dollar per ton. Report said that fluctuations in market shares are also visible. In 2005 where UAE prices were lower by 300 dollar per ton, imports from the UAE constituted 48 percent of Pakistan’s imports. In 2012 when the price differential was 1,100 dollar per ton the UAE’s share in Pakistan’s imports was only seven percent. Market share for UAE based special purpose motor vehicles and all items under the HS code remained less than five percent between 2005 and 2012. Interestingly, UAE prices while remaining closer to world prices between 2005 and 2011, suddenly dropped in 2012 when the differential increased to 13,000 dollar per ton however market share was unable to exceed one percent. Pakistan imported 19 tons of Radiators for motor vehicles in 2005 and 29 tons in 2006. In 2012, this quantity became 205 tons. UAE prices have shown a downward trend since 2007 and valuations are currently 2,000 dollar per ton lower for imports from the UAE. Market share remained below five percent between 2007 and 2011, rising to six percent in 2012. Data shows a large price differential between UAE and world prices throughout the time period of 2005 and 2012; with a particularly large difference in 2007 (nearly 240,000 dollar per tons). Given that lower prices should lead to market share gains, in 2007, only one ton of dirigibles were imported from UAE whereas 15 tons were imported from the world at much higher prices. Between 2007 and 2012, Pakistan’s import of dirigibles increased from 15 tons to 242 tons however UAE which had a lower valuation only had three percent of the market
Posted on: Mon, 01 Sep 2014 06:56:58 +0000
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