Something somewhat strange appeared in the import data of the
Import bill for tea dropped 36% to
This should have meant a sizeable decrease in imported quantity. But there was a reduction of only 0.26% to 73,834 tons from 74,027 tons in the comparable period of the previous year.
There are two possible explanations for the phenomenon.
“That’s where smuggling is playing its part,” said Hamid S Khawaja, former chairman of
At over 120,000 tons a year,
But traders say the high level of taxes on imports has encouraged smuggling over the years. “This difference you see in the
The government collects a total of 38% in taxes from tea sales. This includes sales tax, import duty and other charges. All of them are levied ad-valorem, which means on the value, in percentage terms.
“So we are leaving a large incentive for traders to smuggle the expensive variety and increase their margins by avoiding taxes,” said Khawaja. “Instead of the 38% taxes, the smugglers pay 12% to 15% bribe and transportation charge, pocketing the remaining difference.”
According to PTA, around 100,000 tons of tea is smuggled via Quetta and
Other traders say that the tea import bill shrunk because prices have crashed in
“They have the largest output. Average price has come down to
But this decrease has not affected the retail price of the tea in
Curbing the menace
Industry people say only way to discourage smuggling is to cut taxes. They insist this strategy has already worked.
The Pakistan People’s Party (PPP) government slashed sales tax on tea import to 5% in the 2012-13 budget, which led to the immediate decrease in retail price and increased imports through formal channels.
“Unfortunately, the branded tea companies didn’t keep their word for long and retail prices were increased after a few months,” said another trader. The sales tax was revised upwards by the interim government after only few months.
Some industry people that smuggling has become so entrenched in the market that it would take years for the government to control it.
“We have actually accepted that smuggled products are a part of life. Every tea cup you drink at the roadside cafes or restaurants in
Do we even need tea?
According to the State Bank of
Government also classifies tea as a necessity and uses it in the consumer price index. “Yet the quantum of taxes is so high. This doesn’t make sense,” said Janoo.
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