FBR warns insurers to comply with guarantee standards

ISLAMABAD: Tax authorities warned insurance firms on Monday over
their role in underwriting billions of rupees of Afghan transit
trade as several of them allegedly went into default after misusing
the trade facility.FBR Chairman Shabbar Zaidi told The News that
some insurance companies were not charging average fee on Afghan
transit trade (ATT) cargoes as directed by the apex tax authority
and therefore they were given warning to immediately comply with
the instructions of the revenue board.“FBR has observed that some
insurance companies are not properly complying with the
requirements and fee condition with respect to guarantees on Afghan
transit goods,” Zaidi said in a tweet. “Such entities are
warned to correct their mechanism and immediately correct their
system,” he said.Under the customs laws, Afghan importers through
customs agents or transport operators in Pakistan are required to
furnish financial security in the form of insurance guarantee for
goods destined for Afghanistan, from an insurance company that
remains valid for at least one year and encashable in Pakistan for
ensuring the fulfillment of any obligation arising out of customs
transit operation between Pakistan and Afghanistan. The amount of
financial security for transit operation is determined by system on
the basis of the assessment done by customs at the office of
departure so that it covers all import levies, according to the
customs rules.Insurance companies, however, argued against their
noncompliance with the rules. “We are providing insurance
services for securing the duty for the FBR,” an official at
Crescent Star Insurance Limited said, requesting anonymity. “In
case goods fail to reach Afghanistan then the insurance companies
pay the guaranteed amount in terms of customs duty,” the official
added.Sources said the insurance guarantee condition was placed to
ensure safe transportation of goods up to Afghanistan under the
transit treaty. But the FBR found that the issued guarantees worth
billions of rupees were not encashed so the FBR issued instructions
for insurance companies to avoid such practices and comply with the
instructions in order to avoid any punitive actions, the sources
said.“These guarantees could not be encashed from banks and the
stuck amount has gone into millions and billions of rupees,” one
customs official confirmed.The FBR chairman took this timely step
as Pakistan is ready to open up Torkham border on 24/7 basis.
Although Pakistan has placed clearing system on 24-hour basis
Afghan side closes border gates in evening and nights. Afghan trade
transit was recently resumed.Officials said the bilateral trade has
dropped in recent years,but now it is hoped that the bilateral
trade volume would increase gradually in months and years ahead and
could reach $5 billion.The insurance firm’s official further said
the transit goods crosses the borders in different time period and
once the customs authorities in Afghanistan verify that the goods
have reached the guarantees provided by insurance companies are
automatically deleted/eliminated.The official expressed surprise
over the remarks of the FBR chairman. “On what ground he is
blaming the insurance companies.”Sources in Pakistan Customs said
financial guarantee of both provided by insurance companies or
banks in terms of Afghan transit trade is acceptable. The purpose
of ensuring guarantee against Afghan transit trade is to secure the
duty and taxes for national exchequer.The sources said in the past
there was a mega scam in Afghan transit trade and in which the
Federal Tax Ombudsman reported huge losses of duty and taxes. The
procedure of financial guarantee was adopted in order to secure the
duty and taxes.Muhammad Aamir, general secretary of Karachi Customs
Agents Association said customs agents dealing with transit trade
work on behalf of Afghan importers and also ensure financial
guarantee from insurance companies.Aamir said the insurance
guarantee is applicable till the clearance of goods and when the
customs authorities in Afghanistan verify cargo arrival.Aamir,
however, said there are concerns that national trade data is
showing decline in imports of Pakistan. On the other hand, the
import under transit trade is rising, he said.Aamir said if there
is clearance of transit trade on fake and forged documents, then
there would be fraud at all the stages. The Afghan customs verify
the entry of goods in their territory, he added.Zeba Bashir,
director of Directorate of Transit Trade said there is no issue of
financial guarantees by insurance companies. The customs secures
the duty and taxes through financial guarantees and there are no
issues in this regard on those goods destined for Afghanistan, she
added.
Source: FS – All-News2-Economy
FBR warns insurers to comply with guarantee standards