Key Takeaways
- None of the 13 reforms introduced in Finance Act 2025 are 'fully operational'.
- Three reforms are partially operational, while six are administratively initiated.
- Four reforms remain at Stage 0, Legislation Only, awaiting notifications.
A new research by the Policy Research Institute of Market Economy (PRIME) and Transnational Alliance to Combat Illicit Trade (TRACIT) has revealed that none of the tax reforms aimed at combating smuggling, tax evasion, and counterfeit goods are 'fully operational' in Pakistan. The findings were presented during an event held in Islamabad on Wednesday.
The research developed a four-stage framework to track progress on each reform: Stage 0 for legislation only, Stage 1 for administratively initiated actions, Stage 2 for partial operation, and Stage 3 for full-scale implementation with regular outcome tracking. Applying this framework to the 13 reforms introduced in Finance Act 2025, none has reached Stage 3 one year after enactment.
Three of the reforms are at Stage 2, meaning they have been partially operational but not yet fully implemented. Six reforms are at Stage 1, indicating that administrative actions are underway but require new technology or systems to move forward. The remaining four reforms remain at Stage 0, Legislation Only, awaiting government notifications.
Despite these challenges, some progress has been made in certain areas. For instance, the Faceless Customs Assessment System has reduced container clearance time by 39 percent in Karachi. Additionally, more than 119 vehicles have been seized under new rules presuming tampered vehicles to be smuggled in Quetta and Peshawar. Provincial officers have also seized over 86,000 illegal cigarette packets in Punjab and sealed a tobacco manufacturing unit.
However, the Digital Cargo Tracking System, designed to track every shipment crossing Pakistan's borders in real time, is still at the design stage. A South Korean firm was contracted in March this year for its implementation, with an expected rollout of about 18 months from now. Similarly, only five out of planned digital enforcement stations have been partly set up so far, and their central control room remains inactive.
The four reforms stuck at Stage 0 include the Customs Command Fund, which has been notified but has yet to make any payments for informers or enforcement officers. Curbs on high-value transactions by non-filers, a bank-FBR data-sharing mechanism, and new powers to freeze accounts and block property transfers for unregistered persons are all written into law but still await government notification.
Saud Bangash, Resident Director of the Pakistan Business Council (PBC), commented, 'Illicit trade goes far beyond border transit and customs issues. It encompasses any activity that undermines the integrity of our tax system.' He emphasized the need for comprehensive measures to address this issue effectively.
'Illicit trade goes far beyond border transit and customs issues. It encompasses any activity that undermines the integrity of our tax system.'
Saud Bangash, Resident Director, Pakistan Business Council (PBC)
