Debunking Truth: Unravelling Money Laundering & Smuggling Secrets of Pakistan
This thread ๐งต is to help the government and people on the right side, otherwise, newspapers avoid sharing
Starts with basics, process and last solution:
This thread ๐งต is to help the government and people on the right side, otherwise, newspapers avoid sharing
Starts with basics, process and last solution:
Basics:
1. In Pakistan, we see many imported items in our daily lives, from chocolates to high-tech televisions. If some decent person starts an import business & pays all taxes, he fails because many are selling without any duties or taxes. Legal business is difficult at times.
1. In Pakistan, we see many imported items in our daily lives, from chocolates to high-tech televisions. If some decent person starts an import business & pays all taxes, he fails because many are selling without any duties or taxes. Legal business is difficult at times.
2. Pakistan has one of the highest import duties on all items (mostly 50%). Legally importing simple things can make their prices go way up. Surprisingly, all are available in Pakistan,
like cosmetics from one big store in Islamabad, which may be worth more than 50 crores, but the Pakistan Bureau of Statistics' official number is only 30 crores in annual imports.
3. We always think that these items are smuggled, but an important question remains: how does the money go out of Pakistan for these duty-free imports.
How Money Laundering Happens:
1. Agents: They are present in all countries where overseas Pakistanis are present, including the UAE, Saudi Arabia, Europe, and even the USA. They purchase dollars from overseas Pakistanis and also through exchange companies, at least 2% premium
1. Agents: They are present in all countries where overseas Pakistanis are present, including the UAE, Saudi Arabia, Europe, and even the USA. They purchase dollars from overseas Pakistanis and also through exchange companies, at least 2% premium
(now a days they are paying 10%+ more).
2. Some exporters have companies in the UAE, etc., which receive goods and transfer them further (showing lower exports to the Pakistan government so they can get a better USD rate and sell USDs in the black market).
2. Some exporters have companies in the UAE, etc., which receive goods and transfer them further (showing lower exports to the Pakistan government so they can get a better USD rate and sell USDs in the black market).
3. Importers pay PKRs to the workers of these agents in Pakistan, and these workers transfer this money to the overseas Pakistanis' or exporters' homes in Pakistan bank accounts or in cash (charging their services fees but still getting a good dollar rate back home).
4. Now exporters/overseas Pakistanis got a better USD rate & importers' dollars are available overseas because agents keep this amount there.
receive the remaining amount through agents.
receive the remaining amount through agents.
5. Importers also have fake companies in the UAE, Japan, and China that get USD from these agents, and these companies also issue small legal orders of $5K to $50K through legal banking channels.
6. These fake companies pay the full amount to the foreign companies for purchases of goods, usually 5Xโ10X more than the legal transfer, and send goods to Pakistan with an official transfer rate declaration.
7. In Pakistan, customs officials charge taxes according to legal transfer rates (sometimes bribed too). Like if X product costs $100K in China but a fake company sends it to Pakistan for $10K, customs will charge 50% tax and product will cost $105K to importer in Pakistan,
while officially it should be $150K.
Consequences:
1. Smuggling
2. Tax loss
3. Pakistani companies are not able to compete even with high duties.
These high duties actually encourage the black market to grow. Now, cherry on top, SBP stopped opening LCs above $50K, so actually,
Consequences:
1. Smuggling
2. Tax loss
3. Pakistani companies are not able to compete even with high duties.
These high duties actually encourage the black market to grow. Now, cherry on top, SBP stopped opening LCs above $50K, so actually,
it's party time for these agents, importers, & black market dealers.
Solution:
1. No strict checks can work here, because it's at grass-roots level. The only way to make it work is if State Bank offers a better exchange rate to exporters/overseas Pakistanis through legal way.
Solution:
1. No strict checks can work here, because it's at grass-roots level. The only way to make it work is if State Bank offers a better exchange rate to exporters/overseas Pakistanis through legal way.
2. The government should reduce duties so that black market business will be more expensive than legal channels. It looks bad, but it will not be as bad as the USDs are already outflooding; we just don't see it.
3. Also, customs needs a lot of improvements.
This thread excludes smuggling from other ways.
Lastly, we can pray for improvement & share things with others so someone can work towards a solution.
This thread excludes smuggling from other ways.
Lastly, we can pray for improvement & share things with others so someone can work towards a solution.
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