Dr. Ikramul Haq
A news item in a leading newspaper alleging a revenue loss of Rs.100 billion due to the launch of the Faceless Customs Assessment (FCA) system has been thoroughly rebutted by the Chairman FBR along with his team of senior customs officers during a media briefing today. The report was based on misinterpretation of a preliminary audit report of the Directorate General of Post Clearance Audit (PCA)—Press Statement, FBR, September 15, 2025
The Faceless Customs Assessment (FCA) system, inaugurated by the prime minister last year in Karachi to combat corruption, has incurred a revenue loss of about Rs100 billion in three months. This was revealed in a detailed analysis by the Pakistan Customs Audit — an internal arrangement of the Federal Board of Revenue — spanning December 16, 2024 to March 15, 2025—Faceless Customs system loses Rs. 100bn in three months, Dawn, September 15,2025
In a major system breach, importers have tampered with over 10,000 Goods Declaration (GD) forms by altering originally declared quantities and descriptions of goods in connivance with the Pakistan Single Window (PSW) to evade billions of rupees in taxes—Customs fraud causes loss of billion, The Tribune, March 19, 2025
The government has ordered a fact-finding inquiry after an intelligence agency uncovered a network of 78 alleged corrupt Customs officers and smugglers involved in smuggling non-duty paid goods from Quetta to Punjab and Islamabad—Govt orders inquiry into smuggling, The Tribune, February 15, 2025
The picture that emerges is of gross inefficiency, maladministration and corruption in an organization that is geared to further principally individual and communal self–inertest of a few individuals at the cost of Pakistan and her people—Report on ISAF Container Scam by Office of Federal Tax Ombudsman (January 10, 2011)
The mafia-like operations prevailing in Customs wing of Federal Board of Revenue (FBR), highlighted way back in a 2011 report by Dr. Shoaib Suddle, a retired senior police officer and former Federal Tax Ombudsman (FTO), unfortunately persist even in 2025. A number of recent reports cited above suggest that in fact, the state of affairs has further deteriorated. The situation has not improved even after use of IT-based systems, ostensibly employed to curtail corruption in Customs’ clearance processes. The reason is simple: men behinds machines are the culprits—engaged in mega corruption. Many of them have not been brought to books, even after a lapse of 15 years, despite clear instructions given by the Supreme Court of Pakistan in Suo Moto Case No.16 of 2010 [PLD 2011 SC 997].
In major tax frauds, parties are official(s), tax advisers (sic) and taxpayer(s). Cases where unilateral tax fraud is committed, are rare such as using fictitious bank account(s) to obtain fake refunds etc. However, even in such cases, bank officials are involved with tax officials. Historically, mega tax frauds in Customs have caused losses of billions, with alleged involvement of staff backed by high-ranking officers.
A news report, published in February 2022, revealed that the Customs Intelligence Department “unearthed a network of top officials involved in large-scale misdeclarations of description and value of imported goods in over 900 containers causing losses worth billions to the national exchequer”. The most disturbing aspect of the report was alleged involvement of “collectors or chief collectors linked to political circles or top bureaucracy at the federal level, using this clout to their advantage and causing huge revenue losses to the national exchequer”.
The report mentioned: “…. corruption has become so vivid at the collectorate level that DG Customs Intelligence Muhammad Zahid had sent several letters to FBR Chairman Shabbar Zaidi for taking action against the involved officials”. While lamenting that “no action was taken against those officers involved in the corruption”, the report mentioned that “only a few customs officers posted in Peshawar and Quetta were transferred and relieved from their job with immediate effect”.
Earlier, a report of 2020 revealed that the competent authority “dismissed seven customs officials from service over their alleged involvement in wheat smuggling in the backdrop of wheat shortage and unbridled flour prices across the country”. Among the sacked officials were “four collectors, additional collectors and deputy commissioners, who were part of the Torkham and Chaman Customs operations”.
In February 2025, Shehbaz Rana, a well-respected journalist covering FBR, reported: “Thirty-seven allegedly corrupt Customs officials and 41 smugglers have been identified as part of the network, which is said to have smuggled various goods, including cigarettes, tyres, and clothes, from Quetta to major consumption centers in Punjab”.
The report claims: “Independent studies have suggested that cigarette smuggling alone is causing Rs250 billion ($900 million) in revenue losses”. The report further reveals: “FBR and the military establishment have jointly initiated an effort to tackle smuggling, which is severely damaging the economy and undermining domestic production. The involvement of FBR officials in the smuggling network raises serious concerns about the extent of the network’s penetration within the country, which could undermine the civil-military efforts to combat illegal trade”.
Premier Shehbaz Sharif, taking a lot of credit of operationalisation of Pakistan Single Window (PSW) in March 2025, failed to take appropriate action against those who allegedly caused revenue loss of billions at its opening. The mega scam, as per report, “has shaken the belief that …document carrying details of importing companies, agents, imported goods, and due duties and taxes once filed online, cannot be altered or changed”. The modus operandi to defeat software was simple: “the importer-PSW officer nexus targeted GD forms originally declared at Karachi port but destined for inland dry ports such as Peshawar, Multan, Lahore, or Faisalabad. The common method of tampering involved declaring at least two types of goods in a GD one subject to a high customs duty and another with a lower duty rate”.
In the above backdrop, the Press release of FBR claiming that its Chairman emphasized in the media briefing that “the leaked audit observations, cited in the report, were preliminary, exaggerated, and in some cases factually incorrect”, is more in the nature of a cover-up. The report (161 pages) gives a detailed analysis after “scrutiny of 13,140 goods declarations (GDs)”, detecting “several discrepancies in 2,530 GDs”, raising serious concerns about “quality of assessments, indicating revenue and compliance risks”. Without giving an opportunity to Customs Audit to prove the veracity of findings, Press briefing by FBR Chairman, even otherwise, was not a prudent move.
The reports by credible journalists quoted above confirm beyond any doubt that tax evasion and loot of national wealth continue unabated, courtesy unholy alliance between unscrupulous tax advisers, greedy businesspersons and corrupt tax officials. Evasion of customs duty of billions of rupees is not possible without the connivance of this trio. It is time for the Chairman FBR to read the directions of Supreme Court in Suo Moto Case No.16 of 2010.
After considering ‘Report on ISAF Container Scam by Office of Federal Tax Ombudsman’ and one-man Commission Report of Ramzan Bhatti, ex-Member Customs, the highest court of the land passed strictures against FBR. It also asked for implementing the Commission’s recommendations but until today, no action has been taken against the culprits—the same is the fate of three mega frauds involving senior officers of Customs wing discussed above during the last five years.
The Supreme Court of Pakistan in its order of March 4, 2013 in CMA No.2243 & 3683 of 2012 in SMC No.16 of 2010 held: “The performance of the FBR, as indicated by the report, now submitted is far from satisfactory. Despite a lapse of almost one and a half year since the Report was compiled by the Federal Tax Ombudsman, no progress worth mentioning has been made for the recovery of the loss identified, which is regrettable”. After 12 years of this order, it appears, even the Supreme Court has lost track of it—FBR as usual has not retrieved even a single penny from quantified collosal revenue loss.
Suo moto actions from 2009 to 2018 by the Supreme Court became its favourite pastime coming down tough on politicians and government officials and passing several orders but failing to establish any effective follow-up. This raised serious questions about solving governance issues through suo moto powers, now curtailed through 26th Constitutional Amendment, even where issues of fundamental rights are involved thus nullifying the fundamental duty of the highest court to safeguard and enforce fundamental rights of the people. Resultantly, there is perpetual and wilful non-compliance of judicial orders by Executive.
While dealing with the case of missing containers the Supreme Court failed to order installing equipment to x-ray and scan incoming and outgoing containers—non-intrusive inspection of cargo and vehicles. These scanners, including drive-through and gantry systems, help to improve security, reduce physical inspections, detect contraband, and increase cargo flow efficiency by allowing for the rapid scanning of containers and trucks. This is where the actual problem lies. Corruption can be minimized by using technology and better monitoring system, but neither the Court nor the government has ever seriously pondered about this solution.
Way back in 2012, in an op-ed by this scribe, as co-author, observed: “It is a disturbing reality that all containers—both inbound and outbound—are not scanned in Pakistan. In importation, the collector-businessman mafia deprives the nation of billions of rupees in the form of evaded duties—Customs, Sales Tax and Federal Excise Duty, wherever applicable”.
The goods (grossly undervalued) once released without proper valuation remain outside scope of taxation under sales tax and income tax. This is the main cause of generation of underground economy. Customs mafia is not ready to accept simple technological reforms of scanning all the containers and baggage. The incumbent Chairman FBR must understand that proper collection of duties at import stage would automatically lead to better collection of all taxes, namely general sales tax (GST), federal excise duty (FED) and income tax.
In its order of August 30, 2013 in SMC No.16 of 2010, Supreme Court noted:
“In order to further ascertain the correct position about the smuggling of arms and ammunition as well as evasion of the duty on different items at the Ports of Karachi and Bin Qasim, we are of the opinion that there must be a strict check and full duty should be recovered because on account of evasion of custom duty, black money is also generated, which allegedly flows inside the country particularly in the city of Karachi and is used by the accused persons in order to promote their criminal activities throughout the country”.
Supreme Court’s order for strict check on ports was ignored as it could have dried the speed money that goes into so-called common pool for all the officers/staff of Customs. A viable solution to counter tax evasion at the importation stage is installing of radiographic scanners that use x-rays or gamma rays to provide an image of the internal contents of containers. This not only increases detection rate of contraband hidden in containers but also helps to detect any secret compartments within the containers. Such scanners are working successfully at the thirty busiest ports of the world, from Shanghai, Singapore, Los Angeles, Rotterdam to Jebel Ali etc—FBR must install the same without wasting any further time.
The plea by FBR that it requires huge investment in buying equipment and training personnel is nothing but a flimsy excuse (in fact motivated by ulterior motives, as it would end their notorious era of mega corruption). The use of radiographic scanners is necessary to counter precious revenue leakages. One hopes that the Premier Shehbaz Sharif and Finance Minister Muhammad Aurangzeb, will take up this matter on priority basis.
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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.