Tyre smuggling continues in Pakistan

Black market fuelled by tax loop-hole

The Pakistani tyre market is subject to widespread under-invoicing, which continues to lead to smuggling and illegal cross border trade. It’s nothing new, but local news sources are reporting that it is now happening at a “colossal” scale due to the Afghanistan-Pakistan Transit Trade Agreement (APTTA), citing data produced by the Pakistan Business Council (PBC).

For example, the Pakistan Tribune reports that in 2014 “Pakistan imported truck and bus tyres valuing US$190 million at an average unit price of $84 [£53.40; 75.30 euros]” compared with an average per-unit price of $142. The point is these prices are so low that Pakistani importers are “saving millions in import duty” by only declaring “half of the original value of the commodity”.

The Tribune suggests that such under-invoicing is not possible without the complicity of tax officials. But some unnamed local market sources also blame the lack of support for domestic manufacturing: “Pakistan does not encourage its manufacturing sector which is why renowned international tyre manufacturers do not invest here. In presence of current tyre smuggling and under-invoicing, no new tyre company will invest in Pakistan”.

According to the Tribune, Pakistan imported car tyres worth $18.3 million in 2014 at an average price of $23 per unit, down 35 per cent from the average international price of a car tyre of about $35 per unit.

The report also draws out the international nature of the problem – neighbouring Afghanistan imported almost the same amount of car tyres in 2014 as Pakistan, despite the fact that Afghanistan’s population is less than a sixth of the size and its economy a 10th the size of Pakistan’s.

Tyre imports are said to many originate from China, while the rest of the market is divided by Japan, Germany, Italy and South Korea.

The last remaining domestic producer – General Tyre and Rubber Company (GTR) – only produces car tyres. GTR meets 23 per cent of the total tyre demand in the country, while according to industry estimates, the country imports 40 per cent of the tyres from different countries. This calculation leaves 37 per cent of the market share in the hands of tyre smugglers. Many of the tyres brought in by the smugglers are said to be low-quality used and “refurbished tyres”.