None of tax reforms to fight smuggling and tax evasion fully operational: research
ISLAMABAD: A new research by the Policy Research Institute of Market Economy (PRIME) and the Transnational Alliance to Combat Illicit Trade (TRACIT) on Wednesday revealed that none of the tax reforms to fight smuggling, tax evasion and counterfeit goods are “fully operational,” while three reforms are partially operational.
Finance Act 2025 introduced 13 reforms to fight smuggling, tax evasion and counterfeit goods.
In this regard, an event was organised here on Wednesday.
The brief, “Combating Illicit Trade in Pakistan: A Framework for Tracking Progress on Reforms,” developed a four-stage framework to track progress on each reform. A reform sits at Stage 0, Legislation Only, if the law is passed but no procurement, staffing or enforcement activity is recorded; Stage 1, Administratively Initiated, once contracting, procurement or staffing is under way; Stage 2, Partially Operational, once it is live in at least one location and producing results such as seizures; and Stage 3, Fully Operational, once it runs at full scale with outcomes tracked and published regularly.
The objective of the framework is to assess each reform against the objective the government has set for it, identify where implementation is falling short, establish a baseline for monitoring outcomes, and evaluate efforts in curtailing the grey market.
Applying this framework to all 13 reforms, the brief finds that none has reached Stage 3 one year after enactment. Three reforms are Partially Operational, six are Administratively Initiated, and four remain at Stage 0, Legislation Only, awaiting the notifications needed to take effect.
The reforms at Stage 2 are the ones enforcement agencies could act on right away with their existing capacity. The Faceless Customs Assessment System has cut container clearance time in Karachi by 39 percent.
Under new rules presuming tampered vehicles to be smuggled, more than 119 vehicles have been seized in Quetta and Peshawar. Provincial officers, newly empowered to act against counterfeit goods, have seized over 86,000 illegal cigarette packets in Punjab and sealed a tobacco manufacturing unit.
The six reforms at Stage 1 need new technology or systems and are moving more slowly. The Digital Cargo Tracking System, meant to track every shipment crossing Pakistan’s borders in real time, is still at the design stage, with a South Korean firm contracted in March this year and rollout expected in about 18 months. The Digital Enforcement Stations, planned for high-risk smuggling routes, have only five stations partly set up so far, and their central control room is not yet running.
The four reforms stuck at Stage 0 have not moved beyond the law itself. The Customs Command Fund, meant to reward informers and enforcement officers, has been notified but has made no payments. 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.
Expanding on this, Saud Bangash, Resident Director, Pakistan Business Council (PBC), stated, “Illicit trade goes far beyond border transit and customs issues. It encompasses any commercial activity operating outside the formal net. This informal economy actively spoils the market for the formal sector and is a root cause of de-industrialization.”
The brief links this progress to Pakistan’s ranking of 101 out of 158 countries on the Illicit Trade Index 2025, prepared by TRACIT, where the country scores lowest on monitoring goods within domestic supply chains. It says closing this gap depends less on new laws and more on institutions changing how they work.
The brief indicates that the direction of these reforms is right, and enforcement agencies are operating in reform areas where the existing infrastructure is sufficient. However, mere legislation is not sufficient, and implementation of reforms is crucial to achieve results and curb illicit trade. The reforms that require institutions to change how they work are the ones now falling behind, and they need urgent attention.
Private sector representatives echoed this urgent need for action and political will.
Fahad Barlas, Vice President of the Rawalpindi Chamber of Commerce and Industry, stated, “Counterfeit goods and smuggling remain the biggest menaces in our society. It is the primary factor hampering our micro and macroeconomic stability.”
Engineer Arshad Dad, Chief Advisor of the Constructor Association of Pakistan, argued that the core issue is a lack of political will, urging authorities to map and eradicate illicit manufacturing hubs directly.
Rana Ihsaan Afzal, Coordinator to the Prime Minister (Commerce), concluded the discussion by stating: “We can never succeed in combatting illicit trade unless there is provincial ownership. Under the recently rolled out National Tariff Policy, we are heading towards zero Additional Customs Duty, zero Regulatory Duty, and four slabs of customs duty peaking at 15%. This will obviously reduce the incentive to smuggle.”
Copyright Business Recorder, 2026