Countering the Menace of Smuggling

Context: 

Recently, FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) launched a comprehensive report titled Illicit Markets: A Threat to Our National Interests.

About Illicit Markets: A Threat to Our National Interests Report:  

• It examines the impact of illicit trade in five key industries in India:
  • Mobile Phones
  • FMCG-household and personal goods
  • FMCG-packaged foods
  • Tobacco products 
  •  Alcoholic beverages.

Findings of the report:

• The tax-loss to the Centre from illicit trade has jumped by 163% over 10 years.
• The size of illicit markets is very large.
• Household and personal goods and packaged foods together accounting for three-fourths of the total illicit value of goods. 
• The unlawful trade in these industries results in a large amount of employment loss. 

Threats with smuggling:

• Smuggling is a multidimensional issue that has a detrimental impact on the economy and national security. 
• It can further destabilize countries by instigating crime, funding terrorism and generating and circulating black money globally.

How smuggling is a threat to Atmanirbhar Bharat?

• A growing threat to Atmanirbhar Bharat today is the deadly combination of smuggling and massive amounts of misdeclaration that leverage existing treaties and Free Trade Agreements.

Examples which are proving this threat: 

• Cigarettes: Many imported attractive looking cigarette packs do not have the dreadful images that are mandatory under the ‘Cigarettes and Other Tobacco Products Act’ (COTPA) guidelines. 
• Sewing needles: A high rate of sewing needles brought into the country through misdeclaration is causing severe harm to the Indian manufacturers who produce high-quality needles and form part of the country’s SME and MSME ecosystem. 
• Such a kind of materials are damaging the local manufacturing, enjoy cost arbitrage due to tax avoidance, leverage mis declarations and create an opportunity for tax evasion. This has unfortunately created an uneven playing field, and works counter to the vision of an ‘Atmanirbhar Bharat’.

What needs to be done?

• Tax control: Higher taxes cause customers looking for overseas sources. Indian customers are shifting to overseas platforms to avoid this high tax as well as GST, which creates a cost arbitrage opportunity resulting in revenue-loss to the country.
• Technology: Need to involve more technology in monitoring, surveying and chasing smugglers.
• For example, Europe is deploying a new set of high-tech anti-smuggling tools, including a machine that fires part of an atom in containers that helps analyze their contents. 

Conclusion:

• Smugglers are using sophisticated methods and technologies and hence there is a need for technologically advanced and law enforcement to up the game with better cross-border coordination and trade-data reconciliations, beside in-country crackdowns on the grey market.

                                                                                                                                            News Source: The Financial Express