Economy, Domestic Economy

Organizing Imports Can Help Check Smuggling

Organizing Imports Can Help Check SmugglingOrganizing Imports Can Help Check Smuggling

According to official statistics released by Iran’s Central Task Force to Combat the Smuggling of Goods and Currency, $20-25 billion worth of contraband is annually smuggled into and out of the country, Mehr news agency reported.

Official statistics show commodities such as cigarettes, cell phones, cosmetics and medicine top the list.

According to the Islamic Republic of Iran Customs Administration, from Iran’s annual $11 billion in cigarette imports, 25%, or $3.6 billion, is smuggled into the country. Drug trafficking is estimated to be worth $3 billion.

Unconfirmed statistics put the value of illegal cell phone imports at $2 billion, with 85% of cell phones imported to Iran illegally, leading to $200 million in custom tax loss for the government.

Cosmetics smuggling is also a big business, with the official import value at $1 billion. However, the actual value of illegal cosmetic imports is expected to be much more. Officials have repeatedly warned against the high volume of smuggled drugs, bodybuilding supplements and cosmetics to the country.

What is most worrying is that the value of contraband currently stands at nearly half of the average annual trade registered through official channels, and has been increasing year on year, despite various policies and programs put in place to combat smuggling.

Economic experts believe high inflation rates and unemployment are the main reasons behind the growth in smuggling. Prohibition on many products is another root cause of smuggling.

  Legal Barriers

According deputy minister of industry, mine, and trade, Mojtaba Khosrotaj, the government seeks to organize imports by encouraging traders to opt for legal channels instead of smuggling.

“Any measure to combat the smuggling, especially in border provinces, needs to be accompanied by the cooperation of the ministry of industry, mine, and trade and the Free Trade Zone Organization,” Persian economic daily Forsat Emrooz quoted the official as saying.

The implementation of such a measure would not be easy for the government, he said, given the extensive scope of smuggling activities and the huge profit involved in the illegal practice.

As a solution for legalizing illegal imports – a measure that would certainly endanger the profitability of many, head of the Industry and Agriculture Committee of Khorramshahr Chamber of Commerce suggested that import regulations be revised in a way that smugglers are seriously challenged by law.

“Once legal barriers are enforced for all, smuggling would no longer be economical and nobody will risk doing that,” Ahmad Sharifat said.

  Reducing Customs Tariffs

Meanwhile, some officials recommend reducing the customs tariffs and bureaucracy in a bid to decrease smuggling, noting that the commodities which are highly demanded by people but whose imports are either banned or controlled by imposing high tariff rates, ultimately find their way to the market through illegal channels.

“Obviously, the more barriers on the free market, the more smuggling there will be. Strict regulations imposed on legal imports encourage smuggling, for example cell phone smuggling saw a sharp increase when a 40% tariff was imposed on cell phone imports,” member of Tehran Chamber of Commerce, Industries, Mines and Agriculture board of directors, Mohamamd-Hossein Barkhordar was quoted by IRNA as saying on Tuesday.

Head of Ilam Chamber of Commerce, Shaban Forutan, also believes in reduction of custom duties as a good solution to curb illegal imports. He also suggested developing and controlling especial markets in border regions, as well as creating job opportunities for inhabitants of these areas to help undermine smuggling by enhancing the participation of people in legal economic activities, Forsat Emrooz reported.

Ever since it came to office in 2013, the Rouhani administration has been seeking to reduce import tariffs as a way to curb smuggling. But the policy is a double edge sword since it could lead to increased import of finished goods, which would in turn hamper production. Arriving at a compromise to reduce smuggling while protecting the domestic manufacturers, appears to be one of the biggest challenges facing the government.