NOVEMBER 2017 GOVERNANCE NOTES No.4 APRIL 2019 No.15 Domestic Resource Mobilization Community of Practice PAKISTAN CUSTOMS: MOBILIZING DOMESTIC REVENUES FOR ECONOMIC DEVELOPMENT Prepared by Anna Custers and Richard Sutherland, Governance Global Practice The government depends on the ability of Pakistan Customs to A MODERN CUSTOMS play a significant role in mobilizing domestic revenues, which In most countries, the customs administration performs at least contribute to the country’s economic development. However, four basic functions. Firstly, it collects revenue for the government, the predominant focus on the agency’s revenue objective a function which has traditionally been prioritized by many appears to constrain its utilization of facilitation measures developing countries because import duties are “easy” to collect. that are necessary to expand trade and help the country Secondly, it protects domestic producers and provides supply chain develop. This Governance Note explores pathways Pakistan security. Thirdly, it plays a key role in facilitating legitimate trade Customs may take to facilitate trade without compromising its through the timely release of goods at the borders. Finally, customs collection of payable duties and taxes. It proposes three reform protects societies by preventing the importation of prohibited, options for consideration: enhancing the risk management dangerous, and unsafe goods (Wulf and Sokol 2005). system; improving pre- and post-clearance facilities; and The responsibilities of customs are evolving. The fast-growing contributing to the broadening of the tax base. Taken together, and increasingly competitive global environment demands implementing these reforms could accelerate the advancement gradually more effective and efficient border control without of Pakistan Customs, building on its relatively strong cargo compromising the cross-border movement of goods. Consequently, management and revenue control capabilities. the challenge is how to manage the increased volume of trade while safeguarding revenue, protecting infant and local industries, OVERVIEW ensuring border security and compliance, and facilitating trade at Domestic resource mobilization (DRM) is vitally important to the lowest possible cost to the budget and trading community. Pakistan today. Fiscal and current account pressures have To respond to this increasingly globalized environment, a modern widened substantially, and tax revenues are on the priority reform customs agency “must organize itself to be a trade facilitator in a agenda (World Bank 2017). While Pakistan’s ratio of tax to gross rapidly changing world, as well as an efficient provider of revenues” domestic product (GDP) rose steadily to 12.5 percent (FY17) — a (Wulf and Sokol 2005). significant 3 percentage points above the earlier 9.5 percent Yet, most customs and finance ministries across low- and (FY11) — it is still well below the 15 percent tax-to-GDP ratio that middle-income countries often consider whether there is a trade- is thought to be critical in meeting the basic needs of citizens and off between revenue collection and trade facilitation (Raballand et businesses (Gaspar, Jaramillo, and Wingender 2016). Customs al. 2009). Revenue control is often guaranteed through systematic revenues account for more than 45 percent of overall tax revenues inspections and checkpoints, relying heavily on physically and are essential for Pakistan’s effort to increase its DRM. controlling the cargo. When excessive, this control in turn negatively Reliance on customs for revenue collection, however, impacts impacts trade facilitation by increasing the dwell time and costs for the business environment. The World Bank Group’s 2019 Doing traders. It may also introduce corruption into the system through Business Report ranked Pakistan 136 out of 190 economies for multiple contact points. Reducing physical control of cargo — which ease at doing business and 142 for trading across borders. As this would facilitate trade — on the other hand is perceived to reduce Governance Note will show, customs relies heavily on controls control on revenue collection. such as physical examinations that appear to affect the general The perceived trade-off is influenced by the relatively low business climate in Pakistan. While a trade-off is perceived administrative capacity and low compliance environment between reducing controls to facilitate trade and increasing typical of developing countries. In these countries, tax systems revenue collection, ample examples show this hypothetical are characterized by a persistent and high reliance on indirect trade-off does not exist in developing countries. It is possible to taxation as opposed to direct taxation, with an important role drastically reduce controls and generate more revenues at the for trade taxes and collection at the border. As a rationale for same time. This note will offer concrete suggestions for Pakistan border tax collection, trade taxes are considered “revenue-efficient” Customs to achieve this dual goal. when administrative capacity is constrained and compliance is 1 GOVERNANCE NOTES APRIL 2019 No.15 deemed low because information about the tax base is readily is widely recognized that many aspects of interest to customs observable and controllable.1 Large leakages of revenue might result cannot be detected through the traditional singular examination from reliance on the domestic market for taxation when the of all (or a majority of) customs declarations. Moreover, to administrative capacity of tax authorities is limited and taxpayers uncover indiscretions such as valuation verification, fiscal evasion, are noncompliant. smuggling, and customs fraud, it is often necessary to examine a In this context, trade facilitation measures offered by customs, trader’s entire international trading pattern as well as domestic for instance under a reform program, could be interpreted as transactions. loosening controls and lead to a reduction of information critical to Consequently, measures such as advance rulings, authorized tax collection. This is particularly the case when no strong domestic economic operators, risk management, and post-clearance tax net is present. As a result, national treasuries might not be audits are needed more and more to not only speed up clearance willing to endorse this kind of reform because of the uncertainties procedures and reduce the need for physical inspections (especially it might impose on revenue collection. A similar trade-off is unlikely for low-risk traders), but also to increase the likelihood of detecting to be perceived in high compliance, high administrative capacity fraud (UNCTAD 2016). If properly implemented, administrative environments. In these environments, the majority of the revenue measures like these could preserve revenue and concurrently collection occurs in the domestic market while borders have the facilitate trade by reducing the time and cost to comply with border primary role of securing the country and facilitating licit trade. requirements. Ample evidence exists, however, that this perceived trade-off between revenue collection and trade facilitation does not exist SITUATIONAL ANALYSIS in developing countries. For example, in Madagascar, a fragile Current Role of Pakistan Customs in DRM economy and the world’s fifth poorest country, declarations cleared A decomposition of historical public revenue data reveals a through the red channel (physical inspections) were reduced from persistent reliance on customs to collect a sizable portion of 60 percent to 20 percent and, in the meantime, revenues increased taxes in Pakistan. Table 1 shows that customs-collected revenue drastically. This increase in tax revenue was driven by trade volume, constitutes a substantial portion of Pakistan’s total tax revenue. with a reduction in average delays, an increase in the number For the last decade, duties and taxes collected at the country’s of import declarations, and greater tax revenue per declaration borders represented over 40 percent of national revenue on (Raballand et al. 2017). average. This observation is consistent with trends in other It is possible, therefore, for customs in developing countries to countries at comparable levels of development. For example, the collect substantial revenue and simultaneously implement trade customs administrations for middle-income countries in Africa facilitation measures. While for developing countries the revenue similarly collect over 40 percent of government revenue on average. function continues to be by far the most important customs However, the average contributions of customs to tax revenue in function, it is possible to become more efficient at it and facilitate the South and Southeast Asia region is lower, at an average of 27 trade. Considering the ever-expanding global environment, it percent (see figure 1). Table 1. Customs Revenue as a Percentage of Total Tax Revenue, FY2010–17 Fiscal Duty Sales Tax on Income Tax Additional Regulatory Excise Other Total Customs Total Tax Year Imports Withholding Sales Tax Duty Revenue Revenue (%) (%) (%) (%) (%) (%) (%) (%) (PRe, millions) 2010–11 12.0 20.9 5.0 0.2 0.3 2.4 2.9 43.7 1,327,384 2011–12 11.9 24.6 5.5 0.7 0.2 2.5 2.3 47.5 1,558,013 2012–13 10.4 20.4 5.6 0.9 0.2 1.8 2.7 42.1 1,882,694 2013–14 10.5 23.2 6.4 1.1 0.2 2.0 2.6 46.0 1,939,424 2014–15 11.3 22.9 6.4 1.1 1.0 0.9 3.9 47.6 2,254,531 2015–16 11.8 24.3 6.8 1.1 1.8 0.4 5.2 51.4 2,589,979 2016–17 11.5 21.2 6.1% 1.0 2.0 0.3 5.2 47.3 3,112,472 Source: Data from Pakistan Customs, Federal Board of Revenue, 2017. 1 Bachas, P., A. Jensen, and F. Tourek. “International Trade, Domestic Production Networks, and Indirect Taxes: Evidence from Rwanda.” Unpublished manuscript, last modified June 2018. 2 GOVERNANCE NOTES APRIL 2019 No.15 Figure 1. Customs: A Global Snapshot SOUTH AMERICA, FAR EAST, SOUTH AND NORTH OF AFRICA, NORTH AMERICA, WEST AND EAST AND SOUTH EAST ASIA, NEAR AND EUROPE CENTRAL AMERICA CENTRAL AFRICA SOUTHERN AFRICA AUSTRALASIA AND MIDDLE EAST AND THE CARIBBEAN THE PACIFIC ISLANDS Number of Customs 68.5 1.2 7.4 6.1 171.7 92 Declarations (million) 26.2 0.1 7.3 1.7 97.2 115.7 Percentage of 85.2% 85.5% 92.7% 100% 85.9% 91.6% Electronic Declarations 87.3% 89.6% 95.8% 100% 91.9% 93.6% Contribution of 27.2% 40.3% 37.1% 44.4% 25.8% 27.4% Customs to Tax Revenue Source: WCO 2017. import Note: Reproduced with permission from WCO with the following disclaimer — numbers are aggregate figures based exclusively on information provided by export members. Pakistan’s Trading and Business Environments underwent physical examinations that lasted 16 hours on average. Strong dependency on customs-collected revenue is a concern Worse yet, few seizures were found through those inspections (less for trade facilitation and thereby Pakistan’s business climate. The than 2 percent), which suggests controls are ineffective. Import 2019 Doing Business Report ranked Pakistan at 142 out of 190 values for the red channel were adjusted 18.4 percent of the time.2 economies for trading across borders, which was a significant Moreover, pre- and post-clearance facilities or fast track channels improvement in comparison to earlier years, but remains a are rarely utilized. Shortcomings in the execution of these and other challenge. For example, it is more expensive, by more than 200 core functions are negatively affecting the regulatory environment percent ($256), to comply with border requirements for importing for businesses in Pakistan, as evidenced by its rank of 136 out of when compared to more competitive neighboring economies such 190 for ease of doing business. as Singapore. Singapore only collects 15 percent of tax revenue at In summary, Pakistan Customs’ apparent focus on revenue the border and levies no customs duties (WCO 2017). control may be at the cost of trade facilitation. As figure 2 A deeper look reveals that the high transaction cost of illustrates, Pakistan is among those countries that are classified trading with Pakistan corresponds with lengthy port-site in the upper-right quadrant of the graph, which all feature high processes to which most shipments are subjected. For example, customs-collected revenue relative to total tax revenue as well as physical examinations are excessive, and documentary reviews low scores in trading across borders. In contrast, countries that rely are numerous. During FY2016–17, about 46.9 percent of goods the least on customs-collected revenue also tend to be associated declarations (GDs) were cleared through the red channel and with more efficient cross-border movement of goods. 2 Adjusting import values signals weak compliance by traders through under invoicing. It also acts as a distortionary measure to trade facilitation when valuation rulings are complex and outdated, as is the case in Pakistan. 3 GOVERNANCE NOTES APRIL 2019 No.15 Figure 2. Association Between Customs-Collected Revenue and Facilitating Trade Across Borders Income 80 High Income Comoros Low Income Kosovo Uganda Lower-Middle Income Moldova Mozambique Upper-Middle Income 70 60 Haiti Revenue Collection by Customs in Tax Revenue Togo Samoa Fiji Belize 50 Cambodia Guinea-Bissau Guinea Tonga Serbia Madagascar Afghanistan Bulgaria Guyana Mauritius 40 Paraguay Jordan Nepal Mali Pakistan Zimbabwe Costa Rica Switzerland Mexico Rwanda Senegal 30 Malawi Israel Greece Tunisia Zambia Cameroon Poland Mongolia Finland Chile Uruguay France Bhutan Thailand South Africa Maldives 20 Spain Panama Benin Singapore Turkey Canada Indonesia Bangladesh Ireland 10 Netherlands Romania Germany Brazil Lithuania Australia Italy United States Angola 0 Sweden 0 20 40 60 80 100 120 140 160 180 Trading across Borders Sources: WCO 2017; World Bank Group 2017 Doing Business Indicators. Note: While more recent Doing Business results are available, for purposes of comparison, 2017 results are used. To better understand what effective levers for reform may be to decades ago, taxes on dutiable goods constituted a significant improve trade facilitation without losing revenue, it is useful to portion of total revenue, about 44 percent in 1990.3 In stark examine why the two outcomes of relatively high collection of contrast, duties (including regulatory duties) represented less revenue at the border and poor trade facilitation are emerging. than 13.5 percent of tax revenue in FY2016–17 (see table 1). This At least three underlying factors are identified. Firstly, figure is average for the country’s level of development. Pakistan Customs continues to play a key role in DRM, albeit Notwithstanding the sharp decline in import duties as a tariffs are reducing. Administering taxes at the border is easy, share of revenue, Pakistan Customs collects a sizable portion comparatively. Consistent with international trends, Pakistan of noncustoms and sales taxes at the border — nearly 30 is reducing its reliance on import duties to boost trade. Three percent). Imports appear to be used as a convenient “tax 3 World Bank Open Data, accessed at https://data.worldbank.org/. 4 GOVERNANCE NOTES APRIL 2019 No.15 handle.” More generally, Pakistan relies disproportionally on tax assessed and paid, regardless of whether this causes delays in the collection from federal sources as compared to the provinces, release of imports (Wulf and Sokol 2005). which are responsible for sales tax on services and have been Thirdly, the focus on preserving revenue and physically underperforming on this front.4 This implies that the pressure to controlling goods occurs against a background of significant collect taxes from customs duties, federal sales taxes on goods, increases in volumes of trade. The World Bank estimated that and personal income tax is very high compared to provincial sales Pakistan’s Import Volume Index increased by about 50 percent taxes on services. between 2002 and 2014. Correspondingly, the number of Given a relative weak ability to tax goods and people in the import and export GDs increased by 41 percent and 64 percent, domestic market, a large share of this responsibility to collect tax respectively, between 2010/11 and 2016/17, whereas the value revenue has shifted to customs. Since imported goods cannot per goods declaration has risen by 14 percent and 17 percent, be landed until liable duties and taxes are paid, border taxes — respectively. whether in the form of import duties, sales tax, or income tax — are relatively easy to collect and difficult to avoid. Consequently, Achievements and the Remaining Challenges customs has been consistently collecting more than 40 percent Pakistan Customs uses a robust information technology (IT) of total tax revenue (figure 3). This reliance on indirect taxation system to cope with growing trade volumes and ensure its at the border, however, has increased the burden on imports as focus on protecting revenue through maximum cargo control. illustrated by the Doing Business indicator. Since its introduction in 2011, the Web-Based One Customs (WeBOC) system has significantly improved the efficiency and Figure 3. Customs Collection as a Percentage of Total Revenue, effectiveness of customs operations in Pakistan, eliminating some FY2000/01 to FY2016/17 of the most vulnerable points of a manual system. An automated selectivity system helps the Customs office manage the growing 0,7 volumes of trade, which accounts for more than 1.8 million of Share of total FBR revenue 0,6 processed GDs annually (1 million for imports and 0.8 million for 0,5 exports). 0,4 While the current risk management system (RMS) does enable 0,3 customs to identify which GDs to examine and which to release, 0,2 risk–based targeting of suspect consignments is limited. A key 0,1 issue is that the RMS is not very efficient at identifying (major) misclassifications, misdeclarations, or threats to sanctity and 0 security of international supply chains. For example, in addition 20 /09 20 /03 20 /04 20 05 20 /07 20 08 20 /01 20 /10 20 02 20 /06 to the high proportion of GDs selected for examination, the 20 16 20 13 20 4 20 15 7 20 11 20 2 /1 /1 / /1 / / / / / / 00 08 06 09 03 04 02 07 01 10 16 13 15 14 12 05 11 20 RMS does not guide examiners to be more targeted with their Source: Data from Pakistan Customs, Federal Board of Revenue (FBR), 2017. inspections, as it lacks a complete risk profiling for all authorized operators. The result of this is a low number of seizures (less than Secondly, Pakistan Customs relies heavily on excessive physical 2 percent). In addition, no annual post-clearance audit plan is in controls to safeguard revenues. The focus and frequency place to systematize the detection of misdeclarations post entry of control mechanisms seem geared toward minimizing into the country. undervaluation. For instance, Pakistan Customs adjusted the aggregate value of self-declared taxes and duties by 18.4 percent More generally, Customs has not exploited the full potential for GDs that were cleared through the red channel in FY2016–17. of WeBOC, as it still relies heavily on high levels of physical These adjustments yielded 1.91 percent in additional revenue for examinations and revenue-biased controls. For example, WeBOC the Federal Board of Revenue — PRe 59,530,359,831, which is is typically applied only after goods have arrived in the country, equivalent to $567 million. Similarly, in the same period, 20.6 and it does not permit pre-arrival clearance. Added to this, no percent of GDs were processed through the yellow channel mechanisms are in place to migrate from physical to post- wherein the declared amount of duty and taxes was raised by clearance control. In addition, there is limited use of data mining 3.54 percent, amounting to PRe 7,963,290,903 ($75.8 million).5 and exchange of electronic information with other public agencies These high rates of physical and documentary inspection delay to draw up risk profiles. As a result, the prospect of preparing the clearance of goods and are also cumbersome, expensive relevant and comprehensive profiles is greatly reduced. activities to engage in, particularly when trade volume is high. Like other customs at this level, it seems a control mentality has REFORM OPTIONS AND RELATED POLICY CHANGES permeated in Pakistan Customs that ensures that all duties are A few observations can be made. First, reforming customs is 4 World Bank Open Data, accessed at https://data.worldbank.org/. 5 Based on interviews with Pakistan Customs officials. 5 GOVERNANCE NOTES APRIL 2019 No.15 central to boosting domestic revenue mobilization in Pakistan. pre- and post-clearance mechanisms, the second reform priority, Historically, reforms in customs have been realized by focusing by shifting the focus of information flows from goods (i.e., the on its revenue collection function. While this focus has ensured Harmonized System [HS] of Coding) to the tracing of operators and that customs collection as a portion of revenue remained stable their behavior, including their association to HS codes. over time, this approach has had its implications for the business Important to note here is that RMS improvement will not environment. imply trade facilitation for all. Rather, it will imply a more effective, The central question Pakistan Customs faces today is how targeted facilitation for those who comply, while applying to continue to generate revenue while improving its role in effective enforcement measures to fraudulent operators. Over facilitating trade. International experiences provide examples of time, this will help customs create a positive feedback loop with several ways to do this. More specifically, three reasonable reform compliant operators, building trust and encouraging and rewarding options are to: (i) enhance the RMS, (ii) improve pre- and post- compliance through facilitating trade. A trusted trader program, clearance capabilities, and (iii) contribute to broadening the tax allowing pre- and post-clearance facilities for compliant traders, base. Taken together, these three reform options should enable would be a first step in the direction of a positive feedback loop. Pakistan Customs to achieve the next level of maturity, building on its relatively strong base of goods and revenue control. Table 2 The second reform priority is to strengthen pre- and post- provides an overview of the sequencing that may be pursued for clearance facilities and enforcement capabilities. Post-release the aforementioned administrative reforms. control and audit regimes represent the safety net for the entire facilitation approach. In this regime, traders can clear their goods Table 2. Sequence of Proposed Reform Priorities for Pakistan without inspection upon arrival, but audits take place post- Customs clearance and can be done at the aggregate firm level, rather than at the single GD level. Audit and enforcement capabilities are First Priority Second Priority Third Priority one of the most effective trade facilitation strategies available to Enhancing the risk Improving Broadening the border agencies. It can enable the immediate release of imported management clearance facilities tax base cargo but ensure compliance through the subsequent use of system audit-based regulatory controls. Pakistan Customs has the institutional set-up in place to facilitate pre-clearance, but further Strong laws and clearly established processes effort is required to expand utilization and robustness of such Enablers Sufficient and competent workforce facilities. Similarly, the institution has the basics in place to support Supportive and fully utilized information technology systems post-clearance audit (PCA) activities but lacks the capacity to execute on a systematic basis. Ultimately, pre-clearance and PCA should be designed to broaden auditors’ review of the trader’s The first reform priority is to enhance the RMS. A system overall transactions and provide a clear indication of levels of focused on risk profiles of authorized operators (i.e., carriers, compliance with tax and regulatory requirements. In this context, brokers, and traders) will over time allow customs to ensure strengthening the central RMS is critical to ensure there will not only those GDs posing noteworthy risk to revenue, safety, be major revenue losses, as compliant traders and taxpayers will or security are selected for physical examination. Excessive benefit from PCA controls. controls will need to be reduced, for example, by imposing a cap on the number of GDs selected for physical and documentary Strengthening PCA should be accompanied by reforms to inspection. Simultaneously, enhanced capabilities to analyze address the weaknesses of Inland Revenue.6 Typically, the value economic sectors along with improved feedback mechanisms added tax (VAT) may be used as a safety net to safeguard against would contribute to enriching the RMS and its targeting of risky leakages in the domestic market. The VAT is charged on all transactions. The internal feedback mechanisms between the domestic sales by registered firms, including imports (Keen 2008). RMS and the operational staff, especially the inspectors and A mismatch between import records and VAT records can point appraisers, are critical for sound checks and balances about the revenue administrations to leakages and address those in the performance of both: the central RMS and the expected PCAs. For this mechanism to work, however, attention should be outcomes from the field. paid to strengthening Inland Revenue’s capacity to administer An improved RMS will subsequently help customs manage such taxes and conduct audits. Moreover, in a context of increased large volumes of trade more effectively while relying less on green channel clearances and reduced border checks, effective physical and documentary inspections. In this way, the same (or administration of VAT will preserve public revenue since it is increased) trade volumes can be effectively managed while largely essentially a tax on the purchase of informal operators and on guaranteeing revenue collection. It would also facilitate effective their imports. 6 See Lopez-Calix and Touqueer (2013) and World Bank (2017) for a summary of prevailing weaknesses. 6 GOVERNANCE NOTES APRIL 2019 No.15 Once improved RMS and PCA are being fully utilized, physical shortcomings, point to an urgent need for customs to rehabilitate inspections and documentary checks at the borders may be its workforce and SOPs. reduced. This will flow naturally from reforms to the RMS and The WeBOC system is performing well on basic functions PCA capacities. A well-designed RMS will allow customs to move such as streamlining goods declarations. To support reforms, the away from traditional time-costly clearance approaches to more information it captures could be further exploited using business effective trade facilitation strategies that enable the immediate intelligence. For example, physical examination of goods could be release of imported cargo. In addition, the adoption of pre-arrival better directed by making more efficient use of trader histories, clearance together with more intense use of PCA should help average assessed values, correlations between declared weights customs facilitate high volumes of cargo transactions in a timely and goods, and so on. In addition, WeBOC’s functionality could be manner while ensuring that traders maintain elevated levels of enlarged to include better cargo management. All these activities compliance. Together, these improvements will result in lower are key to successful improvements of the RMS, audit, and costs to the business community, while simultaneously promote enforcement capabilities. revenue generating activities through an improved business climate.  Acknowledgments The third reform priority is to contribute to broadening the This note is part of the World Bank’s broader operational tax base, linking traders into the domestic tax net through engagement with Pakistan around revenue policy and joint audits and joint registries between Customs and Inland administration led by Raul Felix Junquera-Varela, lead public Revenue. Rich trade data can be linked to business activities to sector specialist; Jose Eduardo Gutierrez Ossio, senior public bring traders into the domestic tax net, thus reducing informality sector specialist; and Muhammad Waheed, senior economist. in the domestic market. Take for example the transfer pricing (TP) practices of multinational companies. Multinational companies References in Pakistan are responsible for about 60 percent of imports. Gaspar, V., L. Jaramillo, and P. Wingender. 2016. “Tax Capacity and Analyzing trade, sales, and income data in an integrated way Growth: Is There a Tipping Point?” IMF Working Paper WP/16/234, can better inform customs valuation and TP studies, as well International Monetary Fund, Washington, DC. https://www.imf. as contribute to improving capacity to detect avoidance and org/external/pubs/ft/wp/2016/wp16234.pdf. undervaluation. Ultimately, such enhancements will improve compliance, reduce the tax gap, and thus increase revenue. Keen, M. 2008. “VAT, Tariffs, and Withholding: Border Taxes and Clearly, close collaboration between Customs and Inland Revenue Informality in Developing Countries.” Journal of Public Economics is critical for these reforms to be implemented successfully, and 92:1892–1906. to avoid risking a loss in revenue collection. Lopez-Calix, J.R., and I. Touqueer. 2013. “Mobilizing Revenue.” Overall Reform Context Pakistan Policy Note 16, World Bank, Washington, DC. http:// It is important to highlight three cross-cutting components documents.worldbank.org/curated/en/378401468074335833/ — strong laws and clearly established processes, competent pdf/795830BRI0SASE0Box0377381B00PUBLIC0.pdf. human resources (HR), and a supportive IT system — that are critical enablers to facilitate this reform agenda. An HR Raballand, G., J. Marteau, E. Mjekiqi, and T. Cantens. 2009. “Is team that is well guided by clear strategic goals, standard There Any Trade-Off Between Revenue Collection and Trade operating procedures (SOPs), and streamlined business processes Facilitation In Africa?” Research Committee Development that are automated will ensure that reforms are consistently Economics, Proceedings of the German Development Economics implemented as necessary. However, strategic planning and Conference, Frankfurt A.M. Accessed at: https://www.imf.org/ performance measurements are rarely used to direct customs external/pubs/ft/wp/2016/wp16234.pdf. operations. Secondly, while Pakistan Customs has a well-trained, highly esteemed cadre that inhabits higher level functions, other UNCTAD (United Nations Conference on Trade and Development). staff could significantly benefit from additional, systematic 2016. Trade Facilitation and Development: Driving Trade training. In addition, internal incentive structures for staff is Competitiveness, Border Agency Effectiveness and Strengthened important. Experience of other customs offices shows that Governance. New York and Geneva: United Nations. http://unctad. inspector performance contracts that reward good performers org/en/PublicationsLibrary/dtltlb2016d1_en.pdf. (e.g., through merit rewards, training opportunities at home and abroad, and accelerated career progression) and sanction poor performers are effective (Raballand et al. 2017). Thirdly, critical departments like PCA are under-resourced. These, among other 7 GOVERNANCE NOTES APRIL 2019 No.15 WCO (World Customs Organization). 2017. Annual Report 2016–2017. Brussels, Belgium: WCO. http://www.wcoomd.org/-/ media/wco/public/global/pdf/media/annual-reports/annual- report-2016_2017.pdf. World Bank. 2017. Managing Risks for Sustained Growth: Pakistan Development Update. Washington, DC: World Bank Group. http://documents.worldbank.org/curated/ en/386771510146349984/Managing-risks-for-sustained-growth- Pakistan-development-update. World Bank Group. 2019. Doing Business 2019: Training for Jobs. Washington, DC: World Bank. http://www.doingbusiness.org/ content/dam/doingBusiness/media/Annual-Reports/English/ DB2019-report_web-version.pdf. (Database accessed, Measuring Business Regulations, http://www.doingbusiness.org/data/ exploreeconomies/pakistan.) Wulf, L.D., and J.B. Sokol. 2005. Customs Modernization Handbook. Washington, DC: World Bank. https://siteresources. worldbank.org/INTEXPCOMNET/Resources/Customs_ Modernization_Handbook.pdf. GOVERNANCE GLOBAL PRACTICE Guiding Results through Public Institutions Governance Notes captures knowledge derived from World Bank This series is produced by the Domestic Resource Mobilization engagements and technical and financial assistance requests. Community of Practice. For more information. The views expressed are those of the authors and do not http://www.worldbank.org/en/topic/governance/brief/domestic- necessarily reflect the views of the World Bank. resource-mobilization (public access) For more information, contact: govgplearns@worldbank.org. http://tax/ (WB access) 8