<b><i><span>Automation, Bureaucratic Discretion, and Customs Delays: Theory and Evidence from Pakistan</span></i><span>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

This paper investigates the dynamics of delays and discretion in customs clearance using administrative data of 331841 import declarations registered in Customs automated system at Karachi port. Exploiting the variations in clearance channel, import volume, use of discretion by the customs officers through documents calling, change in clearance channel, and imposition of additional taxes, I find that as import volume grows, exercise of discretion decreases. Further, as a result of audit of randomly selected import goods declarations where documents were called by the customs assessors, I find that in 79.2 percent declarations documents were called unnecessarily as same had no relevance for customs clearance. Similarly, escalation of the level of scrutiny through assessor-induced change in computer-marked clearance channel did not lead to detection of tax discrepancies in 89.2 percent declarations. Despite being registered for automated clearance, 121309 GDs i.e. 36.5 percent declarations passed through the hands of customs officers for documentary check and physical inspection. Paradoxically, number of import declarations with imposition of additional taxes is quite high but the amounts imposed are small. Detections of substantial amount of tax evasion are uncommon and uncovered only through intensive physical inspection. The patronage customs officers, in contrast to merit officers, are 6 percentage points more likely to enhance the intensity of scrutiny channel and take 10 percentage points longer time in customs clearance. However, I do not find any statistically significant evidence that non-merit officers collect less tax.