Combating Illicit Flow of Excisable Products Revenue Benefits
Combating Illicit Flow of Excisable Products Revenue Benefits of Comparing Customs and Revenue Data
Introduction • A good Customs IT system and database have significant benefits: • • Tax/revenue, fiscal, monetary, statistical, and macroeconomics; Facilitation of domestic [direct and indirect] tax administration; and Enhancing support to, and compliance by, taxpayers. Border controls: links security of nations and bilateral/multilateral cooperation • However, these depend on efficient & effective interfaces and integration of systems supporting tax, customs, and other operational functions.
Elements of Customs Operations • Registration, filing and payments • Same TIN/NIN used for domestic tax and customs registration • Tax office codes or numbers: assigned to all importer/exports • Valuation and classification • HS/Customs Tariff schedules: recognized & comprehensive nomenclature for goods (trade and protection); and revenue flows (import duty, tax and levies); • Useful for Bo. P (forex flows and measurement); and other statistics • GDP [C+I+(E-M)]; BOP [E-M]; Deficit [R-Expenditure
Elements of Customs Operations • Compliance and enforcement (revenue) • Customs compliance: based mainly on invoice manipulation and false declarations • Customs databases can support domestic tax collection, audits and investigations • Customs post-clearance audits and integrated risk management modules • Physical inspections: verification and validation of goods and records
Elements of Customs Operations • Compliance and enforcement (non-tax) • Post release audits already a recognized collaborative tax/customs function • Customs data and information can support investigations into illicit and criminal information in many areas • Border and immigration controls: illicit financial flows and money laundering [and manipulation]; people trafficking, drugs, arms; terrorism etc.
Elements of Customs Operations • Interface of organization, systems and process • Customs is now part of revenue authorities in many countries • Makes it easy to merge and interface revenue databases • Data-match of values on returns • Automatic comparison of import/export and domestic tax declarations • Turnover or sales levels [import/export values and sales/profit declarations] • Taxpayer support • Primary or frontline services to assist taxpayers to comply • Intermediation: third party assistance to taxpayers [records and accounting]
Example of Ad Hoc Exercise • Ghana: case study of ad hoc exercise • Selection of import and export data for top 5, 000 importers (scaled down to 2, 500) • Data sent to domestic tax offices for importers • Some importers did not have a TIN [registration] or code to show their domestic tax offices [LTO, MTO, LTO] • Comparison with domestic turnover declarations showed significant differences
Example of Ad Hoc Exercise • Ghana: case study (continued) • Similar with declarations for VAT Input Tax Credit (ITC) and refunds • Non-compliance notices (with additional assessments) were sent to taxpayers • Majority did not contest the assessment and paid up • Voluntary compliance: word got round and several taxpayers appeared in offices to pay assessment and penalties
Example of Ad Hoc Exercise • Ghana: case study (continued) • Some fundamental problems • Tax and customs systems not fully integrated and lacking interfaces • TIN & Tax Office numbers not on Customs declaration or databases • Major customs offices not helping to enforce registration of taxpayers • No program exists for such exchange of information (but domestic tax offices have read only terminals
Further practical examples • Important to have customs integration to work with • VAT administration • Threshold: use of import/export values to check violation of VAT threshold • Import VAT: import VAT collected as though it were an import duty • Input Tax Credit (ITC): use of customs declaration support the validation of zero-rating [exports] and ITCs • Excise administration • Use of customs databases and stamps (banderols] to monitor domestic stocks and sales activities
Further practical examples • Post-clearance audits • Acceptable tax compliance practice involving domestic tax officials • Financial flows and money laundering • Customs processes involves significant global movements of funds in different currencies and at different exchange rates [declaration and invoicing] • Borders controls • Customs institution monitor the physical movement of goods (e. g. , manifest, invoices, declarations etc. , ) and persons (e. g. , customs/immigration declaration); • Many involvw criminal and illicit activities
Conclusions • The use of customs data for administration and compliance may be impeded by a number of factors, including • Poor integration and interface of tax and customs IT systems • Absence of useful informations (e. g. , tax-office numbers or codes) • Absence of critical modules and use of different platforms in tax and customs • Absence of programs and management information reporting • Poor coordination, even within revenue administrations
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