DALLAS: FIJI Revenue and Customs Authority has come under the spotlight lately all for not too palatable reasons.
A week after it was revealed that substantial amount of Customs revenue was being lost through duty evasion, the contracts of two senior managers were summarily terminated following the alleged breach of the code of conduct.
However, for the purposes of this article I shall confine myself to the more pressing issue of revenue fraud.
During his address to the Fiji Commerce and Employers Federation’s TOPEX Conference the Attorney-General and Minister for Finance, Aiyaz Sayed-Khaiyum, while alluding to the decrease in revenue from import VAT, attributed the shortfall to the understating of value of imports, prevalence of creative accounting and close relationships between Customs officials and some of the businesses.
The minister’s concern about the inherent leakage of Customs revenue is quite justified given the consequential economic and budgetary implications.
However, we need to put things into its proper perspective in order to gain a better insight and appreciation of the complexity and gravity of the situation.
In that context it is imperative at the outset to grasp a clear understanding of the rules and principles pertaining to the valuation of imported goods.
First and foremost it must be understood that some of the valuation fraud are highly sophisticated in nature particularly where there is strong collusion between the importer and the overseas supplier and is not easily detectable.
As such it cannot be picked up by normal verification of trade documents. In such circumstances obtaining documentary evidence to prove fraud can be quite challenging as it would require the co-operation of the seller of the goods.
As a contracting party to the WTO Valuation Agreement Fiji is strictly bound by its rules.
Under the agreement the primary basis for Customs value is the transaction value i.e. the price paid or payable for the goods.
It is only in cases where Customs has reasonable doubt as to the truth or accuracy of the importer’s declaration, that the burden of proof could be shifted to the importer to prove that the declared value represents the total amount actually paid or payable for the goods.
However, the fact that much of the information needed to ascertain the correct value of a transaction is not available because it remains privy to the foreign supplier makes the verification process even more complicated and difficult.
Therefore, validation or cross-checking of declared values can be often excessively cumbersome.
The increase in international trade has exerted mounting pressure on Customs administrations to minimise intrusion into legitimate trade.