Ghana adopted the Pre-Arrival Assessment Reporting System (PAARS) on 1st September, 2015. This is to be complemented by the full adoption of the Single Window environment concept of clearing goods. The adoption of the PAAR System brought about the cessation of operations of the Destination Inspection Companies (DICs); meaning Customs has now taken control of its two core functions of valuation of imports and exports and the proper classification of goods under the Harmonized Commodity Description and Coding System (the HS).
The adoption of the PAARS by the Customs Administration is the most prudent action for revenue mobilization and maximization. But some of us viewing from afar think that for the PAARS and the Single Window environment to succeed, certain measures should immediately be put in place:
i. The Customs Administration should vigorously fight “Valuation Fraud” i.e. under-invoicing and over-invoicing of imports and exports by ensuring that the WTO concept of valuation which is based on the “Transaction Value” is strictly applied to all commercial imports. Research has revealed that over the years, between eighty-five percent and ninety percent of commercial invoices submitted to the Inspection Agencies and Customs by traders had been falsified or had been doctored. They were/are mostly locally prepared! The values normally quoted on these invoices had been fixed between twenty percent and thirty percent of the Transaction Values i.e. the price actually paid or payable. Both the big and small companies had been (or are) the culprits. Ironically, values for goods imported for government projects, or government logistics had always been hiked. The State does not benefit from any increment in the rate of duties after budget reading. Traders always mock the Minister for Finance whenever he increases the rate of duties on imports. If for example, the value declared by the importer at one point is GH¢2,000 and the prevailing rate of duty is 10%, the duty element would be GH¢200. But when a budget is read and the rate is increased from 10% to 20%, the trader would manipulate the value to let us say, GH¢1,000 and would pay the same duty of GH¢200. In Ghana, traders pay what they want to pay but not what the law says they should pay. Valuation Fraud is prevalent and should therefore be punished severely!
ii. The Customs Administration should enforce the regulations relating to the submission by traders of “Customs Attested Invoices” in duplicate in the prescribed form to support their declarations. It should be noted that ECOWAS has moved to the level of a Customs Union and one cardinal requirement is the uniformity of Customs procedures in all Member States of the Community, especially in the area of valuation of imports and the classification of goods. It is because under the Customs Union there would be “free circulation of goods”. A principle which provides that once the correct import duties have been paid on goods from “third countries” (that is countries other than the ECOWAS) in any of the states, the goods could circulate freely in all the states without further payment of duties. Again goods imported under the ECOWAS Trade Liberalizations Scheme (ETLS) shall circulate freely in the Community. It is also a principle that revenues obtained on imported goods would be shared among the Member States by a formula yet to be decided upon. It would therefore be shameful and embarrassing if it turns out that the Ghana Customs Administration applies lower values for imports from “third countries” and that since importers have the option to pay duties at any port in the Community, the Ghanaian ports would be used as conduit for the importation of lowly valued goods into the Community.
iii. The Compliance and Verification seats at the Long Room should be scrapped. These seats are the main bottle-necks to the free flow of documents in the clearing system. The System Administrator’s seat could be maintained to cater for queries and offences from the Outdoor (the Port). It is a known fact that before the CCVR is issued, the importer submits all relevant documents to the Ghana Customs Management System (GCMS) for verification and processing; and then the risk profile of the goods is assessed. Why should officers at the port again verify such attached documents? When the correct duties and taxes have been assessed and paid, the Banks should inform the Ghana Customs Management System (GCMS) of the payment and the importer or his agent would immediately be informed of the officer who has been selected by the system to examine the goods; the importer would then proceed to the port for the examination and release of his goods.
iv. The examination officers appointed to examine goods should be trained and re-trained sufficiently to use the appropriate methods of examination for all goods for the purposes of expediency without compromising the revenue. Only dedicated and committed officers should be selected to examine goods else the whole exercise of valuation and classification at the Head Office would not yield any results.
v. The Customs Administration should consider the establishment of a well-resourced and reliable Post Clearance Audit Department made up of several experienced, dedicated and committed officers who would apply all the Customs laws and regulations to ensure that the appropriate duties are paid on all imports. The Administration as an incentive should reward any officer who detects an offence or an omission which would result in the payment of a short-collection. I would like to suggest that for every short-collection detected, irrespective of the quantum of the amount, the officer should be rewarded 0.25% of the short-collection payable. This is a practice by the Mauritius Customs Administration and it would make the officer work like a blood-hound.
With these measures, the Customs Administration should be able to collect treble what they are currently collecting.
I entreat Customs officers to exhibit sincerity and commitment to ensure that the PAARS and Single Window environment concepts do not fail in Ghana. Nigeria and several other countries have adopted it and it is working successfully.
We should congratulate the Commissioner-General and his team for bringing prudent innovations in Tax Administration in Ghana.
Author: KOFI DANQUAH
Consultant on Customs Related Matters