Government fleeced off N$2.2m through under invoicing

March 8, 2015, 8:57pm

Government fleeced off N$2.2m through under invoicing

Government lost potential revenue worth N$2.2 million last year because of undervaluation by importers at the country’s ports of entries including borders, ports and airports The Villager can reveal.

The Ministry of Finance’s, Customs and Excise departed also confirmed that attempts to skip paying excise duty at the ports of entry into Namibia increased by 72% last year  compared to 2013 when goods worth N$1.6 million were detected.

Permanent Secretary at MoF, Ericah Shafudah confirmed that Customs recorded an undervaluation of 29 cases in 2014, while the department only handled 18 related cases in 2013 adding that the detection led to appropriate duties and taxes being recovered. 

Loopholes exploited by some unscrupulous business peoples saw a combined 47 cases of undervaluing being recorded between 2013 and 2014.

 “In the customs context under-invoicing refers to misrepresentation of invoice information or providing false information or documentary evidence in support of a transaction with the aim to lower the duty and tax liability to be incurred on the goods imported,” said Shafudah. 

Shafudah emphasised that under-invoicing occur in the form of misrepresentation of facts, especially in the areas of Customs Valuation or determination of value which is the basis for duty/tax assessment and payment thereof; tariff determination which is the means to assess duties/taxes paid or payable on a consignment; and origin compliance in respect of trade agreement preferences.

“It is in the application of these principles where misrepresentations are observed particularly in the form of undervaluation/overvaluation, misclassification and non-compliance to origin criteria,” said Shafudah. 

Globally, Customs valuation, tariffs and origin of goods are essential tools for trade negotiations as they support compilation of trade statistics, monitoring quantitative restrictions, applying tariff preferences (tariff quotas), licensing, and collecting customs and excise duties and national taxes.

Shafudah noted that in all the MoF’s dealings, they undertake to ensure deeply held principles and standards are upheld as a basis of judgement for our actions and good governance. 

 “It is important that the Ministry of Finance especially in respect of Customs and Excise related fraud joins forces with other Government Agencies and the public to raise awareness on the impact and consequences of non-conformity to trade regulatory requirements,” said Shafudah.  

Shafudah added that the MoF through Namibia Customs and Excise has embarked on dedicated reform initiatives that advocate its roles and responsibilities and continuous collaboration with relevant strategic key role players, including the media, in endeavours that mitigate the effects of non-compliance leading to revenue loss. 

“These reforms promote sustainable partnerships between Customs and Business, Good governance through the National Customs Integrity Programme and voluntary compliance through self-administered Preferred Trader Programme, to mention but a few,” added Shafudah.

She also confirmed that there exist a very close connection between trade under-invoicing and money laundering in that misrepresentation of or concealment of legitimate information may have intent associated with aiding trade money laundering. 

“Money laundering covers all procedures to change the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources.  Money laundering is known to aid crime. By way of example, non-profitable shops are used to “clean money” by declaring all income as profits from the shops or businesses operating (even if no real profit is made) as legal entities and could also be linked to terrorist funding,” she said. 

Shafudah added that other forms of under-invoicing would be overvaluation which is intended to inflate the actual value of the goods to circumvent quota restrictions and permit requirements, but also to aid higher claims of refunds as a financial gain.

“There is also misclassification which is intended to avoid quota restrictions, but also to diminish duties and taxes to lower rates than prescribed with a view to gain unfair market access/pricing advantages.  Origin misrepresentation can be used to claim wrong origin status of a product to qualify for preferential trade treatment (tariff rate),” said Shafudah.      

According to a recent study commissioned by the African Union (AU), it was projected that between 1970 and 2008, Africa lost more than US$1.8 trillion to Illicit Financial Flows (IFF).

In addition, it continues to lose resources valued at up to US$150 billion annually through IFF or the illegal ways of capital flight which is mainly through tax evasion, mispricing of goods and services by multi-national companies and also includes the issue of trade under-invoicing.

Meanwhile Chief Executive Officer of the Namibia Chamber of Commerce and Industry Tara Shaanika also raised alarm over the existence of such mal practices by some business people in the country saying, “It is very unfortunate that some business people are involved in such practices that disadvantages Government. We condemn such practices and urge Government to be merciless to those found wanting. It is unfortunate that this practice is spread worldwide but we would like all our business people to do business in a professional and transparent manner.”

He added that the Government should introduce strict tracking mechanisms to detect such anomalies in the economy as it can cause serious liquidity problems for the nation in future. “Obviously such practices will result in government losing potential revenue and we would not tolerate such practices from our any of our members. However I should make it clear that we have not yet received reports of our members being involved in such shameful acts but generally we do not support any form of dishonest in business,” he said.

Shanika also added that it is regrettable that such practices are now found in the Namibian business sector and called for a change in mind to those who practice such acts.

Charmaine Ngatjiheue: The Villager