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Import Duty Collection: Okonjo-Iweala's First Hurdle

Posted by ThisDay on 2003/07/27 | Views: 967 |

Import Duty Collection: Okonjo-Iweala's First Hurdle

New Port reforms may threaten the current National Income targets of the country. Unless government studies the UNCTAD report on the "Scanning Machine Project" and make amends, revenue will drastically drop, writes Nik Ogbulie

What makes up our national income could be the focus of the new Finance Minister, Mrs. Ngozi Okonjo-Iweala. The celebrated World Bank chieftain is quite aware of the dwindling national revenue base. The growing expenditure pattern of government and the huge debt overhang call for a more proactive formula for accessing new sources of funds. This is why the import trade sector which is the largest business transaction after oil and gas must now receive the kind of attention that could assist in plugging all the leakages associated with import duty and tariff regimes which had been associated with the various kinds of reforms since the past 10 years.

As a world bank chief, the question of due diligence will be a condition which must be upper most in most of her economic activity consideration. This is because, the haphazard approach to major revenue issues has constituted major loopholes in realising revenue targets from that sector. If the real income from import activities is completely harnessed, the economy would experience a boost. The combination of an efficient oil and import trade revenue approach is expected to offer the kind of relief the economy desires in effecting its 2003 budget demands.

This is why many Nigerians and the international community have continued to react to the new efforts being considered by the Finance Ministry in implementing its import trade policy. The arrival of the new destination inspection policy as a major trial in changing the income approach is now a consideration that must be handled in such a way that it does not distort the flour of funds into the national coffers.

Few weeks ago, the finance ministry, led by its permanent secretary rushed into the signing of a $70 million scanning machine project with a French firm - Cotecna Limited, as a way of "improving" the revenue collection process of government. The project which has been treated with many criticisms is no doubt an issue that must be looked at again using her background as an investment expert. The essence is to ensure a free flow of income. The content of that agreement and the experiences of other countries that have operated the scanning machine project must be dutifully considered to avoid a policy pitfall and a probable reduction in income at this point in time.

Because, Okonjo -Iweala knows the kind of importance attached to reactions of multilateral agencies on projects that have global outlook, she may now be forced to have a second look at the recommendations of the United Nations Conference on Trade and Development (UNCTAD) on the scanning machine project.

Last month, UNCTAD had written a letter to the Ministry of Finance concerning Nigeria's $70 million scanning machine agreement and warns exclusively on the content; especially the fact that the agreement may exclude the customs from tariff administration in the new ports reforms. Frowning at the third party involvement in revenue collection, UNCTAD had reasoned that the Nigerian, economy may not be better if such approaches are effected.

The letter titled, "Asycuda and Scanning project," from the Services Infrastructure for Development and Trade Efficiency division of UNCTAD in Geneva, signed by Mr. Nicolae Popa, regional co-ordinator could be a working tool for Okonjo-Iweala in an effort to address revenue inflows before it really takes off to distort the already existing and tested import revenue efforts.

The UNCTAD letter to the Finance Ministry reads, "Please be informed that further to our letter dated 23 May, 2003, two meetings have been organised between UNCTAD and Cotecna in which possible overlaps and synergies between the implementation of Asycuda in Nigeria and the Cotecna offer for installation and operation of scanners have been received in depth.

I have to inform you that during the last meeting that was held yesterday, both parties agreed to suspend this initiative, due to serious difficulties in harmonising both approaches. It is obvious that the Cotecna offer was made long time before the UNCTAD feasibility study and therefore does not take into account the overall philosophy of the UNCTAD/Asycuda approach. In order to be compartible with the Asycuda approach, the cotecna offer would have to be re-designed and we do stand ready to participate in this exercise.

It has become more apparent that the Cotecna offer is not as it stands conducive to the establishment of an efficient, modern and responsible customs service in Nigeria. We do not believe that the proposed approach would lead to a significant increase in revenue. Further, we believe - and this is true in the hundred countries in which UNCTAD operates - that the sharing of responsibilities between the customs administration and another party will end-up in a situation where nobody is fully responsible and therefore fully accountable.

In the current version of the Cotecna offer, several activities are overlapping the activities of the Asycuda project-classification and calculation of customs duties and taxes; Risk-assessment. The first two activities are proposed by Cotecna only for the preparation of the final classification and valuation report (FCVR), while in the Asycuda project the proposed processing responds to the legal requirements of the Customs declaration Process (SGDs).

Regarding the offer from Cotecna to participate in the cargo risk-analysis, in the way described in the current version of the scanning project, UNCTAD is adamant that this task has to be part of the integrated customs operation process covered by the Asycuda project.

In addition, UNCTAD is of the opinion that the management and operation of a customs risk-assessment and selectivity system should be the responsibility of the national authorities i.e. customs service, and not of a third party.

We consider therefore that the Cotecna offer in these three areas of the customs business would create confusion, complicate and delay the clearance process, in other words run contrary to a key objective of this programme which is, inter-alia, to facilitate trade.

There is a fundamental difference between the UNCTADs and Cotecna approaches concerning the telecommunications system, both functionally and technically. In addition, as underlined in the feasibility study for the implementation of Asycuda, UNCTAD considers that the operation of the telecoms system should be the responsibility of the customs service and not of a third party. Therefore, should BOT approach be more appealing to the Nigerian government, UNCTAD could assist in identifying telecoms companies prepared to submit on short-notice a BOT offer for the installation of the Asycuda telecoms system and, whenever necessary, also the need of the scanning project.

Although, in view of the fact that this reform will have a deep impact on both the revenue and the trade facilitation of the country, it is our duty to give the government of Nigeria a frank opinion on the present version of the scanning project. UNCTAD will continue to assist Nigeria and do its best to find efficient solution whatever decision is taken in this regard."

It is believed that UNCTAD as a global trade monitoring and regulatory body could always make recommendation that will encourage fruitful global trade initiative which if strictly adhered to must contribute efficiently to national development.

Since import trade makes at least half of the kind of income which the economy makes from oil and gas, it means that the finance ministry must critically assess and review its stands on issues especially when they have some expert recommendations into them.

One tip the finance ministry must note is that the fall of Ghana's import income was attributed to the introduction of scanning machine in the last few years. Today, Ghana has made more incomes from ports where such machines are not in use. The reasons are not far fetched. First the scanning machines in Ghana work at slow speed and could hold up inspection for days, thereby reducing the daily income records at its major ports.

To avert a possible decline in its income, Ghana has found an alternative whereby new computer based import declaration efforts are applied. Apart from fast clearing of goods, adequate and accurate duty assessments are now made with the computer based information system with the assistance of the customs. One of the major flaws of the scanning machine approach is that customs were not made part of the process in a duty they have been adjudged the only professionals by the international community.

The UNCTAD position could be understandable because the scanning machine operators are not experts in customs collection measures and could not make certain decisions that demand some professional approach at the right time. In Ghana, the scanning project has been explained as largely a waste of resources as its contribution to national income has been highly minimal.

Apparently, the new finance minister would be interested in this development because the project will for the next 10 years determine the import revenue inflow. It becomes, quite interesting as the scanning machine project has become obsolete in many developing countries as it has mainly been used in identifying arms and communications and not the real content of a container.

This development becomes equally interesting as scanners do not become useful in a situation where a container has more than one item. It is not used for heterogeneous imports as it does not have the capacity to classify all items at a time. The consequence is that all goods, no matter their quality are classified as one and this does not offer any duty payment advantage. At the end of the day, customs will resort to physical identification. Then where lies the efficacy of the contract. This is a test case for Okonjo-Iweala.

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