Watch out, tax dodgers!
IMPORTERS and suppliers who collude to defraud the Jamaica Customs Agency (JCA) of cash by supplying false documentation of deliberately undervalued goods could soon find themselves being slapped with criminal charges, outside of the monetary fines currently imposed.
The recommendation followed an examination of the 2013 Auditor General's Report during Tuesday's meeting of the Public Accounts Committee of Parliament at Gordon House in downtown Kingston.
Auditor General Pamela Monroe Ellis said the findings of the audit highlighted operational weaknesses at the JCA (formerly Jamaica Customs Department), which impaired its ability to consistently determine appropriate and objective valuation of imports.
The JCA was also rapped for not having a uniformed research methodology for customs valuations. According to the audit, the entity did not establish formal guidelines to ensure that research activities were conducted in a structured and transparent manner nor did it have a centralised data storage of information to facilitate research for valuation.
She said in the absence of centralised data on commodity prices customs officer compiled their own file with copies of supplier invoices, catalogues and prices from Internet sources which they use to value imports. She said these invoices are reportedly from trustworthy importers and are maintained in files according to countries and item type.
In the meantime, the auditor general said the JCA did not maintain a valid price reference to aid valuation verification which is conducted to confirm the correctness of the price declared by the importer.
In addition, Monroe-Ellis said the JCA's Valuation Verification Unit (VVU) should maintain appropriate records of invoices and other documentary evidence to support the basis of the valuations used to decide on customs duties.
"We examined 22 files which were referred to the VVU and found that these files were not properly maintained and stored to preserve the information regarding the research method used for price determination. Consequently, we were unable to determine the bases for nine rejections and five acceptances of transaction totalling US$222,474 and US$128,636, respectively," she said.
She added that these weaknesses may hamper the JCA's ability to analyse and make realistic forecasts on revenue collections.
"The JCA's current practices do not ensure that, in all instances, documents presented by importers reflect the true value of the items and that amounts duly owed to Government are collected. Our review of 22 customs entries revealed that the JCA failed to determine the final assessments for eight entries for which it applied provisional values totalling US$716,944," Monroe-Ellis said.
"The related files for these entries did not provide any evidence that the JCA sought additional information to satisfy itself that the goods were not undervalued," she said.
Opposition committee member Karl Samuda said it was a very serious indictment on the attentiveness of Customs.
Chief executive officer of the department, Major Richard Reese, told the Committee that under law the department had two years in which to revisit values. "In a number of cases it involves fraud investigations and it does take a considerable period of time with support from other jurisdictions to obtain the original invoices and generally from some jurisdictions it's faster and from other jurisdictions slower and yet others are sometimes non-responsive," he said.
Reese said, for example, in the case of a motor vehicle where an individual declares at a particular value, which is deemed doubtful, a value is applied provisionally. "The individual clears the vehicle, we subsequently obtain the original documentation for the transaction we can then recover the vehicle and charge the additional duties and penalties," he said.
"... Provisional values have been closed; once the two years have expired we would not be able to pursue that. Regarding the evidence of action taken when a provisional value is assigned, given the number of transactions and our present system it is posing a challenge so we look at it from a risk base and a value base in order to prioritise those investigations," he told the committee.
Said Samuda: "They are doing nothing about it, that's why I call it 'dun cyah (don't care attitude); it's about time this department is made to do the work on behalf of the people of Jamaica in an expeditious manner."
Reese, who said $482 million has been collected year-to-date following instances of that nature, said 90 per cent of importers who present invoices state that they are original invoices.
"The Jamaica Customs now makes contact with the supplier or co-operating agencies who do further checks and get independent verification of the invoice and where is it deemed to be a fraudulent invoice then the requisite action is taken," he said, noting that in instances you can have a series of persons in collusion.
Government member Fitz Jackson sought to verify whether it was the case that some suppliers will provide original blank invoices for the purchasers to present to Customs.
"Yes, they do, or they do two, you have cases where the importer and the supplier are the same but it is not immediately apparent to Customs as well," Reese admitted.
Asked by Government committee member Julian Robinson whether the only penalty was financial, Reese said the penalty imposed was "three times the value of the vehicle or the duty, whichever is higher".
"We can also forfeit the vehicle," he added.
"That's fraud. Someone who gives you an invoice that's not accurate, how do you determine whether you go beyond the (financial penalty)?" Robinson wanted to know.
"You could actually go the other route of a criminal charge," Reese admitted.
"But you should; a man gives you an invoice for half of the value, you 'slap him on the wrist', he pays the penalty and drives the car. You need to send a signal beyond the financial penalty that this kind of behaviour is not acceptable, you should impose the harshest penalty, that's the only way you are going to send a signal that people shouldn't try these things," Robinson insisted.
The Customs head was, however, adamant that "it's not a slap on the wrist".
"We will take these suggestions on in terms of the amendments we will be making to the Customs Act to seek to strengthen the provisions consistent with the other laws which we are modifying as well," Financial Secretary Devon Rowe said in addressing the issue.