Our borders are very porous and goods that should be paying customs duty are somehow finding their way into the country for free.
The Finance Minister also pointed out that a successful rethinking of the state requires that every loophole in our revenue collection be closed and tightened.
For the period January to October 2012 import payments dynamically grew to $6.5 billion, compared to $5.2 billion for the same period last year. This represents a 26 percent increase in imports.
However, revenue from customs duty was a mere $289.1 million, representing a mere 10.4 percent of total revenue collected. Customs duty is just 4.8 percent of average duty collection, notwithstanding the fact that the legislated duty rates range from 5-40%.
What this actually means is that the customs duty of 4.8 percent we are actually collecting right now, as a percentage of total imports, is much less than the lowest customs duty of five percent we are charging on imports. This in an anomaly that should not be allowed, given the liquidity crunch we are currently facing.
The government has projected that imports will close the year at $8 billion if the average duty collection benchmark is to be applied. However, if the average duty collection was, say, 15 percent, the Consolidate Revenue Fund would be actually accruing about $1.2 billion in customs duty. This would be a major boost to our revenue.
Certificates of origin
There are many reasons for the porosity of our borders. Firstly, some importers are abusing the certificates of origin to avert customs duty payment. The SADC and COMESA certificates of origin are the most abused certificates of origin.
Importers source their products from other nations such as Asia and Brazil and then tamper with the certificates of origin to make them appear as if the goods are originating from SADC or COMESA. Since Zimbabwe is a member of the SADC and COMESA Free Trade Areas, goods originating from these nations are allowed in the country duty free, provided that they have certificates of origin.
Another customs union loophole is caused by undervaluation of declared goods. Most importers who declare their goods do not indicate the actual values, resulting in them paying less duty or not paying at all since the value are below the taxable amount.
Other importers, especially informal traders, have a tendency of averting customs duty payment by breaking down their goods into values below the taxable amounts and then giving the goods to other people to declare.
The border posts, especially Beitbridge, are also a target for smugglers. Clothing, poultry, and other foodstuffs are the most smuggled products on the border.
Smuggling
To ensure that customs duty is effectively channeled into the Consolidated Revenue Fund, there is need to automate the Beitbridge border post and urgently implement the re-construction of the post as well. The post clearance audit facility should also be deepened, as well as ensuring that risk management measures are strengthened.
We can never have control of our economy until we have control of our borders. The need to protect our industries can only be effective if what has been restricted from getting into the country, does not somehow find its way in. Let us tighten screws on our borders and take control of our economy.
Post published in: Business