Leading by Example – Varsha Singh

It is not common for a person within a Revenue Authority to work in both the Customs and Tax disciplines. It is even more rare for such a person to excel in both. I am glad and most fortunate to know and have worked for such a person – who under duress and fortitude has scaled great heights in her career.

Just recently she was nominated and included to celebrate the achievements of women of the past and present who have contributed to and shaped the future of women working in international tax across the profession. The Woman of IFA Network (WIN) representatives of the International Fiscal Association (IFA) UK branch called upon the global WIN network to identify and recognise the leading women in their regions and local branches. A profile book and the photo montage, which it supports, was prepared in September 2019 to mark this occasion and to celebrate the contribution of women to international tax discourse and policy development in all fields of the profession. Refer to page 61 for Varsha’s profile.

Varsha Singh

Deputy Head of the Global Relations and Development Division, OECD, South Africa.

Recognised for her contribution to international tax discourse through advocacy and encouragement of developing countries perspectives in the development and implementation of global tax policy.

Varsha Singh is the Deputy Head of the Global Relations and Development Division at the OECD Centre for Tax Policy and Administration. Her primary role is to encourage developing countries perspectives in the development and implementation of OECD standards and guidelines in the tax area, and to provide assistance to developing countries to strengthen their tax systems. Ms Singh also oversees the multilateral Global Relations Programme, which delivers over 50 seminars annually through six Multilateral Tax Centres.

Before joining the OECD, Varsha worked at the South African Revenue Service (SARS) for over 22 years and has extensive experience in a range of Tax, Customs and IT matters. She previously occupied the position of Head of International Relations at SARS. In that capacity, Varsha played a pivotal role in the establishment of the African Tax Administration Forum (ATAF)and as the head of the interim secretariat of ATAF, also worked closely with other Regional and International Organisations, particularly in the area of capacity building. Varsha holds Masters degrees in Business Administration, International Customs Law and Administration and completed the Women in Leadership Programme with Henley Business School.

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WCO’s “Guidelines”on Customs-Tax Cooperation

customs-taxThe “Guidelines for strengthening cooperation and exchange of information between Customs and Tax authorities at the national level” have been formulated with the support of WCO Members and development partners, especially the Organisation for Economic Co-operation and Development (OECD) and the International Chamber of Commerce (ICC). The Guidelines aim to provide reference guidance to Customs and Tax authorities who wish to go further in their cooperation and develop operational models which enable agencies to work together to their mutual benefit.

Although there is no limit to the ways in which these two agencies can work together, and countries should consider new and innovative methods based on their organizational structure, needs and operational requirements, the Guidelines highlight some overarching principles and associated benefits concerning enhancement of Customs-Tax cooperation.

The WCO Guidelines for Strengthening Cooperation and the Exchange Of Information between Customs and Tax Authorities at the National Level are intended to supplement the ongoing initiatives in this domain. The aim is to provide general, overarching principles for cooperation which take account of operational considerations, bearing in mind the different organizational structures and national requirements of countries. It is expected that these Guidelines will be useful to Member Customs administrations in developing a sustainable cooperation mechanism (including a MoU where needed) tailored to their unique situation, in close cooperation with their respective Tax authorities

In particular, the Guidelines provide a comprehensive overview of the enablers for mutual cooperation and the exchange of information, address the scope and remit of information exchange, cover different information exchange mechanisms, list the type of activities that Customs and Tax authorities may undertake together, and provide key principles and points to consider when developing a Memorandum of Understanding/Agreement (MOU/MOA). Source: WCO

EAC – Top Regional Trading Block in Africa

Doing Business EAC 2013Improving customs efficiency can boost trade volumes and reduce the cost of doing business in the region, the Doing Business in the East Africa Community 2013 survey (Click hyperlink to view the report) has indicated.

The study conducted by World Bank (WB) and the International Finance Corporation showed that a one day reduction in inland travel times could lead to a 7 per cent increase in exports. The report also noted that easing access to finance, improving infrastructure and empowering the private sector are key in the region’s integration process.

“Transport efficiency and a favourable business environment have a greater marginal effect on exports as they boss access to foreign markets, especially in low income economies,” it indicated. “Improving logistical performance and facilitating trade may have a larger effect on regional trade, especially on exports, than tariff reduction.”

Also, economies with efficient business registration, fair tax policies and efficient transport have a higher entry rate of new firms and greater business density, meaning that they are essential to ensure strong firm productivity and macro-economic performance.

According to the report, lowering costs for business registration improves formal job opportunities as more new firms hire skilled workers. “This strengthens other sectors, including the education sector and legal systems,” said Chantal Umuraza, the director of Chamber of Industries. “Economies that rank high on the ease of doing business tend to combine efficient regulatory processes with strong legal institutions that protect property and investor rights,” she added.

According to the report, financial market infrastructure, including courts, creditor and insolvency laws, as well as credit and collateral registries, improves access to credit and boosts trade. It also noted that entrepreneurs in EAC face weak legal institutions and complex regulatory processes compared with global averages and those of the developed economies.

Despite instituting some reforms, the survey found that East African Community businesses still faced huge obstacles, while economies in other regions had improved business regulations. “As a result, EAC member states’ rating in this area has stagnated at around 117 over the past four years,” the report showed. According to the report, it requires only eight procedures and 20 days on average to start a business in the East African region.

EAC economies accounted for two of the 11 regulatory reforms implemented in sub-Saharan Africa to make it easier for entrepreneurs to start businesses, the survey said. Rwanda still has the most efficient process in the EAC to start a business and 8th globally out of 185 countries surveyed. It is followed by Burundi at 28th position, Tanzania at 113, Kenya at 126 and Uganda trails at 144.

In general, 3 of 5 EAC economies rank well below the regional average in all areas measured by the survey. Burundi eliminated four requirements to have company documents notarised, to register the new company with the commercial court and the department of taxation. As a result, it moved up 80 places in the global ranking on the ease of starting a business, from 108 to 28.

On the whole, the report indicated, the region’ fares better than other regional trading blocs on the continent on the ease of starting a business. It was ranked 84th, way above 104th position for the Southern African Development Community (SADC). The Common Market for Eastern and Southern Africa (Comesa) is at 110th position while the Economic Community of West African States (Ecowas) ranks 127th. Source: AllAfrica.com

Warehouse Operators – Easy prey for HMRC

warehousingThere is growing evidence that HM Revenue & Customs (HMRC) has begun a campaign to target warehouse keepers and hauliers who may unknowingly be handling excise goods on which the duty has yet to be paid.

And the United Kingdom Warehousing Association (UKWA) is warning that any company found guilty of storing goods on which duty is outstanding could face ‘financial ruin’ – even if the storage company was unaware that duty had not been paid.

“While HMRC has had the authority to assess anyone for duty on goods illegally diverted from bonded movements who was ‘aware or should reasonably have been aware’ of the diversion at any point in the supply chain since 2010, action has been spasmodic,” says Alan Powell of Alan Powell Associates, UKWA’s honorary adviser on Customs & Excise Matters.

“However,” he continues, “HMRC is deploying more officers to investigate excise goods supply chains. As a result, we are now increasingly seeing third party service providers, including hauliers, warehouse keepers and lessors of property, such as barns and outbuildings, being penalised by HMRC as a result of their involvement with businesses that have evaded duty on alcohol and have absconded – so called ‘missing traders’.”

Anyone found to have held or dealt in duty-unpaid excise goods, can be fined up to 100% of the duty evaded, as Alan Powell explains: “HMRC had been slow to apply what are called ‘excise wrong-doing penalties’ but are now vigorously applying them.  As a result, many small and medium companies are facing unexpected bills and penalties from HMRC of hundreds of thousands of pounds.”

Allan Powell continues: “In simple terms, if an organisation has been involved at any stage in the supply of goods that have been illicitly diverted from a bonded supply chain, that  organisation could be liable for duty – even if that organisation is not directly responsible for the diversion.

“Essentially, anyone handling duty-unpaid product is classed as being ‘contaminated’ within the supply chain and assessed for the duty.”

In one particular instance, a storage company is facing a duty bill alone for nearly £100,000 after HMRC inspectors found duty-unpaid alcohol stored at the company’s site.

“The storage company was simply unaware about the risks involved in handling loads of duty un-paid alcohol and the director of the company to whom they leased the space has disappeared,” says UKWA’s chief executive officer, Roger Williams.

The message from Alan Powell and UKWA is that if you offer third party logistical services of any kind, you must check what is being handled or stored – do not take storage requirements on face value.

Alan Powell says: “Always be wary and query the business need, checking out with HMRC if possible.  If in any doubt, do NOT become involved – it could end very badly.” Source: www.ukwa.org.uk.

Read a followup article by – UKWA :Don’t be fazed by HMRC move (Lloyds List)

Reform by Numbers – a reference work on Customs reform

The word ‘reform’ is a constant in the daily life of a customs officer. No customs administration among the 177 members of the World Customs Organization has not had a reform program in progress or planned. This is ultimately quite normal.A new World Bank publication “Reform by Numbers” will no doubt appeal to customs and tax reform experts and change agents.

It was written in the context of new and innovative policies for customs and tax administration reform. Eight chapters describe how measurement and various quantification techniques may be used to fight against corruption, improve cross-border celerity, boost revenue collection, and optimize the use of public resources. More than presenting ‘best practices’ and due to the association of academics and practitioners, the case studies explore the conditions under which measurement has been introduced and the effects on the administrative structure, and its relations with the political authority and the users. By analyzing the introduction of measurement to counter corruption and improve revenue collection in Cameroon, two chapters describe to which extent the professional culture has changed and what effects have been noted or not on the public accountability of fiscal administrations. Two other chapters present experiments of uses of quantification to develop risk analysis in Cameroon and Senegal.

By using mirror analysis on the one hand and data mining on the other hand, these two examples highlight the importance of automated customs clearance systems which collect daily extensive data on users, commodities flows and officials. One chapter develops the idea of measuring smuggling to improve the use of human and material resources in Algeria and nurture the questioning on the adaptation of a legal framework to the social context of populations living near borders. Finally, two examples of measurement policies, in France and in South Korea, enlighten the diversity of measurement, the specificities of developing countries and the convergences between developing and developed countries on common stakes such as trade facilitation and better use of public funds.

The “gaming effect” is well known in literature about performance measurement and contracts performance, because there is a risk of reduced performance where targets do not apply, which is detrimental to the overall reform. It is crucial to keep in mind that, by themselves, indicators “provide an incomplete and inaccurate picture” and therefore cannot wholly capture the reality on the ground. Measurement indicators must be carefully chosen to ensure that knowledge is being uncovered.

Measurement, for purposes of reform, should not be “copied and pasted” from one country to another. Due consideration must be given to the varying aims of the customs service and the specific political, social, economic, and administrative conditions in the country.

Measurement applied to experimentation is also about how donors, experts, and national administrations work together. On the one hand, national administrations in developing countries ask for technical assistance, standards, and expertise that are based on experiences of developing countries and use experts from such countries.These requests encourage the dissemination of such models. On the other hand, reforms of customs or tax administrations are represented as semi-failures in terms of the initial expected outcomes set by donors and politicians – usually the end of a reform is the time when donors and local administrations become aware of the gaps of their own representations of success.

While scientific and academic in approach, lets hope it means more than just miserable experimentation in target countries.

The book is available for free reading online – www.scribd.com or you can purchase from amazon.com.

New Tax law to give SARS upper hand

Taxes

News24.com reports that legislation allowing the SA Revenue Service (Sars) to search business premises without a warrant is expected to come into operation within the next three months. The Tax Administration Bill was promulgated into law on Wednesday in the Government Gazette, Sars said in a statement on Thursday.

The act will come into operation on a date to be determined by the President  by proclamation in the gazette.

“Sars’s preparations for the implementation of the act are at an advanced stage and it is anticipated that it will come into operation within the next three months,” it said.

The act was intended to simplify and provide greater coherence in South African tax administration law. It eliminated duplication, removed redundant requirements, and aligned existing disparate requirements in different tax acts ranging in age from four to 63 years old. It created a single, modern framework for the common administrative provisions of the tax acts.

“Most taxpayers are compliant, and the act should ensure better service and a lower compliance cost for them,” Sars said. “Sars is, however, duty-bound to actively pursue tax evaders in order to maintain compliant taxpayers’ confidence in the integrity of the tax system.”

Key features of the act include:

  • A move to a single registration process and number across taxes to reduce red-tape and streamline the system, and self-assessment of taxes so taxpayers need not wait for a Sars assessment;
  • Greater access to third-party data to underpin Sars initiatives, such as the pre-population of individual tax returns;
  • Clearer rules on Sars access to information, so tax liabilities can be determined more quickly and accurately;
  • The ability to search business premises without a warrant in narrowly-defined situations, where the general requirement for a warrant will defeat the object of the search, so Sars can act when tax is at serious risk and time is of the essence;
  • Clear requirements and timelines for issuing tax clearance certificates to provide greater certainty and responsiveness to business;
  • Feedback on audit progress and findings to engage more fully with taxpayers and ensure they understand the reasons for any adjustments;
  • Specific timeframes for decisions of the Tax Board (a “small claims court” for tax) and wider reporting of Tax Court decisions to improve access to justice; and
  • The appointment of a Tax Ombud, informed by international experience, to provide taxpayers with a low-cost mechanism to address administrative issues that cannot be resolved through Sars’s normal channels.

Although the act provided for a year from its commencement for the appointment of the Tax Ombud, Finance Minister Pravin Gordhan announced in his 2012 Budget speech that the ombud would be appointed this year. Source: News24.com

“Sars is, however, duty-bound to actively pursue tax evaders in order to maintain compliant taxpayers’ confidence in the integrity of the tax system.” 

Who is going to pursue corruption and wasteful expenditure in order to maintain the citizens confidence in paying tax in the first place?

SARS issues Compliance Programme 2012/13 – 2016/17

SARS has issued its inaugural SARS Compliance Programme, a high-level overview of its plans for the next five years to further grow compliance with tax and customs legislation. More so than perhaps any other time in history, the current global economic conditions have thrust domestic resource mobilisation into the spotlight, highlighting sustainability built on a foundation of tax compliance. Countries lacking this solid base have found their room for manoeuvre in these uncertain times severely curtailed and, in some cases, completely absent. The impact of self-reliance on self-determination is self-evident.

Many tax administrations publish similar compliance programmes (including Australia, Brazil, Canada, Denmark, Netherlands, New Zealand, Poland, Spain, Sweden, Turkey, USA, UK) and SARS has based it’s Compliance Programme on their ground-breaking work. To download and read the SARS Compliance Programme, click here! For Customs specialists and trade practitioners no less than 3 priority areas involve Customs –

Illicit cigarettes: the trade in and consumption of illicit cigarettes is detrimental to the fiscus and to the health of South Africans. SARS interventions will continue to focus on clamping down on cigarettes smuggled via warehouses as well the diversion of cigarettes destined for export back into the local market. SARS also plans to modernise it’s warehousing management and acquittal system.

Undervaluation of imports in the clothing and textile industry: Undervalued imports pose a significant risk not only to the fiscus but to local industry and job creation. SARS will continue to work together with other government agencies and industry stakeholders to clamp down on this practice including through the establishment and frequent revision of a reference pricing database to detect undervaluation, increasing inspections as well as supporting an integrated border management model.

Tax Practitioners and Trader Intermediaries: Regulation of this industry will be pursued to ensure that tax practitioners and trade intermediaries are all persons of good standing, are fully tax compliant in their personal capacity and provide a high quality service and advice to their clients. SARS will also develop a rigorous risk profiling system to identify high risk practitioners and trade intermediaries.

Draft Taxation Laws Amendment Bill, 2011 – Impact on Customs

As if the myriad of changes affecting the Customs industry are not enough, there’s some more important considerations for customs traders and practitioners, soon, posed by the Draft Taxation Laws Amendment Bill [2011].

Goods Sold in Bond. For the purposes of the VAT Act, the Bill proposes that ‘the value to be placed on the importation of goods into the Republic which have been imported and entered for storage in a licensed Customs and Excise storage warehouse but have not been entered for home consumption shall be deemed to be the greater of the value determined in terms of subsection (2)(a) or the value of acquisition determined under section 10(3) if those goods while stored in that storage warehouse are supplied to any person before being entered for home consumption.’

Duty free goods imported on a temporary basis. Goods imported in terms of Rebate Item 470.03, which are duty free, will in future have to be declared under a specific rebate sub-item for duty free goods. In addition, provision is also to be made for the importer of duty free goods, where the importer is contractually entitled to keep a portion of the goods manufactured, processed, finished, equipped or packed in lieu of payment for the operations carried out, that importer must:
a) export those goods within the 12 month period, or
b) process a goods declaration for payment of the VAT on the goods retained and pass a voucher of correction amending the quantity and value of the original declaration.

New tax incentives for Industrial Development Zones. Government is seeking to renew its efforts to enhance the Industrial Development Zone (IDZ) regime to encourage industrial development within certain geographical areas. The main focus of the incentive is to promote capital expenditure. Greenfield projects receive an additional 55% allowance and brownfield projects receive a further 35% additional allowance. The additional allowance for greenfield projects located in IDZ’s will be increased to 100% (instead of the current 55%) and to 75% for brownfield projects (instead of the current 35%).This change will be welcomed by IDZ Operators that are constantly looking for ways to make IDZ’s more attractive. In terms of the Customs and Excise Act, it should be noted that duty rebate and VAT dispensations ONLY apply to entities establishing licensed premises within the customs controlled area of an IDZ.

For more information on the above please click here!

The Draft Taxation Laws Amendment Bill, 2011 is available on the SARS website.