Tariff Determinations Publishing
by Vusi Ngcobo
This is the first thought that came to mind when I became aware of a bizzare case involving some or other campaign currently being driven in the Customs offices of the Northern Cape.
Some of my clients have been receiving letters of intent and letters of demand as a result of some or other desk audits conducted by Customs going back 2 years to 2018.
These desk audits are said to have uncovered imports which require a 10% upliftment in VAT. The officials in these border posts are relying on section 13(2)(a) of the VAT Act to demand this 10% VAT upliftment on the said imports.
Let me hasten to add at this stage to make sense of what I am on about by pointing out that the goods concerned would be imported from Namibia and all of them would have originated from South Africa at some point or another. Customs have never proven in any of these ‘imports’ that the goods concerned would have originated from outside of the Southern African Customs Union (SACU). For all of them, the country of origin is reflected as ZA. For those who may not be aware, ZA stands for South Africa.
What does section 13(2)(a) say?
This section of the act states that;
(2) For the purposes of this Act the value to be placed on the importation of goods into the Republic shall be
deemed to be
(a) where such goods are entered or are required to be entered for home consumption in terms of the
Customs and Excise Act, the value thereof for customs duty purposes, plus any duty levied in terms of the
said Act in respect of the importation of such goods, plus 10 per cent of the said value;
May I just point out at this stage that SACU uses a single tariff. May I also point out the obvious that section 13(2)(a) refers specifically to goods entering South Africa from outside the SACU in order to impose the additional 10% Added Tax Value (ATV) on the Customs value, plus any duties levied.
Just a line further down which I suppose could have been too much reading for my colleagues to do, that same section 13(2)(b) then clearly states that;
(b) “where such goods have their origin in Botswana, Lesotho, Swaziland or Namibia and are imported from such a country, the amount of the value as contemplated in paragraph (a), except that such value shall not be increased by the factor of 10 per cent:”
Now between you and I this seems to be very simple and straight forward in that section 13(2)(a) requires the 10% upliftment to be included in the calculation of the ATV but section 13(2)(b) prohibits this upliftment on goods originating from SACU countries.
We all know that tax revenue is down, and I assume that Customs officials have been given marching orders to collect as much revenue as possible. This is an old age practice which I was also part of the collective that would rest on laurels throughout the year and rise from our slumber just a few months before financial year end. During this time, we would be expected to be creative and come up with grand ideas to collect additional revenue. Some of this grand plan would include categorising what should be normal run of the mill operational actions, as “revenue initiatives”. I suspect that officials in the Northern Cape Customs officials got a Eureka moment on calling for a 10% upliftment on goods moving within SACU countries.
What a bad move during this economy currently in the ICU and failing to be resuscitated. I won’t go into the illegality of this action, but I am concerned about clients who do not have access to people like myself but who because of the threats made against them end coughing out the required amounts and further negatively affecting their businesses ending up retrenching staff or completely shutting down their businesses.
Customs official are playing the lotto with traders. “Bathatha ama chance, bathatha amaVAT”. The idea is to raise these unlawful and illegal demands with the hope that they will collect some revenue and thus qualify themselves for performance bonuses or any other kind of performance recognition that may come their way.
During my time at SARS, our mantra was that we would only collect into the fiscus what was legally due and payable to the fiscus. We would collect nothing less and nothing more than what was legally due to us. This seems to be no longer the case. The overzealousness that used to engulf in the early 2000s when we didn’t know anything about taxpayer rights and obligations, seems to be back in the Customs block.
I wonder how many other traders have received similar letters as received by my clients. What is sad about this scenario is that the officials involved are very seasoned Customs officials in leadership roles with many years of experience under their proverbial belt. It leaves me wondering how they could proudly sign off on these legally flawed letters of demands.
If you are caught up in this fiasco, feel free to contact us at Mageja Customs Consulting, your bespoke Customs Consulting service. We shall fight nail and tooth for justice and fairness in how Customs deal with innocent traders being subjected to this abuse of authority and almost bordering on bullying and extortion.
About the Author:
Vusi is an experienced Customs Practitioner with 15 years of practical Customs operational experience having led Customs operations at big land ports, seaports and airports around South Africa. Vusi holds a Master’s degree in International Customs Law and Administration from the University of Canberra. He also has international Customs experience having spent four years in the People’s Republic of China where he served as a Customs Attache and was elected as the Vice President of the Foreign Law Enforcement Committee (FLEC) as the first and only African to ever occupy that position.
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