South African Revenue Service (Sars) celebrated International Customs Day (ICD) at the weekend by honouring the men and women in its Customs division. Whilst the core focus of Customs offices is to manage ports of entry and facilitate travellers and traders, sadly there is a proliferation of illicit and criminal activity that requires Customs to remain vigilant in combatting this scourge.
It is estimated that illicit trade results in losses to the fiscus of billions of rands every year.
The Sars Commissioner, Edward Kieswetter, has committed the organisation to work closely with other government agencies to stamp out the illicit trade in clothing and textiles, leather and footwear, precious metals and scrap metal, second hand vehicles, fuel and cigarettes because of its disastrous consequences for our economy and our people. According to the Sars Commissioner “The losses in tax revenue and the negative impact on our domestic economy affects industries, erodes employment opportunities and generally denies the most vulnerable in society the social and economic well-being they deserve”.
Sars has found that importers or exporters in these sectors specifically are using various ways to avoid paying the import or export duties, as well as Value-added Tax (VAT), that apply to the goods, which in turn impacts on the amount of revenue that Sars is able to collect for the growth and development of our country.
Another negative impact of illicit trade is the erosion of productive capacity in the country as goods are imported rather than produced locally. This in turn leads to job losses which aggravate already high levels of poverty and inequality.
That is why the Clothing and Textile industry is a key focus area for Sars. Under-declaration of customs value in this sector has increased from R5.2 billion in 2014 to R8.52 billion in 2018, with the under-declared customs value in 2017 and 2018 representing 34% and 35% of the declared customs value respectively. Some of the cases of non-compliance that Customs has come across recently in this area include declaring complete garments at values as low as 0.02 US cents, excess cargo (in one case, more than 80% of a container was not declared), fictitious importers’ addresses and misclassification of goods.
Sars forms part of an inter-agency working group with the Department of Trade and Industry (the dti) and National Treasury, focusing amongst others on the Clothing Textile Leather and Footwear Industry. The working group is already seeing several successes since it was established last year. Within the first month of the project, Customs issued 20 letters of intent to seize goods from traders who were found to be non-compliant in terms of value, quantity, classification, licensing and registration. The potential loss to the fiscus of these intended seizures amount to about R20 million.
The Deputy Minister of Finance pledged his full support for the important work of Sars in this regard.