Why does Customs continue to allow false invoices?

FALSE invoices on imported goods are still very much part of the problems in which Tongan Customs is allegedly mired. No one, not even the Commissioner of Customs, Sefita Tangi, could justify the fact that values of some goods imported have been drastically altered and new false invoices issued so that the amount of duty charged is far less than what it should be. This allows the cheating importer to sell goods at a much lower price, even when he has to pay off Customs officials either in cash or in kind.

A case in point is the vehicles that are imported with an FOB value of $100 – $200 pa’anga per vehicle. Other goods such as tin corned beef have valuations of .20 seniti per can. Why these goods are being valued at ridiculous prices is so they can be charged ridiculously low duty rates. The money that could have gone to Government in appropriate duty payment ends up being paid out to corrupt Customs officers and others. Obviously the cheating importer makes huge profits from paying extremely low duty.

The recent revelations brought on by a senior Customs Officer, Vehitau Ma’ukie, Chief Officer in Charge in Vava’u, which were vehemently denied by the Commissioner, only add fuel to the fire that has been burning for quite some time.

Someone must take responsibility for extremely huge differences in duties charged to different importers of the same products. In one case, a company pays duty for an invoice that puts a value of $57 per unit, while the same unit is valued at $4 to another importer. The difference of $53 per unit for the valuation of the same item is not a typing error. It is the reality of what happens on a regular basis, as many importers alter their goods’ value so they pay very little duty. This is on record, and the question of how no one spots it, when it occurs so many times, is alleged to be part of a cover-up that lets dishonest importers and corrupt Customs officials continue in their collaboration of cheating the Government and the public.

It is not only honest importers whose businesses are affected, because they pay high duty for their imports and have to sell their goods at a higher price. Everyone is affected. The only ones who are not affected are the dishonest importers and the Customs officers they deal with. But as the saying goes, “be very careful for the day will come when you will need to give an account.”  The cheaters are not playing on a level field. If they were allowed to continue in their inappropriate and immoral practice, business in Tonga would end up being under the control of those who are corrupt. What a disastrous outcome this would be for Tonga.

There are many stories that can be documented about corruption collaboration between importers and Customs officials. Some are quite well known, others not so much. Why there is no vigorous investigation and prosecution is a question someone needs to answer.

A well-known store and importer in Nuku’alofa was charged with issuing false invoices and non-payment of proper duties. This dishonest importer had over $1 million pa’anga of duties not paid because of the fraudulent issuance of false invoices. But, before the case came to court, the documentations that were in the possession of Customs disappeared mysteriously. There was no longer a case to pursue.

Here are the outstanding issues in regards to the Customs debacle that is being brought to the public’s attention right now:

1)   Once an importer issues a false invoice, he pays a substantially lower duty, and thus his goods would be sold at a cheaper price than his competitors. It affects the business of those trying to be honest and follow the proper procedure.

2)   The allegations that the Chinese are the ones who are cheating with lower duty payments are not exactly correct. They would need the co-operation of Tongan Customs officials to be able to cheat on their import duty.

3)   Government loses millions in uncollected revenue due to some importers being charged so little. Ultimately it is the people of Tonga that looses out.

4)   The inflationary tendencies of imported goods depend so much on having to meet a target of duty collections when there are those who pay so much, and others who pay very little for the same products.

A Customs broker leaked to the Taimi ‘o Tonga newspaper a letter he had written to the Deputy Commissioner of Customs, Kelemete Vah,e last year. Editor Faka’osi Maama released this letter also to the Taimionline. The letter reads:

“I’m getting tired of trying to do the right thing when you in your department are trying to make things difficult for us, particularly when we are trying to do what is right.

“It seems you reward those who are cheating the department and abusing duty payments, and not those who are doing right.”

The broker was complaining to the Deputy Commissioner about a company he is representing, yet Customs have held on to their containers for over a week, although they could be paid $100,000 in duty payments for those containers. He said he has represented this company for the past 3 years, and despite the detailed inspections of their imports, the paper work has been correct, and nothing has been found to be irregular.

The broker said: “I have complained several times about a company named ANDA Enterprises that issues false invoices. I have provided the proof, yet you awarded this company by granting them exemption from inspection of their containers. This company issued false invoices of goods that were originally valued at US$17.70 per unit to US$5.50 on the false invoices. Why is it that you let this company off the hook, who have issued false invoices and cheated on Customs duties, yet you keep squeezing us who are trying to help you by doing what is right?”

The broker pointed out to Mr Vahe that there were seven other Chinese importers who brought in 40ft containers, yet they were not inspected. He said he asked the Deputy Commissioner why they were not inspected, and he replied, “they already inspected similar containers previously, and they were letting go of these ones.”

Two documented proofs were provided by the broker as an example of the importation of two vehicles that had false invoices. A truck for carrying containers was valued with a false invoice at $5000, and another truck for tar-mix work was valued at $7000. Both these vehicles had their proper estimated valuations at $80,000 and $100,000 respectively. The duties charged for these two vehicles were obviously far below what they should have been charged.

With revenue from Customs being one of the major sources of funds to Government, it is not surprising why Government struggles at times with balance of payment. It is also of utmost urgency that if corruption is not curbed there is a very dim future facing Government economically and business in general.

By Kalafi Moala

One Response to Why does Customs continue to allow false invoices?

  1. Sam says:

    There’s a very simple solution to this issue. Eliminate ALL import duties for ALL importers and ALL imported goods.

    That way everyone is on a level playing field. The government will save money by not having to pursue collections. And most importantly, the people of Tonga will all benefit by being able to purchase goods more cheaply.

    Ultimately this would help to spur economic growth in Tonga that would more than offset any lost tax revenue caused by elimination of import taxes.

    Of course, this probably makes too much sense to ever actually happen, so instead we’ll continue seeing this silly cat and mouse game where honest businessmen are effectively punished while dishonest businessmen and corrupt officials continue to be rewared.

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