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Business News of Thursday, 10 December 2015

Source: The Finder

Rot in fruit juice imports cost govt over $30m annually

PAINSTAKING investigations conducted by The Finder have revealed that massive corrupt deals and malfeasance still persist at the Tema Port in the application of duties on some brands of imported fruit juice.

The corrupt deals are going on despite the replacement of the Destination Inspection Companies (DICs) by personnel of the Customs Division of the Ghana Revenue Authority (GRA).

Information gathered from the Tema Port shows consistent undervaluation of some brands of fruit juice by some particular importers, and conservative estimates are that government will lose over US$30 million every year in terms of revenue if the situation persists.

Our sources indicate that the system was being manipulated even when the Destination Inspection Companies (DICs) were in charge of operations at the Tema Port, and with their departure as of September 1, 2015, the importers quickly changed their mode of operation in a bid to continue to outwit customs.

It is learnt that some of the importers have now adopted the technique of mislabelling the imported items.

For instance, if they import Don Simon, they label it as wine and supermarket products, thereby attracting less tax on the imported items.

It is not clear whether Garcia Carrion, the renowned manufacturers of juice and wine, are also involved in this type of underhand dealing or it is just the work of the importers.

But industry players strongly believe that the issue should not be too difficult for the Economic and Organised Crime Office (EOCO) and other related government agencies to uncover.

In declaring the quantity of items, these fruit juice importers describe them in LOTS instead of CONTAINERS, and the intention is clear – to beat customs on the actual number of the items brought into the country on a given day.

What makes the matter even more disheartening is that it is alleged that some of the leading shopping malls currently operating in the country are involved in this kind of corrupt practice to rob the nation of millions of cedis.

Furthermore, analyses of the hard copies of their import documents, including the Final Valuation Report made available to this paper, clearly support the manipulation of the clearance process.

Just last month (November 2015), a company (name withheld) imported 12 containers of Don Simon Multifruta Nectar per Entry Number 42015416137. In October, the same company imported 10 containers of the same product per Entry Number 42015406591. The Free On Board (FOB) price was pegged at only $0.46 per litre.

Interestingly, FOB values of the same brand from the same supplier imported at or about the same time by two other importers saw significantly different values which are quite ridiculous.

Indeed, it is on record, for instance, that on March 4, 2015, a particular company (name withheld) per Entry Number 42015005439 brought in Don Simon Multifruta Nectar and was made to pay as low as €0.31 per litre.

On that same day – March 4, 2015 – another company (name withheld) per Entry Number 42015084505 also brought in Don Simon Multifruta Nectar and was made to pay as low as €0.49 per litre.

The question many industry players are asking is: how is that possible, especially when as far back as 2014, there was a minimum guideline value of around US$0.85/litre (approximately €0.77/litre) that was set for inspection companies?

Others also wonder why these guidelines are being blatantly flouted and ignored to the detriment of the country, leading to huge losses in revenue.

Sources within the industry are of the view that the Customs Division of the GRA should start enforcing minimum values of say US$0.8 to US$1 per litre to check the practice of undervaluation of imported fruit juice nectar.

“We produce the same products in the country, pay the right taxes and give employment to many Ghanaians, but some of the fruit juice importers undervalue theirs,” adding that, “When they do so, they are able to sell at cheaper prices because they pay less to the state in terms of taxes,” one source stressed.

The sources described the practice as most unfortunate, and noted that until the practice is halted, the government will not be able to meet its revenue target because the practice is widespread.

“The government should not sit down and allow some unpatriotic importers to rip the state of what is deserves, and that is why we want some action now,” the sources said, adding that, “We have petitioned the appropriate authorities but nothing seem to be done about it all this while.”

The sources wondered who were behind this blatant tax invasion and why it is being allowed to continue despite persistent protest from industry players.

It would be recalled that in Ghana, the concept of destination inspection was introduced by the government in 2000 to replace the pre-shipment inspection system, which involved the inspection of imports before shipment from the country of supply.

But since 2013, the operations of the five DICs; namely, BIVAC International, Gateway Services Limited, Ghana Link Network Services, Webb Fontaine Ghana Limited and Inspection Control Service, came under criticism for their arbitrary charges at the ports and work processes which importers claim cause congestions at the ports.

Some importers claimed that the many interventions by the DICs, such as evaluation, reclassification and scanning discrepancies, were frustrating.

A former Commissioner of the Internal Revenue Service (IRS), now under the GRA, Major Daniel Ablorh-Quarcoo (rtd), who was one of the leading voices in the campaign to scrap the operations of DICs in Ghana, accused the companies of dampening the government’s efforts to mobilise tax resources and also reduce the cost of doing business in the country, as they charged fees for every work done.

It was, therefore, a great relief for importers when the Customs Division of the GRA was made to take over operations at the Tema Port since September 1, this year. But the trust and goodwill has quickly evaporated as the discrimination in the application of duties on some imported items continue unabated.

Barely a year ago, a report released by Global Financial Integrity (GFI), a Washington DC-based research and advocacy organisation, revealed the Government of Ghana lost potential tax revenue of $3.86 billion between 2002 and 2011 through trade malpractices - an average of $368 million a year.

The report, released on May 12, 2014, said, among other things, that $14.39 billion in illicit capital flowed either into or out of Ghana due to trade malpractices while under-invoicing of exports amounted to $5.1 billion and under-invoicing of imports came to $4.6 billion.

The report also revealed that the under-invoicing of exports was the primary method for shifting money illicitly out of the country while the under-invoicing of imports was used mainly to illegally smuggle capital into the country.

As a result of those illicit financial deals, Ghana’s tax loss was put at roughly 11% of total government revenue over the past 10-year period.

Industry players strongly believe that there is the urgent need to plug the channels through which these illicit monies flow, to save the economy and the nation.

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