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KIGALI INDEPENDENT UNIVERSITY
(ULK)
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FACULTY OF LAW
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Internship Report
Carried out in Rwanda Revenue Authority
In partial
fulfilment of the requirement for the Degree of Bachelor
of
Law
19th January-6th March 2009
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By KABERA Charles
Supervisor: NIZEYIMANA Christian Head of Compliance and
Enforcement
March, 2009
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Dedication
I dedicate this work to
My children Charlotte and Junior, My Late wife Ruth,
My Dear mother Therese,
My Late father Ladislas,
My sister and brothers,
All Creative Thinkers and Researchers
Acknowledgement
The success and accomplishment of this report stems from
efforts and dedication offered by many RRA staff whose support was either
direct or indirect during my internship. I thank all of them for their devotion
and generosity.
Special thanks also go to my Supervisor during internship
period, NIZEYIMANA Christian, for being so friendly and supportive during my
training.
Above all, I owe much tribute to the Almighty God who gave me
a life worthy living and I thank Him for giving me the strength to accomplish
this work.
KABERA Charles
Preface
This report is an outcome of the exercise I conducted during
my internship period at RRA. This was an opportunity for me to put in practise
the legal knowledge I had acquired during my four years of study at ULK.
The purpose of this report is to put in writing the work
experience performed and the learning attained from performing specific tasks
while working in a professional legal environment.
Abbreviations
Asycuda: Automated System for Customs Data
ADR: Association of Declarants in Rwanda
DFID: Department for International Development
DTD: Domestic Tax Department
EACMA: East Africa Customs Management Act
GOR: Government of Rwanda
JILO: Judicial Investigations Liaison Officer JILU: Judicial
Investigations Liaison Unit L&BS: Legal and Board Secretariat MAGERWA:
Magasins Généraux du Rwanda RBS: Rwanda Bureau of Standards
RIEPA: Rwanda Investiment and Export Promotion agency RPD:
Revenue Protection Department
RRA: Rwanda Revenue Authority
SWOT: Strengths, Weaknesses, Opportunities and Threats ULK:
Université Libre de Kigali
Table of Contents
Dedication ...... ...... i
Acknowledgement ...... ...... ...........ii
Preface iii
Abbreviations iv
Chapter One: General Introduction
..... 1
1.1 Background . ..1
1.2 Objectives of Practical Training 1
1.2.1 General Objective 1
1.2.2 Specific objectives ......
...... ..2
1.3 Methods used in carrying out field work
..... 2
1.3.1 Participation 2
1.3.2 Interviews 3
1.3.3 Observation ........ .. .. 3
1.3.4 Documentation 3
1.3.5 Data Processing and Analysis 3
1.4 Limitations encountered during the internship 4
1.4.1 Delayed feedback from some staff .4
1.4.2 Limited time for internship research ..
4
1.5 Activities done during the internship 4
Chapter 2: Presentation of Customs Services Department 6
2.1 History of taxation in Rwanda 6
2.2 Customs Services Department ....... 7
2.1 Mission Statement .... .... ..8
2.2 Objectives of Customs Services Department 8
2.2.1 General Objective 8
2.2.2 Specific Objectives ....
.... 8
2.3 Customs Services Swot Analysis 9
2.3.1 Strength .... ....
......9
2.3.2 Weaknesses 10
2.3.3 Opportunities ..11
2.3.4 Threats 12
Chapter 3: A diagnostic Study of Anti-smuggling Strategy 14
3.1 Introduction 14
3.2 Current status of Smuggling in Rwanda 14
3.3 Classification of smuggling 15
3.4 Causes of Smuggling in Rwanda 16
3.4.1 High rates of duties and taxes .. 16
3.4.2 Limited resources and capacity 16
3.4.3 Smugglers are not named and published 17
3.4.4 Attitudes and perceptions towards taxation 17
3.4.5 Corruption 17
3.4.6 Low literacy and lack of education 18
3.4.7 Technological developments 19
3.4.8 Unemployment especially in border areas 19
3.5 Impact of Smuggling 19
3.5.1 Introduction 19
3.5.2 Loss of revenue ...
..... 20
3.5.3 Distorts market prices and discourages investment 20
3.5.4 Collapse of local industries 20
3.5.5 Unemployment 20
3.5.6 Harmful products ..20
3.6 The Customs Anti-smuggling measures 21
3.6.1 Introduction 21
Chapter Four: Trade Facilitation by means of Pre-Clearance 22
4.1 Introduction 22
4.2 Background 22
4.3 Definition of Pre-clearance 23
4.4 Legislation ...... ...... ......23
4.5 Advantages of pre-clearance ...23
4.5.1 To the trader 23
4.5.2 To customs ...23
4.6 Conditions for pre-clearance 24
4.7 Type of goods that can be considered for Pre-clearance 24
4.8 Risk management 24
4.9 Cancellations and re-imbursements 25
4.10 Procedure for pre-clearance 25
4.10.1 Documents required 25
4.11 Pre-clearance processing 25
3.9.1 Examiners - Long room .25
4.12 Pre-clearance desk 26
4.12.1 Documents 26
4.12.2 Physical Inspection 26
4.12.3 Manifested goods .26
4.13 Pre-clearance audits/reports ...
27
Chapter 5: Prosecution of Customs Offences 28
5.1 Powers to institute prosecution .. 28
5.2 Responsibility to institute prosecution 28
5.3 The objectives of JILU ...... ...... 28
5.3.1 The Main Objective 28
5.3.2 Specific objectives ...... 28
5.4 Roles of JILU in instituting tax Prosecutions 29
5.5 Principles Underlying Prosecution Policy of RRA 30
5.6 Detailed Procedure in instituting prosecution ....31
5.7 Test for Reliability of Evidence 31
Chapter 6: Recommendations and Conclusion 33
6.1 Recommendations . 33
6.1.1 Amendment of Customs Law 33
6.1.2 Number of JILU Staff 33
6.1.3 Provide Powers of Attorney to JILU . . 33
6.1.4 Put in place Anti-smuggling measures 33
6.2 Conclusion 34
References ... ... ..... 36
Annexes 37
Chapter One: General Introduction 1.1
Background
The practical training is an essential exercise that all the
students are required to undergo during a specified period of compulsory
training in private or public organisations during their studies.
The student performance during the training is assessed and
considered as partial fulfilment of the requirements for award of Bachelor s
degree at ULK. However, industrial training is a complement to the knowledge
acquired in the four years of classroom lessons. The training lasted for a
period of seven weeks from 19th January to 6th March 2009.
1.2 Objectives of Practical Training
This internship training is mainly aimed at making a student
gain professional experience in any activity in the field so that the internee
can be able to understand better what was taught in various courses related to
the functions of the institution.
1.2.1 General Objective
To accomplish the academic program is required by ULK to link
the legal theory done in class to practical part of it done on the ground. The
main objective of this training is to provide hands-on experience to students
with the opportunity to integrate the relative practical experience with the
theory. The student is given an opportunity to relate academic programs and
career goals to pre-professional work experience thus giving him an insight
into his chosen career and to familiarise himself with research techniques that
help him to explore the business world that he is not used to.
1.2.2 Specific objectives
1. To get a practical work of what takes place in the field in
relation to the theoretical legal knowledge gained from classroom;
2. To bridge the gap between legal theory and practice;
3. To fulfil the basic requirements to complete the advocated
qualification of a degree in law from Kigali Independent University;
4. To identify problems facing Customs Services in preventing
smuggling, enforcement of Customs Debts, appeals process and institution of
prosecution of customs offences ;
5. To assess strategies put forward to meet those
challenges;
6. To forward recommendations for customs services
improvement.
1.3 Methods used in carrying out field work
This part attempts to describe how data was colleted and
analysed during internship. It explains the employed design, data collection
and analysis methods used during internship exercise.
To make this report meaningful, the trainee kept in mind the
following research methods to collect data during the practical training:
1.3.1 Participation
For better understanding and the application of Customs law,
the internee physically and fully participated in the daily activities of
Compliance and Enforcement Division. Particularly, the internee participated
enforcement of Customs, institution of prosecution of Customs Offences, appeals
process and developing an anti-smuggling strategy based on Law no 21/2006 of
21/04/2006 establishing Customs System.
1.3.2 Interviews
In order to obtain data related to the objectives of the
internship, interviews with different staff in RRA with was conducted. Selected
importers were also interviewed to know their perception towards services
rendered by Customs Services Department.
1.3.3 Observation
This method was used in order to scrutinize things that cannot
be easily sported out such as the activities and attitudes of tax
administrators and taxpayers respectively. For example, using this method, the
trainee observed the attitude of taxpayers towards tax administration and vice
versa. The internee mainly used observation method when he attended appeals
committee meeting to observe whether taxpayers rights and obligations are
considered based on the law. The trainee also observed how smuggling is
conducted at the border stations.
1.3.4 Documentation
Here, the trainee consulted different documents that are used
in Customs Services Department and Legal and Board Secretariat of RRA. These
include different customs processes and procedures, leaflets, annual reports,
business plans and different documents posted on RRA website. The internee
critically analysed the existing Customs law, particularly, the Law no 2 1/2006
of 20/04/2006 establishing Customs System and the Ministerial no 003/07 of
09/05/2007 implementing the Customs Law.
1.3.5 Data Processing and Analysis
The data collected was recorded in a notebook depending on how
it
was judged important. The data obtained was finally recorded in the
internship book for final review after training. The data
collection went hand in hand with interviews. Clarifications were sought from
my Supervisor whenever controversial and complicated issues were being
analysed.
1.4 Limitations encountered during the internship
The internship was to a large extent successfully carried out
except that there were a few constraints especially relating to the
following:
1.4.1 Delayed feedback from some staff
In some instances, some RRA staff would be much occupied
treating urgent cases and the internee could not get sufficient time to collect
data through interviewing.
1.4.2 Limited time for internship research
In most of the time, the internee was given different tasks
depending on the urgency, necessity and priority. This could make it difficult
for the internee to concentrate on area of study and research work.
1.5 Activities done during the internship
During internship training in Customs, many tasks were
performed in different function in order to have the general knowledge of
Customs Operations. The tour in all Customs divisions was carried out and
practically observed how the work is performed there.
However, special attention was given to: conduct a diagnostic
study to develop the Customs Anti-smuggling Strategy(Chapter Three), analyse
trade facilitation initiatives given by Customs services Department based on
the Law in Force(Chapter Four), and consider the prosecution of Customs
offences in case of non-compliance with the law (Chapter Five).
Finally, recommendations were given in areas where weaknesses
were identified in areas covered during the internship (Chapter Five).
Chapter 2: Presentation of Customs Services Department
2.1 History of taxation in Rwanda
One cannot present the Customs Services without highlighting
on the History of Taxation in Rwanda. This history indicates that the first tax
legislation was inherited from colonial regimes. This legislation included the
Ordinance of August 1912 which established graduated tax and tax on real
property. There was another Ordinance of 15th November 1925 adopting
and putting into application the Order issued in Belgium Congo, on 1st June
1925 establishing a profit tax.
The order was amended several times up to the Order of
25th March 1960, meant for Rwanda's development and cash in-flow.
After independence, the first tax legislation passed was that of 2nd
June 1964 governing profit tax, which was repealed and replaced by Law No 8/97
of 26/06/1997 on the Code of Direct Taxes on Different Profits and Professional
incomes.
This law was amended from time to time in order to keep pace
with time and the changing economic environment. Such other legislative
instruments include the 1973 law governing property tax, the tax on license to
carry out trade and professional activities, the law N°. 29/91 of
28th June 1991 on sales tax /turnover tax (now repealed and replaced
by the law N°. 06//2001 of 20/01/2001 on the Code of Value Added Tax
(VAT).
Other substantive Law governing Customs was enacted on 17th
July 1968 accompanying Ministerial Order of 27th July 1968, putting into
application the Customs Law.
In addition, the administration and accountability of taxes
and duties in Rwanda was initially under the Ministry of Finance and Economic
Planning. This was later vested into an independent body, Rwanda Revenue
Authority that was established by the law no 15/97 of 8th November 1997.
Consequently in the year 2005, the parliament adopted the law
number N°25/2005 of 04/12/2005 on tax procedures, amending Decree-Law of
December 28, 1973 relating to Personal Tax, law n° 06/2001 of January 20,
2001 on the Code of Value Added Tax, and law n° 9/97 of June 26, 1997 on
the Code of Fiscal Procedures.
Similarly, LAW N° 16/2005 OF 18/08/2005 2005 on direct taxes
on income was adopted reviewing Law n° 8/97 of 26/6/1997 on Code of Direct
Taxes on Different Profits and Professional Income, and Law n° 14/98 of
December 18, 1998 establishing the Rwanda Investment Promotion Agency,
especially in its Articles 30, 31 and 34. Con
The parliament also adopted Law N°. 21 of 18/04/2006
establishing the customs system, reviewing the Law of July 17th 1968 concerning
the Customs system as amended and completed to date.
2.2 Customs Services Department
Customs activities started in early 1940 s. By then Customs
was used by Rwanda, Burundi and Belgian Congo. There were no borders that
existed between these countries. After Rwanda acquiring independence, Customs
offices were launched at all Rwandan border posts and at Kanombe International
airport.
The Customs Department aims to contribute to the achievement
of
Rwanda Revenue Authority s objectives by maximising the collection of
all revenues due on im ports, at minimum cost; and to facilitate
trade through providing a responsive and efficient service to stakeholders.
The Department works to ensure that all legally chargeable
revenues are paid through effective administration of the relevant laws in
order to facilitate both international and national trade such that local and
foreign investment is facilitated while ensuring that local society is
protected from importation of hazardous material/goods.
2.1 Mission Statement
Department s Mission is to contribute to national growth and
development by maximising the collection of all revenues due on imports, at
minimum cost; and to facilitate trade through providing a responsive and
efficient service to stakeholders .
2.2 Objectives of Customs Services Department 2.2.1
General Objective
The customs Department general objective is to assess, collect
and account for import duties and taxes due on imports and ensure that all
legally chargeable revenues are paid through effective administration of the
relevant laws in order to facilitate both international and national trade such
that local and foreign investment is facilitated while ensuring that local
society is protected from importation of hazardous material/goods.
2.2.2 Specific Objectives
Apart from its fiscal responsibilities, Customs Services
department is responsible for the following:
1. Enforcement of Customs legislation and other relevant
laws;
2. Facilitation of legitimate trade;
3. Protection of society from illegal entry and exit of
prohibited goods;
4. Compilation trade statistics for economic planning;
5. Take all actions necessary to identify and combat evasion of
duties and to combat fraud in its many forms.
2.3 Customs Services Swot Analysis 2.3.1 Strength
1. The Department continues to take every opportunity of
computerizing and modernizing the systems. The majority of Customs operations
are now computer based. The Customs Department has also benefited from the
quality of reports produced by Asycuda++ system.
2. The revised and enhanced Customs processes and procedures
have been fully implemented and both electronic and hard copies have been
availed to each unit. Implementation of these processes and procedures has
increased staff confidence as far executing their duties is concerned.
3. Risk Management and Intelligence, Valuation,
Customs
Enforcement and Post-clearance audit units have been strengthened
through staffing and technical training provided by DFID in order to improve
their skills and efficiency thus maximizing revenue collection. Intermediate
training that Customs trainers delivered to majority of the Customs staff has
increased effectiveness and efficiency.
4. Risk based selective controls have facilitated customer
handling
and demonstrated that RRA customs has graduated towards
internationally recognized methods of customs controls. This indeed has speeded
up the clearance of low risk imports while concentrating its efforts in the
areas deemed to be of highest risk to revenue.
5. The improved communication systems at the border posts
such as Radios, and telephones, internet have improved the efficiency of the
Customs operations.
6. The Customs staff teamwork has also assisted the Department
to achieve its objectives.
2.3.2 Weaknesses
1. A big number of Customs officers are relatively new,
inexperienced and have not benefited from technical training thus lack of
confidence to expedite operations. There is still a need for a short, medium
and long-term training program for Customs operational staff and managers.
2. There is ineffective management of staff performance, due
to lack of objectivity in tracking and assessing performance and a lack of
sufficient managerial skills and insufficient supervision.
3. Response to taxpayer queries and information flow within the
department is relatively low due to bureaucracy.
4. Continued tendencies of corruption among some staff that
result into revenue loss. This also results into dismissal of trained and
experienced staff
2.3.3 Opportunities
1. The implementation of EACMA on 1st July 2009
will enable the users to work in a more certain, relevant and modern
environment. The refresher course scheduled will ensure desired comprehension
of the customs by all Customs Staff.
2. The RRA Senior Management Team continues to have a
committed approach to the enforcement and collection of revenue arrears. This
in turn assists and encourages the Customs Services Department to actively
pursue any arrears of duties and taxes due at import.
3. The planned acquisition of Cargo Scanners will increase
efficiency, improve public protection and build investor
confidence.
4. Following persistent public awareness programs undertaken
by the department coupled with vigorous measures put in place, the department
has started realizing increased tax compliance by importers.
5. The regional information sharing developed by the department
will go a long way in combating fraud especially transit fraud.
6. Regular stakeholders meetings and partnership with other
government bodies e.g. Magerwa, National Police, Army, RBS,
ADR, and other RRA Departments especially RPD provides the
Department with alternative options in its operations.
7. Massive recruitment of staff by RRA will increase the
efficiency of departmental operations.
8. Increase of power supply at computerized border posts by
provision of solar panels will ensure smooth roll out of Asycuda++.
2.3.4 Threats
1. Changes to trade patterns or economic factors arising from
the envisaged East African Community Customs Union will have a bearing on the
perceived success or effectiveness of the department and the ability to achieve
GOR targets. The impact of these changes must be fully investigated and
realistic targets set accordingly.
2. Many of the Customs operational controls are inter-linked
with other RRA departments or outside bodies e.g. RIEPA or the line Ministries
for exemptions and the RPD for transit surveillance and border controls.
Failure by other agencies to fulfill their responsibilities in the overall
procedure or control can impact on the performance of the Customs
department.
3. Continued civil unrest in neighboring countries, has led to
weak Customs controls and lower than normal duty rates being charged in those
countries. In general this leads to
malfunctioning of the system and in
particular contributes to increased cross- border smuggling into Rwanda.
4. Presentation of false invoices, false certificates of origin
continue to be a threat to Customs target.
5. Importation of counterfeits continues to exist.
6. Non-compliance of importers conniving with clearing agents
hinders the smooth systematic way of revenue collection.
7. Fluctuating world market prices of petroleum products and
the current Global Economic Crisis continue to be a threat to departmental
revenue targets.
8. Increasing informal business sector with poor record
keeping has proved to be a threat to the department especially in matters
related to Post-clearance Audit.
9. Asycuda++ system breakdown due to
inconsistent
communication network continues to affect revenue
collections.
Chapter 3: A diagnostic Study of Anti-smuggling Strategy
3.1 Introduction
According to Customs Law, Smuggling is one of the main Customs
offences and defines smuggling as the entry of goods in a customs territory
without payment of legal dues or in violation of law1. During my
internship, I was one of the two member from Customs Services and RPD that was
given at task to conduct a diagnostic study and develop the Customs
Anti-smuggling Strategy.
3.2 Current status of Smuggling in Rwanda
Despite the continuing efforts by the Customs Services, RPD
and other stakeholders to curb this vice, smuggling is still noticeable and
evident. Complaints have been lodged by taxpayers that many products are
illegally ferried into the country that distort their pricing mechanisms. There
is also evidence through captured data that importations of cigarettes,
liquors, beers, powdered milk, jewelleries, etc are dismal yet hugely appear on
the market suggesting that their only route to the market is through
smuggling.
However, apart from irregular smuggling activities at our
borders, physical smuggling is no longer as widespread as it used to be in the
past as indicated in the table below. Nevertheless, cases of technical
smuggling have become very pervasive.
During my visit at borders, it was noted that the regions
mostly
affected by smuggling were: Eastern along Uganda, Burundi
and
Tanzania borderlines, Western Region bordering Lake Kivu and
1 Article one of Law No 21/2006 of 28/04/establishing Customs
system
northern Region along Cyanika-Gatuna border stretch. The table
below shows status of smuggling in Rwanda.
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Offence Category
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U nderval ua tion
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Misclassific ation
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Non declaration
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Fraud Facilitation
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Entry card
abuse
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Exemption abuse
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Removal of seals
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Transit Violation
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False documents
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Other evasions
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Totals
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Source: Customs En forcement Annual Report 2008.
3.3 Classification of smuggling
Generally, smuggling can be classified into
physical and technical smuggling.
Physical smuggling refers to importation of
goods that evade inspection of Customs Services and payment of duties and taxes
by importation of goods through the illegal entries.
Technical Smuggling, on the other hand,
involves fraud through the
use of incorrect information in bringing the
goods through the legal
points of entry. The most common types of technical
smuggling are
undervaluation or understatement of import values, declaration
of false origin, poor or incorrect product description, misclassification or
the use of another tariff line within the same heading.
3.4 Causes of Smuggling in Rwanda
I carried out interview with different Customs officials and
taxpayers to establish the causes of smuggling in Rwanda and observed that
there are many causes of smuggling to the extent that one cannot cite them all
in this report. However, the major contributory factor to the proliferation of
smuggling activities is due to the porous nature of our borders and continued
civil unrests in neighbouring countries.
3.4.1 High rates of duties and taxes
Allegedly high tax and duty rates provoke some individuals to
smuggle goods into the country. When I visited RPD stores to see the goods that
are mostly smuggled, I found that the goods that are predominantly smuggled are
the highly taxed goods like liquors and wines, beers, cigarettes, etc. these
goods are taxed at 30% rate and consumption tax is imposed is imposed on
them.
3.4.2 Limited resources and capacity
Limited resources and capacity of Customs Services is a
reality and often means that Smuggling activities remain unchecked. Limited
resources and capacity can take the form of inadequate numbers of staff or
inadequate staff with the required skills and knowledge (e.g. audit and
investigation skills); poor infrastructure or systems and lack of adequate
funding. With the Customs Services unable to adequately carry out its role of
enforcement and taxpayer education. This often
translates into taxpayer perceptions that there is a low risk
of getting caught and/or there are minimal consequences of non-compliant
behaviour.
3.4.3 Smugglers are not named and published
Lack of publicity (naming and shaming) of smugglers is one of
the reasons for widespread smuggling in this country. Persons involved in
smuggling have not been described as criminals. In international tax
literature, smugglers are described as "white collar criminals". If they are
not named, they will never be de-motivated to commit smuggling. Even when a
smuggler is caught and punished for smuggling, he is not publicised. This has
encouraged smugglers continue smuggling just because they are not exposed to
the public.
3.4.4 Attitudes and perceptions towards taxation
Among some taxpayers, tax morality is low and there is a
strong culture to evade and avoid taxes and duties as a way to get rich quick.
In other words, there is no social disapproval or reprimand for commitment of
smuggling. Often, this is exacerbated by the evasive actions of friends,
relatives, co-workers and business colleagues. The perception of Smuggling as a
crime is also low. This is not the view of only general taxpayers but also
includes mem bers of the judiciary who are inclined to pass lenient fines and
sentences.
3.4.5 Corruption
Smuggling is made possible by the connivance of corrupt
elements of some Customs staff, clearing agents, traders and other
stakeholders. Almost all stages of Customs operation (i.e. assessment,
valuation, classification, warehousing, transhipment, etc) are prone to
fraudulent activities. Corruption can take many forms ranging from
systematic
where individuals act together, to systematically support
smuggling (usually driven by senior staff) to individual corruption, where
staff either have clients whom they facilitate illegally or where they simply
exploit their positions for financial gain. In addition, those involved in
corrupt activities continually seem to be very inventive in finding new
loopholes as some doors are being closed. Examples of corrupt activities
include: Speeding up of services (especially charging for faster clearance of
goods), charging for help to overcome complicated procedures and to qualify for
exemptions or duty free treatment, turning a blind eye to smuggling, and fraud
(for instance, the declaration of false values supported by fraudulent
invoices), aiding importers in understating income and value of goods, losing
files that contain evidence of smuggling, facilitating or organising the
smuggling of goods, receiving payment to complete customs entries for
importers.
3.4.6 Low literacy and lack of education
In Rwanda, the rate of literacy is rather low and there is
limited tax education. For an uneducated person, it is difficult to understand
the need for payment of taxes and duties. Taxes and duties are treated as
punishment. Low literacy level makes it even more difficult for tax
administration to educate taxpayers about their obligations. Many of the
options available to RRA to educate taxpayers, such as brochures, booklets and
information on the web become irrelevant when a large proportion of the
population is illiterate. Some unscrupulous taxpayers exploit the general low
literacy perceptions by not maintaining any business records or accounts when
in reality some of them are fully capable or literate enough to do so. RRA
needs to think of other methods to disseminate information such as running
face-to-face seminars and workshops.
3.4.7 Technological developments
The rise of e-commerce and internet communication is changing
the nature of business (for example, it can involve intangible goods such as
downloadable music), fraudulent scanning of commercial documents. This makes it
harder for Customs Services to track and account for transactions. The
deletion, hiding or encryption of electronic records by businesses also makes
it difficult for Customs Services to uncover and follow the audit trail through
Post Clearance audit.
3.4.8 Unemployment especially in border areas
In some cases, the unemployed are used to smuggle goods, for
example, high level of unemployment in border areas induce individuals to
smuggle goods and evade customs duties and other taxes collected at customs
border points.
3.5 Impact of Smuggling 3.5.1 Introduction
It is a founded belief that smuggling has a negative effect on
the state and business. Smuggled goods compete with legitimate goods and reduce
the profits of law abiding companies. They dodge taxes and lead to budget
revenue losses. If smuggling is not properly addressed, it may result into
organized groups who can use their profits to finance other illegal activities.
Smuggling incites corruption of state officials, customs and border control
officers and politicians.
In a nutshell, the Smuggling results into a situation where a
government is unable to mobilise resources to finance various economic
development undertakings that would result would break economic dependence
syndrome
3.5.2 Loss of revenue
Smuggling is an act of Customs offence which deprives
government of revenue for public investment expenditure. This lost revenue
would have been used to build more infrastructures, hire additional teachers or
purchase more medicines among others.
3.5.3 Distorts market prices and discourages
investment
Goods which are smuggled into the country are often sold a lot
cheaper than goods brought onto market through the right procedures. Smuggling
therefore deprives traders of free competition. Equally, Investors may fear to
invest in Rwanda as a result of unfair competition brought about by acts of
smuggling.
3.5.4 Collapse of local industries
A country achieves better economic growth by developing its
own industrial base. Smuggling undercuts prices of the locally manufactured
goods, thus destroying the market for local products. This leads to collapse of
local industries.
3.5.5 Unemployment
When there is unfair competition in the market, aggravated by
the collapsing of industries, the labour market (employment base) is eroded.
Many professionals, skilled and unskilled personnel remain jobless.
3.5.6 Harmful products
Surprisingly, Customers are not complaining since they benefit
from low priced smuggled goods. However, these goods are in most cases
of poor quality and have harmful impact to body health and
environment.
3.6 The Customs Anti- smuggling measures 3.6.1
Introduction
RRA continues to train its staff in anti-smuggling and fraud
detection techniques, and has continued to strengthen its partnership with
local authorities and security organs to combat smuggling and tax evasion of
all kind. There is also intensified surveillance and intelligence operation
that has led increased seizure of smuggled goods.
Special attention has been given to operations aimed at
fighting smugglers of some sensitive products such as liquors and wines,
powdered milk, and use of forged documents etc.
Chapter Four: Trade Facilitation by means of
Pre-Clearance 4.1 Introduction
As mentioned earlier, one of the objectives of Customs
Services is to facilitate trade. It is against this background that I was
prompted to analyze one of Customs Facilitation initiatives which is
Pre-clearance.
4.2 Background
In an effort to facilitate trade and economic development, the
Rwanda Revenue Authority has introduced Pre-Clearance. This facility greatly
benefits genuine traders and at the same time allows the authority to
selectively enforce controls for the betterment of our country.
This should result both in more efficient revenue collection
and a reduced administrative burden on the trading community. Streamlined
processing of entries also results in reduced clearance times.
Goods that are imported into or exported from Rwanda are
declared to Customs. With the exception of some goods carried as passenger's
baggage, goods of a value not exceeding a prescribed amount and certain other
categories of private or diplomatic importations
It became clear on the need to expedite certain clearances due
to the nature of goods or the urgency of such goods to be used in the community
or industry. Authorised traders can now present clearance documents for
processing when the goods have not yet been reported as arrived. However
certain conditions have to be met before lodgement of such documents to Customs
for processing.
4.3 Definition of Pre-clearance
Pre-clearance is a quick release procedure that allows trade
facilitation in that declarations can be submitted to Customs and processed
while the consignment/goods are yet to come. When the goods finally arrive,
quick document verification is carried out to check on the correctness of
submitted documents against the original consignment documents.
A physical inspection of goods can be carried out as a risk
assessment spot-check on pre-clearances. Post clearance audits may also be
conducted on pre- cleared goods
4.4 Legislation
The Article 80 of Law No 21/2006 of 28/04/2006 states that
The Commissioner General lays down the conditions for lodging and
processing declarations lodged prior to the presentation of the goods to
Customs
4.5 Advantages of pre-clearance 4.5.1 To the trader
1. Turnaround time for customs clearance of goods is reduced
2. Reduces demurrage charges/ storage costs on goods
3. Gives trader flexibility and more time to prepare a correct
declaration
4. Use of copy/ fax documents allowed to make a declaration
without being penalized
4.5.2 To customs
1. Reduces unnecessary backlogs and delays in declaration
processing
2. Gives enough time to Customs to make decisions on whether to
inspect goods or not when they arrive.
3. Improves on efficiency and trade facilitation
4. Pre-clearance import trends can be monitored and this helps
streamline and update Risk Management criteria in the system.
4.6 Conditions for pre-clearance
A declarant or trader makes an application for pre-clearance
in the prescribed form stating the nature of goods and importer. The
responsible officer verifies if such goods qualify for pre-clearance as well as
the importer. Trader and declarant record /reputation is considered.
4.7 Type of goods that can be considered for
Pre-clearance
1. Perishable goods
2. Dangerous goods such as acids and explosives
3. Fragile goods such as glass
4. Goods of a capital nature or other urgent factory material
5. Relief goods for free distribution
6. Diplomatic goods
7. Hospital drugs
8. Agricultural inputs
9. Other goods which will be allowed at the express authority of
the Commissioner
4.8 Risk management
The Risk Management and Intelligence Unit in Compliance and
Enforcement Division from time to time add or remove other goods from the list
above based on the risks identified.
In the event that during the declaration process, a
pre-cleared declaration is selected for physical inspection, special focus is
done on such a declaration when the goods arrive. Spot check (physical
inspections) on low risk goods is done to verify if the risk level is correctly
set.
4.9 Cancellations and re-imbursements
A maximum of two weeks (14 calendar days) is allowed between
the submission of declarations and when the goods arrive. If that time expires,
the declaration is cancelled from the system.
4.10 Procedure for pre-clearance
4.10.1 Documents required
1. Application for pre-clearance
2. Invoices
3. Packing list (if applicable)
4. Bill of lading ( if applicable)
5. Freight statement
6. Certificate of analysis (if applicable)
7. Certificate of origin ( if applicable)
8. Import licenses and agricultural permits (if applicable)
4.11 Pre-clearance processing
Once approved, the declaration is prepared and submitted for
processing after all documents are stamped / endorsed FOR PRECLEARANCE by the
approving officer.
3.9.1 Examiners - Long room
Examiners always take note on the pre-clearance and the
endorsement when processing such declarations.
1. Query notification is completed if a declaration is in
error
2. An examination request is completed when an examiner feels
the goods should be inspected.
After documentary processing, an assessment notice is
generated and is subsequently paid and a release order generated. All the
documents are then sent to the pre-clearance desk awaiting arrival of goods.
4.12 Pre- clearance desk
4.12.1 Documents
Documents are not released to the trader until goods have arrived
and all necessary original documents are submitted and verified.
If original documents do not conform to the pre-clearance
documents, a query notification and request to amend form is completed and all
documents sent to Query Desk the normal way.
4.12.2 Physical Inspection
Where an examination request had been issued, the documents are
sent to physical verification officers for finalization.
4.12.3 Manifested goods
If the pre-cleared goods are inward transit goods, the
Pre-clearance Desk officer makes sure that a manifest is generated after the
validation is done.
An amendment on the Customs declaration is done for inclusion of
the Manifest number for manifest acquittal purposes only.
4.13 Pre-clearance audits/reports
Reports are generated which show the declarations that have been
lodged for pre- clearance.
Reports on cancelled declarations due to the non arrival of
pre-cleared goods are produced and audits carried out on such companies
The pre-clearance processing data is also used for risk analysis
hence spot checks on pre-clearances
Chapter 5: Prosecution of Customs Offences
5.1 Powers to institute prosecution
Through article 3 (c) of the Law no 15/97 of 8/11/1997
establishing RRA, the Authority is given powers to institute prosecution of
violation of Customs and other taxation laws.
5.2 Responsibility to institute prosecution
Institution of prosecution of Customs of offences and other
tax offences is the responsibility of JILU. This Unit is structured in Legal
and Board Secretariat of RRA. The Unit is supposed to have two Judicial
Investigation Liaison Officers (JILOs): One officer to handle Customs Offences
and the other to handle Domestic Tax Offences. However, by the time I was
conducting this training, the Unit composed of only one Officer who handled
both cases from Customs Services and from DTD. The Officer reports to the
Director of Legal and Board Secretariat Department.
5.3 The objectives of JILU
5.3.1 The Main Objective
The objective of Judicial Investigation Liaison (JILU) is to
follow up
Customs and Domestic tax offences in prosecution process and
Courts.
5.3.2 Specific objectives
The specific objectives of JILU are to:
1. Determine if there is sufficient evidence in support of a
particular case.
2. Assess legal issues and related merits of the case.
3. Keep record and register case files.
4. Provide guidance and advice on prosecution issues.
5. Be in charge of all litigations and represent the Institution
in Courts.
6. Follow up the cases under prosecution process and in
Courts.
7. Report on the cases in prosecution Process and in Courts;
8. Ensure that there is smooth working relationship between RRA
and Prosecutor General s Office and other relevant Authorities. 5.4
Roles of JILU in instituting tax Prosecutions
In general terms, every member of staff of RRA and the public
at large is required to identify and report the commission and/or attempts of
Customs and other tax offences: However, is the role of JILU to:
1. Determine if there is sufficient evidence in support of a
particular case;
2. Assess legal issues and related merits of the case;
3. Keep, record and register case files;
4. Provide guidance and advice on prosecution issues;
5. Be in charge of all litigations and represent the Institution
in courts where possible;
6. Follow up and report on the progress of cases under
prosecution and in courts of law;
7. Make regular reports on the cases in court, those at the
Ministry level and inventory of issues encountered in those cases;
8. Liaise and coordinate investigations and file compilation of
offenders in Customs services and other RRA Operational Departments;
9. Ensure that there is smooth working relationship between RRA
and Prosecutor General s Office and other relevant Authorities.
5.5 Principles Underlying Prosecution Policy of RRA
In order to decide whether prosecution action is the most
appropriate remedy for dealing with non-compliance, the JILO puts into
consideration the following principles:
1. A matter may not proceed to prosecution where an
administrative penalty by itself, or any other administrative response, is more
appropriate.
2. Prosecution may also not be instituted or continued where
there is insufficient evidence.
3. Consideration is also taken on the likely length and cost of
pursuing prosecution in relation to the possible benefit to be obtained.
4. The JILO maintains professional standards in
instituting
prosecutions through: adhering to the intent and spirit of the
Customer Care Standards; giving the accused taxpayers a reasonable opportunity
to present their case before proceeding to prosecution; and observing relevant
provisions of both criminal and civil procedure codes.
5. Any prosecution action should have a deterrent effect on both
the offender and the wider community.
6. The decision to prosecute does not bar the use of other
civil recovery measures such as civil remedies or amicable settlement in some
cases.
7. Where possible and necessary, RRA withdraws charges
instituted against a person.
8. The JILO maintains a close follow up on all cases forwarded
for prosecution.
9. Prescription period of the offence is also considered.
5.6 Detailed Procedure in instituting prosecution
In order to institute prosecution of tax offences, the Judicial
Investigations Liaison Officer follows the following steps:
1. Receives offence cases from Customs Services Department (or
any other relevant department such as RPD, DTD, Quality Assurance );
2. Analyses relevant factors, evidences, legal provisions
related to the case and provides advice whether prosecution is necessary or
not;
3. Follows up the case(s) submitted to the Prosecution to
establish whether there is additional information in relation to the committed
offence;
4. Attends all Court hearings of Customs and Domestic tax
offences and represents RRA in case there is claim for damages related to these
offences;
5. Follows up decisions taken by Courts on the cases and
submits progress reports and final reports to the Director for Legal and Board
Secretariat Department;
6. Prepares statistics of cases prosecuted indicating their
status and carries out inventory of issues encountered in those cases; and
7. Records and keeps case files.
Case files compiled by Police Officers in RPD are sometimes
transmitted directly to the Prosecution Department but with close communication
with JILO depending on circumstances. The copy of that is submitted to JILO for
follow-up.
5.7 Test for Reliability of Evidence
In determining whether or not evidence meets the test of
reliability, the JILO evaluates and answers the following questions.
1. Is it likely that the evidence will be disqualified by the
court? There are certain legal rules which might mean that evidence which seems
relevant cannot be given at a trial. For example, is it likely that the
evidence will be disqualified because of the way in which it was gathered? If
so, is there enough additional evidence for a realistic prospect of
conviction?
2. Is there evidence which might support or detract from the
reliability of a confession?
3. What explanation has the accused person given? Is the court
likely to find it credible in light of the evidence as a whole?
4. If the identity of the accused person is likely to be
questioned, is the evidence about this strong enough?
5. Where witnesses are to be used, are there concerns over
the accuracy or credibility of witnesses? Are these concerns based on evidence
or simply information with nothing to support it? Is the background and
credibility of the witnesses likely to weaken the prosecution case? For
example, might the witnesses have any motive that may affect their attitude to
the case, or do any of the witnesses have a relevant previous conviction?
Chapter 6: Recommendations and Conclusion 6.1
Recommendations
6.1.1 Amendment of Customs Law
Article 215(17) Customs Law N° 21/2006 of 28/04/2006
Establishing Customs System provides that failure to keep mandatory documents,
or to produce them on request by a Customs officer is an offence. However, no
penalty is provided for this offence. It is on this regard that the internee
recommends that this law should be amended to provide a penalty for the above
offence.
6.1.2 Number of JILU Staff
There is only one Judicial Investigation Liaison Officer who
handles both Customs Offences and Domestic Tax Offences to be prosecuted. The
number of staff in the Unit should be increased to two whereby one officer will
deal with cases from Customs services Department and the other will handle
cases from Domestic taxes department according to the current Unit
structure.
6.1.3 Provide Powers of Attorney to JILU
The judicial Investigation Liaison officers should have powers
of State Attorneys in order to represent RRA in prosecution processes and in
Courts where necessary.
6.1.4 Put in place Anti-smuggling measures
Some of the recommended anti-smuggling measures recommended
include to:
1. Increase prosecution of cases of smuggling;
2. Increase the capacity of staff in deterrence, detection of
smuggling;
3. Apply effective sanctions to those caught involved in
smuggling;
4. Update and manage an effective database system of tax
evasion and smuggling in order to provide relevant information to staff
involved in anti-smuggling operations;
5. Enhance the working relationship by exchange of
information with sister Revenue agencies, Customs Enforcement Network (CEN)
through RILO and other law Enforcement agencies to combat smuggling;
6. Strengthen Anti-smuggling campaign countrywide by involving
general public;
7. Review Informer handling mechanism to improve informer
motivation and efficiency;
8.
Conduct a comprehensive investigation in large cases of smuggling
to ensure assets are identified and confiscated;
9. Bring down smuggling of liquors, wines and Amstel Bock beer
brand identified as the most highly smuggled products;
10. Provide optimum technological equipments to enhance
detection of smugglers;
11. Strengthen Customs Risk Management and Intelligence Unit to
handle cases of technical smuggling.
12. Put in place mechanism to prevent corruption and related
offences.
6.2 Conclusion
The Customs Services plays a very vital role in helping the
Government achieve its goal of containing government deficit and attaining a
balanced budget. Being a source of revenue, the Customs Services has to employ
every available strategy to improve its
collections. Based on revenues recovered in the years
2007-2008, it is clear that enforcement of Customs Debts and prosecution of
Customs and other tax offences merits strong attention.
While efforts have been exerted by RRA and other state organs,
tax offenders on other hand, frequently keep on changing their modus operandi
to avoid detection. There is still much to be done to address the problem of
Customs Offences.
Finally, I was impressed by the positive response which RRA
Staff gave
me during my training, particularly in Customs Services
Department
and Legal and Board Secretariat. I wish RRA success in its
endeavours.
References
1. 1. Law no 21/2006 of 20/04/2006 establishing Customs
System
2. The law No 15/97 of 8th November
1997
3. RRA website:
www.rra.gov.rw
4. Customs processes and Procedures Manual
5. Legal and Board Processes and Procedures Manual
6. RRA Strategic Plan 2009
7. RRA Annual Report 2008
Annexes
1. Customs Services Organisation Structure
2. Fiche d évaluation de Stage
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