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REPORT ON PERFORMANCE Customs Outcome | Output 1 | Output 2 | Output 3 | Output 4 | Output 5 OUTPUT 4 The administration of customs duty and sales tax, other border-related revenue collections, and import/export statistics This output covers processing of all imported cargo and mail and items entering Australia with passengers and crew in order to assess and collect Customs duties and relevant taxes. Related activity covered under this output includes:
From 1 July 2000 this output will include:
Output 4 will be amended to the administration of customs duty and indirect taxes, other border-related revenue collections, and import/export statistics. PERFORMANCE ASSESSMENT: The Output Pricing Review examined only a small part of the activities undertaken within this output due to the majority of the activities undergoing major process change as a result of CMR. Investigation activity is a significant component of this output and the review found a number of indicators that demonstrated the efficient and effective service delivery of Customs Investigations. The benchmarking study carried out during the review found that Customs provision of valuation advice compared positively with participating administrations. However, comparisons regarding the provision of tariff advice suggested that the current service standard of 30 days could be reduced. The study also indicated that Customs spent more resources on the internal review of tariff advices than the benchmarking partners. The review also examined Customs Information Centres, which support the activity within Output Four, and found that the effectiveness and efficiency of these centres compare favourably with Commonwealth and private sector call centres. Analysis of Performance There was a general increase in the
number of import entries processed during 1999-2000. During the first
half of the year this increase could be attributed to the importation of
Information Technology products for Y2K remediation activities and
general imports for the new millennium celebrations. The increase in
import entries lodged during the second half of the year could be
associated with preparations for the implementation of the GST and
associated tax reform initiatives including the abolition of wholesales
sales tax and changes to the tariff rates. Imports and exports Customs service delivery targets for Output 4 generally exceeded 99 per cent. In almost every instance in 1999-2000, these service delivery targets, including targets for the availability of Customs commercial electronic systems to clients, were met or exceeded. It is important to note that the figure for the proportion of total revenue subjected to audit activity relates only to audit activity and that other revenue risk treatments represent a significant proportion of the total resources utilised on revenue activities. Other approaches include education visits to clients and leverage exercises. In addition, the introduction of the GST has dramatically altered the revenue demographics of the client profile. For these reasons, the appropriateness of the target of 15 per cent will be reviewed in 2000-2001. Figure 22: Performance Against Targets set in the 1999-2000 PBS - Output 4
Figure 23: Revenue Collected on Behalf of Other Agencies ($m)
KEY ACHIEVEMENTS: Data Integrity Customs undertook a national program to increase the integrity of export data provided by industry. This data is used by the Australian Bureau of Statistics (ABS), numerous government agencies and industry for a range of purposes, including:
In order for Customs to better utilise its resources, the organisation is taking a more pro-active role in improving export data quality before it is lodged. Currently, when this information is found to be incorrect, it is corrected by Customs and the ABS. Valuation Advice Service Customs provides a valuation advice service to assist importers determine the customs value of goods imported into Australia. The customs value is used to determine the duty payable and other revenue liabilities payable at the time of importation as well as to compile import trade statistics. Customs issued 182 valuation advices. The majority of these advices related to buying commissions (29 per cent) and price (23 per cent); both relevant to determining the customs value. Nine advices were the subject of requests for internal review by the policy area in Canberra with the initial decision being affirmed in each case. The extent to which the service level standard of 30 days for finalising valuation advices was met indicated the range in complexity of the matters referred for advice. Around 80 per cent of requests were finalised within the standard, 68 per cent of these within ten days. Eight per cent of requests took in excess of 60 days to finalise. This outcome has prompted a review of the service level standard. The introduction of the GST will increase the importance of the correct valuation of imported goods. It is anticipated that this will result in an increased use of the valuation advice service. Duty Forgone Figure 24 shows the customs duty forgone as a result of concessional arrangements available under a range of industry schemes. Figure 24: Duty Forgone from Industry Schemes ($m)
Tariff Concession System A total of 16 internal reviews of Customs decisions on tariff concession applications and revocation requests were finalised, compared with 20 in 1998-1999. All reviews were completed within the legislated time limits, with an average review time of 33 days from receipt. Figure 25: Tariff Concession System Summary Statistics
* Revised down from 218 reported in 1998-1999 Annual Report. Review of Australia's General Tariff Arrangements In October 1999, the Assistant Treasurer requested the Productivity Commission to undertake a review of Australia's general tariff arrangements. The review was to examine the scope for a post-2000 reduction in the general tariff, covering only those rates of customs duty of 5 per cent or less, and excluding the passenger motor vehicle and textiles, clothing and footwear sectors. Customs provided considerable information to the Commission during the course of the review including details of the Tariff Concession System, a precis of industry policy concessions, responses to comments by other participants and a range of statistical data. The Commission issued its draft report in May 2000 and is due to refer its final report to Government towards the end of July 2000. Compliance Activity An audit program at the end of 1998-1999 revealed significant error levels in all key export entry data fields. A continuing audit program revealed that there was no discernible improvement in export data integrity during the latter part of 1999-2000. Customs undertook a national program to increase the integrity of export data to address this problem (refer Data Integrity) and there was an increasing awareness among exporters and their service providers of the importance of data accuracy. Import data accuracy was maintained at a considerably higher level than export data throughout the year. Considerable progress was made during the year on the development of draft legislation to enhance future compliance. The proposed changes to the legislation relate to record retention, audit powers, deterrent penalties and the extension of powers to examine export goods. The changes will be critical to improving the results of the self assessment regime, particularly in respect of current export requirements and A New Tax System (Goods and Services Tax) Act 1999. Figure 26: Summary of Recoveries * and Refunds # ($'000)
* Recoveries relate to additional revenue identified as payable as a direct result of compliance activities in all commercial areas with the exception of major Excise payers, in 1998-1999 and 1999-2000. # Refunds are the amounts of money identified to be refunded to clients due to an overpayment, as a direct result of compliance activities in all commercial areas with the exception of major Excise payers in 1998-1999 and 1999-2000. ^ Recoveries for 1998-1999 were inflated by five atypical large adjustments totalling approximately $21m. Similarly the 1998-1999 refund total includes one adjustment of approximately $1.4m. Investigation of Fraudulent Activity The appropriateness and quality of
investigation actions are dependent upon the expertise and
professionalism of investigation officers. The effectiveness of the
investigation process was enhanced by a seamless training and
professional development program, improved exhibit retention procedures
and continual review There was an increase in the number of detections involving evasion of import duty (mainly cigarettes). These cases are generally complex and time consuming to investigate to a successful outcome. Investigations Branch successfully completed a number of long term major fraud cases during the year, recording some significant outcomes. 1999-2000 saw a decrease in major fraud cases since the responsibility for both excise and fuel substitution was transferred to the ATO. The transfer occurred in July 1999 as a result of the October 1998 Administrative Arrangement Orders. Figure 27: Summary of Investigation of Fraud Activities
Significant Prosecution Outcomes In February 2000, a person was convicted on three counts under Section 20D of the Commonwealth Crimes Act 1914 for importing 1 100 000 cigarettes from Singapore. The importations took place between December 1996-February 1998 and the cigarettes were hidden amongst foodstuffs in shipping containers. Prior to the full hearing the defendant made full reparations of outstanding customs duty of $241 319. The court imposed a prison sentence of 12 months, with a non parole period of four months, and the remaining eight months conditional upon lodgement of $5 000 surety and to be of good behaviour for five years. Between April 1993-March 1997, an
importer submitted false and forged invoices to evade customs duty on
silk apparel from China. Warrant action was undertaken in August 1997 at
which several thousand documents were seized, many requiring
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