Output 4 - Administration of Customs duty and indirect taxes, other border-related revenue collections, and import/export statistics
Compliance
The Customs Compliance Assurance Strategy is an intelligence-driven program developed by Customs to deliver an international trading environment that reflects high levels of self-regulated compliance.
The strategy operates on several levels through assessment and analysis of the level and nature of industry compliance with statutory requirements. Where non-compliance is identified, a range of compliance improvement and enforcement activities are undertaken. Customs compliance programs focus on assisting clients who are willing and capable of complying with relevant legislation, but there is also scope to impose sanctions for non-compliance.
Customs works closely with other government agencies such as the Australian Taxation Office and the Department of Industry, Tourism and Resources, to assure compliance with GST collection and industry support programs.
Allocation of additional compliance resources
In the 2005–06 Budget, Customs received $28.4m over four years to increase compliance assurance resources by 60 full-time staff. The additional resources will concentrate on the audit of high duty commodities, warehouses, duty free stores, industry support schemes and GST exemptions.
Compliance activities (benchmark and focused audits)
Benchmark audits use a statistically valid sample of the importing and exporting community to provide an indication of the level of compliance with Customs law. Companies that exhibit high levels of non-compliance in a benchmark audit are subject to further compliance activity such as ‘focused audits’.
In addition to benchmark audits, Customs conducts other compliance activities both at the time of, and after, transactions are processed. Real time activities include profiling and red line import declaration checks, cargo examinations and warehouse and depot checks. Post-transaction audit activity includes desk audits (a documentary audit undertaken in the office rather than a visit to the premises), focused audits and leverage exercises. These activities are conducted in response to identified risks.
Benchmark audit results for 2004–05 once again confirmed that revenue leakage in the import sectors audited is not of a material level.
The figures below show the number of benchmark and focused audits carried out in 2004–05.
Figure 33: 2004–05 Benchmark and focused audit program
| Regions | Benchmark audits completed |
Focused audits completed |
Regional total |
|---|---|---|---|
New South Wales |
41 |
22 |
63 |
Victoria |
32 |
40 |
72 |
Queensland |
25 |
19 |
44 |
South Australia |
16 |
13 |
29 |
Western Australia |
24 |
5 |
29 |
Tasmania |
3 |
1 |
4 |
Northern Territory |
1 |
1 |
2 |
Total |
142 |
101 |
243 |
Revenue coverage
Customs conducted post transaction compliance activity across a range of companies. The customs value of the goods imported by these companies, $15 910m, was 10 per cent of a total value of imports ($149 520m).
Real time import compliance activities covered a further five per cent of the value of imports. These activities included leverage exercises, industry referrals and action resulting from profile matches.
For exports, the free on board (FOB)2 value of goods exported subjected to compliance activity was $27 376m representing 21 per cent of a total value of merchandise exports of $126 720m.
2 The term defines the cost of the goods including any cartage costs, incurred in placing goods on board a vessel at the place of export.
Figure 34: Percentage of total value of customs imports and exports in 2004-05 subject to compliance activity
| Imports (CVAL) | Percentage |
Exports(FOB) |
Percentage |
Post transaction activity |
10 |
Post transaction activity |
8 |
Real time activity |
5 |
Real time activity |
13 |
Total |
15 |
Total |
21 |
Declaration validation examinations
Declaration validation examinations are a new activity conducted at the Container Examination Facilities to verify that information declared to Customs is correct. These examinations are conducted when a container is selected for unpacking and a Customs Declaration for the consignment is lodged. The consignment is examined to ensure that the goods entered are described correctly and comply with the law.
Export compliance strategy
Customs administers controls on behalf of permit issuing agencies on the export of restricted goods and passes export transaction information to the Australian Bureau of Statistics for its compilation of international trade statistics.
Exports were subject to compliance attention. This was possible under new export related provisions in the Customs Legislation Amendment and Repeal (International Trade Modernisation) Act 2001 commencing and coincided with the commencement of the exports release of the ICS.
Developing capability within compliance assurance
Internal compliance capability is being built through the development of learning products for use by regional Compliance Assurance teams. In 2004–05, four major learning projects were delivered within budget and timeframe.
The major projects completed were:
- an upgrade to the Infringement Notice Scheme training online for Customs staff
- basic Customs training (investigation skills)
- assurance techniques training (level 1)
- a compliance training package for use at Container Examination Facilities.
A new Customs compliance manual was completed to reflect legislative changes and the reengineered compliance role. This work was undertaken across Customs so that the products are owned and designed by both policy owners and end users across Australia.
Infringement Notice Scheme
Customs administers an Infringement Notice Scheme that allows minor penalties to be imposed for a broad range of strict liability offences.
With the release of the exports component of the ICS, 14 export-related strict liability offences became enforceable under the Infringement Notice Scheme. However, an administrative moratorium of six months ending on 6 April 2005, prevailed while industry adjusted to the new reporting requirements.
The CEO’s Guidelines for issuing infringement notices were updated to incorporate amendments made to a number of the offences since the commencement of the scheme. These guidelines were tabled in Parliament on 16 November 2004.
One hundred and twenty-two infringement notices were issued with 98 notices paid and three notices withdrawn. No prosecutions were initiated for non-payment of an infringement notice. The total amount paid as a result of Infringement Notices issued was $108 359.
Over a quarter of fraud cases in 2004–05 involved tobacco/cigarettes
Australian Law Reform Commission report on Federal civil and administrative penalties
The 2003–04 Annual Report reported that Customs was developing a response to Customs specific recommendations by the Australian Law Reform Commission on Federal civil and administrative penalties.
Customs has developed criteria for classifying offences as civil or criminal. An internal consultation phase has commenced to develop proposals for the legislative revision of the relevant parts of the Customs Act.
Duty recovery
Customs received a number of complaints concerning its approach to the recovery of duty following a decision of the High Court in Malika Holdings Pty v Stretton (Malika). Complainants have argued that recovery action should be limited to 12 months. Customs approach, supported by independent advice and legal council, is to recover duty for periods of up to four years.
A decision of the Full Federal Court (Parks Holdings trading as Gladstone v CEO of Customs, 1 December 2004) supported Customs approach (see page 142).
Investigations of fraud
Customs investigates serious offences such as revenue fraud. Customs also conducts financial investigations in accordance with the Proceeds of Crime Act 2002 to recover assets associated with criminal offences.
The Commonwealth Fraud Control Guidelines and the Australian Government Investigation Standards underpin Customs fraud control methods to minimise revenue leakage. Customs pays close attention to appropriate investigation standards.
Figure 35: Summary of investigation activity – frauds on the revenue
2002–03 |
2003–04 |
2004–05 |
||
|---|---|---|---|---|
Received |
110 |
102 |
129 |
|
Cases adopted |
72 |
61 |
72 |
|
Cases completed^ |
||||
with prosecution (through courts) |
22 |
34 |
26 |
|
without prosecution |
58 |
71 |
41 |
|
Cases where prosecution briefs completed^ |
28+ |
23 |
20 |
|
^ Includes cases adopted in previous years.
+ Does not include six recovery briefs.
Customs successfully prosecuted 26 fraud cases this year. The penalties ranged from a fine to four separate prison terms. These cases covered various goods with over a quarter of the cases involving tobacco/cigarettes.
There was a notable increase in the detection rate of illicit tobacco importations. This may be attributed to the enhanced detection capabilities at the border.
During the financial years 2003–04 and 2004–05, Customs gradually increased the level of attention paid to the identification and recovery of criminal assets associated with revenue fraud. Seventeen cases were investigated by Customs during this period, which resulted in the restraint of assets having an estimated value of more than $21m by the Commonwealth Director of Public Prosecution.