Transcript Conduct of SADC Review
THE SADC REVIEW OF ILLICIT EXCISE TRADE 2010/11
LIZ ALLEN July 2014
WHAT IS SADC?
The
Southern African Development Community
(
SADC
) is an inter-governmental organization
formed in 1980
with headquarters in Gaborone, Botswana.
www.SADC.int
Its goal is to further socio-economic cooperation and integration and political and security cooperation among 15 Member States.
The SADC Treaty sets out its aims which are implemented through a series of Protocols supported by a more detailed Regional Indicative Strategic Development plan (RISDP).
SCOPE OF SADC
Anti-corruption, firearms, health, education, development and co-operation, strategic planning and food security.
In some areas, the aim is cooperation and coordination e.g. Foreign policy.
In trade and economic policy, a tighter coordination is in progress with a view to one day establishing a common market with common regulatory institutions.
WHICH COUNTRIES ARE IN SADC?
The Southern African Development Community consists of: Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Madagascar (suspended), Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe.
Population size 2010 : 257, 726,000 (257.7 Million inhabitants). Gross Domestic Product (GDP) : 471,118 US$ billion (471.1 US$ billion).
THE SADC REVIEW OF ILLICIT EXCISE TRADE -2010/11
TERMS OF REFERENCE Briefly:
“to evaluate the extent of and provide recommendations for solutions for combating the illicit trade in excisable products in the SADC region, with particular emphasis on the illicit trade in alcoholic beverages and tobacco products.”
BACKGROUND TO THE REVIEW
SADC Secretariat commissioned the review at the request of the SADC Tax Subcommittee.
Study of over 6 months funded through the EU in support of implementation of the SADC Protocol on finance and Investment (FIP).
FIP contains an Annex on regional tax cooperation - including excise.
Two Excise specialists recruited through GFA/DNA covering both policy and administration aspects.
STATUS OF THE REVIEW
The study report including recommendations was validated by the SADC Tax subcommittee
The report has been released into the public domain but SADC owns the intellectual rights to all aspects of the study.
I have a duty of confidentiality, but SADC has authorised me to present to you as one of the consultants engaged in the study.
CONDUCT OF THE REVIEW
Questionnaire – designed and sent to all Member States
Inception
– Research and planning selection of countries to visit, detailed itinerary requirements
Country Visits to
: SOUTH AFRICA ZIMBABWE NAMIBIA SWAZILAND ZAMBIA MOZAMBIQUE
FINDINGS - CIGARETTES
Illicit trade in cigarettes
is a
significant problem
resulting in considerable leakage of tax revenue across SADC potentially a minimum of approximately
US$350 million a year
The amount of revenue leakage for cigarettes in South Africa alone is estimated at
US$323 million.
ESTIMATES (BY INDUSTRY) OF ILLICIT TRADE IN OTHER COUNTRIES VISITED Cigarettes
12% to 15% of total consumption in Namibia 10% to 13% of total consumption in Zambia 10% to 12% of total consumption in Swaziland 1% to 2% of total consumption in Mozambique Minimal proportion in Zimbabwe
NATURE OF ILLICIT TRADE SADC
Cigarettes
Main source countries in region are Zimbabwe and, to a lesser extent, South Africa, Mozambique and Malawi.
Some counterfeit and contraband from Dubai and counterfeit from China (reduced since World Cup 2010 Destination country – mainly South Africa but illicit cigarettes find their way into all countries Transit countries – Namibia, Botswana, Swaziland, Mozambique, Zambia, Tanzania.
12
FINDINGS - ALCOHOL
Illicit trade in alcohol for most of the countries visited
is a
significant problem
resulting in considerable leakage of tax revenue across SADC potentially a minimum of approximately
US$115 million a year.
The amount of revenue leakage for alcohol in South Africa alone was estimated at about
US$96 million.
13
ESTIMATES (BY INDUSTRY) OF ILLICIT TRADE IN OTHER COUNTRIES VISITED Alcohol
Swaziland - no estimate available - one importer estimated legitimate sales had decreased by 40% in 2010.
Mozambique - estimate 50% of nationally produced spirits and over 50% of imported spirits are illicit. Namibia industry’s rough estimate was “less than 10%” illicit but growing.
Zambia - unofficial estimate of excise loss of about K15bn a year (over $3 million) excluding opaque beer.
Zimbabwe - industry estimate of illicit alcohol was between 100,000 and 150,000 litres a month and growing.
14
NATURE OF ILLICIT TRADE
Alcohol
Source countries for finished products - South Africa and Europe (via South Africa and Namibia), Mozambique and Zambia.
Source countries for bulk spirits - S. Africa, Swaziland, Zimbabwe and Malawi.
Destination countries for finished products Mozambique and Zambia. Particular concern small plastic sachets of fruit-flavoured high strength spirits and small plastic bottles of spirits.
COUNTER MEASURES
Good Practice
South Africa
– tax policy, action plans to combat illicit trade, modernization programme , partnerships with industry, comprehensive anti-corruption strategy.
Zimbabwe
– clear and stable organisation, professional training centre and effective Mutual Assistance enquiries handling.
Namibia
– investment in scanners, commitment and enthusiasm .
Swaziland
– comprehensive plan to transform excise & customs.
Zambia
– profession and national approach to excise control and comprehensive anti-corruption strategy and supporting activities.
Mozambique
– clear structure, strong organisation & focus on customs enforcement, investment in scanners, successful mutual assistance and international co-operation efforts.
AREAS FOR IMPROVEMENT
A strategic approach to tackling the illicit trade in alcohol and tobacco products is needed including:
Zero-tolerance of corruption A balanced evidence based tax policy leading to specific duty structure and potential tax harmonisation Reliable and complete data Understand the size and nature of the enemy Targeted enforcement strategy and action plans across all enforcement agencies Implement regional customs transit system Investment in one-stop-border posts, training, more scanners, sniffer dogs and better examination facilities
AREAS FOR IMPROVEMENT Continued
Clear, straightforward and appropriate excise administration policies and legislation Appropriate offences, penalties and a judiciary aware of the seriousness of excise fraud and smuggling A national professional focus on excise control Supply chain controls on products and on wholesale and retail outlets E-filing and inclusion of excise in modernisation programmes Raise capacity and capability of officials Mutual assistance between Member States
18
RECOMMENDATIONS
A SADC Strategy to Tackle Illicit Trade to overarch Member States individual strategic programmes.
1. Move towards a harmonised approach to excise taxation.
2. Co-ordination and support for better control and enforcement (through the SADC Tax Sub Committee).
3. Capability building
19
A HARMONISED APPROACH
SAD C should -
Fast track
the development of excise guidelines;
Promote
the concept that the ability to manufacture, warehouse or move excise goods under bond should be a privilege not a right;
Develop
a SADC wide requirement for excise specific licensing of all transporters of excise goods under bond;
and
Develop
a regional requirement for excise producers to hold bonds/financial security sufficient to cover revenue at risk.
20
HARMONISED APPROACH
Contd.
Develop
and promote adherence to a strict Code of Ethics for all Customs and Revenue officials;
Facilitate
agreement of a long term phased plan for all Member States to move from
ad valorem
to specific rates of tax for excise products; and
Provide
Member States with support in adapting administration and controls.
21
CO-ORDINATION AND SUPPORT FOR BETTER CONTROL AND ENFORCEMENT
Through the SADC Tax Sub-Committee/Indirect Tax Working Group, SADC should:
Set up
a permanent Excise Working Group;
Facilitate
the identification by Member States of the most useful data to collect to support policy evaluation and effective control and enforcement;
Maintain
and analyse the regional database and compare the product quantity gap with the size of the illicit trade estimated in each Member State;
Set up
a regional forum with the alcohol and tobacco industry representatives specifically to tackle illicit trade .
22
CO-ORDINATION AND SUPPORT FOR BETTER CONTROL AND ENFORCEMENT
Promote
a consistent regional approach to the implementation of standards required for the track and trace component of the FCTC;
Facilitate
the speedy introduction of the proposed SADC Community Transit System;
Facilitate
the moves to one-stop-shop border posts supported by scanners and facilities for examining tankers at key points in the region;
Facilitate
the development of a regional approach to control of the wholesale and retail supply chain for alcohol and tobacco products;
CO-ORDINATION AND SUPPORT FOR BETTER CONTROL AND ENFORCEMENT
23
Fast-track
the implementation of
the recently signed
SADC Agreement on Assistance in Tax Matters (AATM) and develop effective administrative procedures to support control and enforcement.
Under the AATM,
set up
an early project to enable speedy electronic access to data on all excise operators, bonded warehouses and licensed excise transporters by enforcement and excise staff in Member States.
REGIONAL EXCISE GUIDELINES
Common Tax Structure/Definitions/Bandings Exemptions/Reliefs Specific Tax Structure for Tobacco Products Tax Point/Bonded Warehouse Facilities Registration/Licensing of Excise Operators Register of Excise Operators and Access to data Powers, Offences and Penalties Capacity building including specialist excise training and guidance
WHAT NEXT?
SADC Excise Working Group set up 2011.
Work commenced on developing guidelines for the coordination of excise taxes in the SADC Region in December 2011. A major and ambitious undertaking.
First draft produced in March 2012 . Second more detailed draft scheduled for December 2014.
Status reported to the SADC Ministers of Finance at regular intervals.
Future work might include implementation guidelines for the Illicit Trade Protocol.
SEND QUERIES TO:
Ms Leefa Penehupifo Martin, CPRP, ndp (zw) btech (SA) MA (Uk) Head: Public Relations Unit, Office DGP31 Ground Floor, SADC Headquarters Plot 54385 CBD, Private Bag 0095 Gaborone, Botswana Tel: : : + 267 395 1863 + 267 3611084 + 267 3181293 (Extn 1084) (Dir Dialing) Dir Cel: + 267 73831177 Fax: + 267 397 2848/3281070 Email: [email protected]
Website: www.sadc.int