Thus, in a particular situation, the records we perused stated that “on one occasion a supervisor asked an Examination Officer to release goods against a cheque of GH¢3,663.37. To date, there is no evidence in the system of the payment of the short collection of GH¢3,663.37 assessed”.
Another record uncovered shows that, “A Supervisor instructed an Examination Officer to release the goods because he (Supervisor) has secured the short collection of GH¢16,882.98. No evidence in system of short collection supposedly secured was paid and many more examples of deliberate manipulation of the system to cheat the state by some companies and their CEPS officer cronies”.
The many acts of corruption by CEPS, have produced a trickling effect on Destination Inspection companies, Importers and GCNet.
DESTINATION INSPECTION COMPANIES AND THEIR ACHILLE’S HEEL
In the past, people colluded with their various suppliers to reduce the value of invoices to ensure that they pay low taxes at the port. To check this, government brought in Destination Inspection Companies whose task was to check and find out the real values of goods imported into the country. DICs are paid 1% of cost plus insurance and freight on every import transaction.
Instead of concentrating on the terms of their agreement, some DICs have over the past few years been found to be cheating on the system through under-classification, misclassification and over classification of items. The New Crusading GUIDE therefore moved in to find out the truth about the situation.
Posing as an importer, our investigative reporter, Anas Aremeyaw Anas, looked into how destination inspection companies work. The key issues The New Crusading GUIDE wanted to unearth were whether or not the charges by these DICs was commensurate with the services they provide; whether or not the DICs were discharging the duties for which the state had contracted them.
The paper imported a container of assorted goods under the name Hakim Dufour of an imaginary Emmanuel Tiger Shipping. A 1X 20 container STC with registration number IPXU3302534 and a seal number TSK1460655 were imported and cleared by our reporter. The container was laden with 300 cartons of sterilized chocolate milk with a gross weight of 3465, 00 kg; 500 cartons of sterilized peach and mango milk also with a gross weight of 5775, 00 kg and 800 cartons of sterilized strawberry milk of 9240,00 kg gross.
Though the original invoice would have required a payment of 14, 654.27 Ghana Cedis, an invoice was deliberately prepared by our undercover reporter to test the efficiency or otherwise of the system. The fake invoice bore a smaller amount to see whether the DI Company would be able to detect the fraud. We tended it in to the DI Company, but they could not detect the fraud. We successfully evaded 30% tax which should have gone to the state. Now, just imagine the thousands of transactions which go on with these DICs every day. If everybody is evading 30% tax, it definitely leads to the loss of billions of cedis.
What is interesting is that Customs officials are sometimes able to detect the fraud by looking at the values, but instead of checking the anomaly, most of them prefer getting their palms greased. DICs have also been found on the electronic system, using wrong HS or CPC codes in making declarations. These codes help to determine a duty rate of 5, 10, 20 or 30 per cent applicable to a particular transaction.
… OF THE GHANA LINKs, GSLs, BIVACs
Instances of wrong tactics employed by some DIs to cheat the system include the classification by Gateway Services Limited (GSL) of boiler pipes under an HS number which is zero rated for Duty and VAT, instead of the right one which attracts 10% duty and 12.5% VAT, resulting in a ¢56.329 million shortfall. On another occasion, GSL wrongly classified Latex gloves under an HS of 10% instead of one that attracts 20%.
There was also the usage by Ghana Link of wrong HS code attracting a10% duty for vinyl artificial leather instead of one that attracts a 20% duty.
Also, there was wrong classification of a consignment of waste paper from Belgium under an HS number which is zero rated, instead of being entered as one which is 20% dutiable.
GSL wrongly classified Jag Bitter alcohol under an HS number of less value instead of one which attracts a special tax of 20%. Then, there was also the classification of floor panels from the United Kingdom under an HS number at a duty rate of 10% instead of an HS number which attracts 20%.
Another wrong classification was made on woven mesh from China, using a zero rated code instead of the correct duty rate of 10%. There was also a classification of GSM copier paper; wrongly using a 10% rated code instead of the required 20%.
There was also the case of BIVAC. Records show a Classification of vertical blind fabric from south Africa under HS 3925300000(10%) instead of HS 63039200000(20%) by BIVAC. These acts form the crux of acts of corruption perpetrated by DICs.
THE BIZZARE TALE OF SERVISTAR, B5, AGRO DELTA COMPANIES
The first to hit our eyes when we dived into the electronic System was a company called Servister, an importer of frozen poultry, fish and meat products. We discovered that this company had devised strategies for evading tax worth millions of cedis on its imports. After importing the products, Servister protests that the values on the Final Classification and Valuation Reports (FCVR) from the inspection companies were too high. Subsequently, they applied for permission to clear the products “on permit”, pending the outcome of their petition to the DIC.
This action is in contravention of the laid down procedure, which stipulates that the goods must be valued and assessed based on the Transaction Price Database (TPD), supplied to CEPS by the appropriate Destination Inspection Companies. A deposit representing 150% on the assessed duties and taxes payable is taken by CEPS before the permit is issued.
The New Crusading GUIDE however, discovered that no evidence exists on the GCMS to show that this deposit had been taken by CEPS Tema in respect of all the permit transactions involving Servister. With the permit granted, the goods end up being sold on the market, with the appropriate import duty unpaid. If Servister had actually paid the correct deposit, which is usually in excess of the actual duties payable, they would have perfected those permits in order to recoup the excess deposited.
The company however skillfully paid only on the basis of their invoice values, not on FCVR or TPD values. Out of 881 transactions done by Servister only four had FCVR values. A careful scrutiny of the four transactions for which they went for FCVR indicates that those FCVR’s, though questionable, always uplifted the invoice values, making Servister to pay higher duties and taxes. To avoid paying the right duties the FCVR portions of their declarations on the database read like this is a very skillful way of evading tax.
In 2006 alone, Servister allegedly evaded tax in the region of millions of cedis with the connivance of CEPS officials who were expected to check this.
In comparison with similar products imported from the same region at the same level of quantity and cleared around the same time by another company, we found out that Francopat, a sister company, was paying higher values in taxes than Servister.
The situation goes further in the area of canned mackerels imported from the same place at the same period of time; having the same quantity and quality. There were huge disparities in the assessment of values. Steel Sheets, Milk Products, Batteries, Cooking Oil, Tyres, Fish, Fridges/Freezers were some of the products that importers have found dodgy ways of milking the state dry through tax evasion.
For instance, Agro Delta brings in cooking oil; they claim they process that as soap. They pay less value for that under the guise of processing. But when we hit the market, we realized that they were busily selling it as edible cooking oil instead of using it for soap. Who is investigating this company? All these evidence exist on the electronic system.
In 2010, FOB on unperfected declarations came to GHC103, 755,276 (about US$ 74,110,907). The projected amount that could have been recovered based on this FOB should have been GHC4, 162,784 (about US$ 2,973,417).
TOO MANY EXEMPTIONS
The scale of both partial and full exemptions has been growing in the country, with devastating effect on revenue collection. In 2005, a total of 1.649 trillion cedis was granted as exemptions at Ghana’s main ports. By the end of 2006, however, it had shot up to a total of GHc1, 125,124,115,114 . In 2009 an approximate amount of 815 million cedis and an equivalent of 545 million dollars was forgone in tax exemptions.
Agencies and individuals that benefited from exemptions were varied. They included manufacturing concerns, free zone operators, NGOs, mining companies, construction firms, and MDAs.
Nestle Ghana Limited imported approximately ¢555.728 billion CIF (US$61.069 million) worth of finished products. The duty/tax exempted on these imports amounted to ¢82.678 billion (US$ 9.085 million), an approximate increase of 83 percent over the total exemption of US$4.969 million that Nestle received in 2004 for its imports amounting to ¢488.728 billion (US$54.333 million) CIF.
Messrs Smart City Holdings Limited received partial exemptions amounting to ¢9.951 billion (approx. US$1.093 million) for its importation of bathroom slippers and polythene bags from Nigeria. This amount represents a 96 percent increase over a similar exemption (i.e. US$558,171) for the importation of similar items, which amounted to ¢25.53 billion (or approximately US$2.85 million CIF), that was granted the company in 2004.
Mis-discriptions, misclassification and undervaluation of imported goods on the Electronic System constituted the major source of revenue leakages. New goods (eg. tyres or electronic items) were declared as used, or the sizes or specifications deliberately mis-described (eg. Rim 17 tyres declared as rim 14 or 21” TV sets described as 14”TVs) Superior types of goods declared as a low quality products (eg. Porcelain tiles declared as ceramic tiles), or the actual quantity mis-described (eg. 3,888 sq. metres declared instead of the actual 5,104 sq. metres imported).
480 undeclared Sollatek AVS stabilizers that were found among a consignment of UPS and multi-guards from China; 16,144 kg of used clothing that were not declared in one particular container; 1,000 dozens kitchen towels that were not declared in a consignment from China. smuggling goods out of the ports. Two such prominent cases were the attempt to smuggle two containers from the Tema port, and the attempt to smuggle 2,566 mobile phones out of the AFGO Village at the Kotoka International Airport.
FAILURES OF THE WATCHMAN
GCNet operates the electronic system for processing trade and customs documents in Ghana. This electronic system, which has been provided by the state, is a database of the description and value of all goods that have been landed and have been cleared in the country and their respective duties and taxes paid.
It contains all transactions engaged in by both genuine and dubious businesspersons across the length and breadth of the country. It is only a select few of special people who know the secrets and can interpret the electronic system.
Although the system has been very efficient since its introduction into operations at the Harbour, The New Crusading GUIDE uncovered that GCNet has over the years failed to check reported cases of fraud which are detrimental to country’s revenue mobilization efforts.
GCNet’s running of the system has being quite successful until the discoveries of fraud in what has since been tagged as the “Elliot Ansah saga”.
Young Elliot went into the system one day and deleted records of some companies who were supposed to be indebted to the state. Though the GCnet control `system is so robust that any such attempt must be detected, it took CEPS to blow the whistle on Elliot’s activities. Elliot, after he was found out, submitted a letter of resignation and left the shores of Ghana without anybody arresting him.
Management of GCNet never gave reasons for arresting not Elliot, but only said they “have reported the matter to the Serious Fraud Office”.
In the company’s response to a questionnaire from The New Crusading GUIDE, GCNet indicated, that “had the anomaly not been detected at, the nation would have lost an estimated amount of GH¢29,000”. This however contradicted our checks, which indicated that the state would have incurred a greater lost than GCNet’s estimates.
CEPS ANIPA ENGAGES IN A MERRY-GO-ROUND GIMMICK
After we came across these anomalies in the system, the Deputy Commissioner of CEPS in charge of Public Relations, Annie Anipa, was contacted for an official response on some of the discoveries we made at the harbour.
The Deputy CEPS Commissioner requested for a questionnaire which was readily provided. We however found some of her responses unsatisfactory and called for a follow-up interview to clarify some points raised.
When we called to arrange a time for the interview, Annie Anipa said she was busy with other needs and needed time to prepare for the interview. Two weeks later [two days ago] she called for the interview. We got to her office for the scheduled time of 11am, but when we called, she refused to pick up.
As the chief institution in charge of Revenue mobilization for the nation, CEPS has once again fallen short in offering reasons for the apparent rot that is hemorrhaging Ghana’s tax system. Actions, such as those exhibited by Annie Anipa remain a tip of the iceberg in efforts to absolve CEPS from its responsibilities.
In our next issue, we bring you details of how Business Tycoons improve their lot through deals with CEPS officials to influence the auctioning of goods at the Tema Harbour. Be prepared for insiders’ account of how key CEPS officials sign contracts with business people to provide them with goods for a fee. Here, the much talked about auctioning process and gazettes are used as smokescreens to mislead the public. Stay tuned.
Source: The Crusading Guide
The Police Administration has banned the movement of heavy duty trucks country-wide after 6p.m. as part of measures to curb the carnage on the country’s roads.
