Fundasaun Mahein (FM), May 26 2016
Irregular Conduct and Disregard for Security Responsibilities in Custom Services of Timor-Leste
National Security Law No.2/2010 describes the General Customs Directorate, an integral part of the Integrated System of National Security (SISN) intended to respond to threats and risks to national security. The role of the Customs Directorate is to manage customs checks at the border by utilizing SISN information in collecting revenue, protecting the community, and preventing customs infractions. It also collaborates with security institutions and intelligence to promote an approach for identifying illegal activities. Law Decree No. 38/2015, on the Ministry of Finance, states that the General Customs Directorate is directly integrated administration for the State and that its primary role is to be responsible for administration and collecting taxes and custom fees at the entry points of the country.
However, FM has noted several incidents in which Customs Services have been worryingly engaged in irregular practices and unlawful conduct. First, FM recorded an incident on March 29th, 2016, wherein authorities seized a cargo container kept at customs in the Dili port. Authorities had suspected the container held illegal substances or material, and it had been suspiciously left in the custom area’s control and given a Bill of Landing document. The document was presented by the importers to Customs, stating that they were importing home appliances and furniture. The owner of the goods stated to authorities that the goods were provided for the State; however, the container was revealed to hold casino machines—not listed by the importers, nor on the Bill of Landing, nor in the Commercial Invoice. Further, FM found that during the operation by security officials, it was discovered that personal interventions were made by customs officials, out of line with standard operating procedure for the General Customs Directorate.
FM’s monitoring further noted a second incident on March 30th, in which customs workers went on strike following the events the day prior. However, FM found that even during the strike, a goods owner continued to break down their container and move the goods out of the port, including cartons, biscuits, and a truck. The owner paid entry taxes on only the biscuits, and the Bill of Landing only listed the import of the car. Again, customs staff intervened in the security processes at the port, and authorities arrested those staff involved in the interference, who were detained at the police jail for further investigation.
Finally, FM noted a case on April 26th, 2016, in which authorities seized four containers carrying 5,478 cartons of Soju wine, 17.8% percent alcohol stored in 360 ml handles (selective import or excise tax) whose customs seizure order had already expired and were due to be removed from customs, but were not processed according to the customs check order. Why were the goods not removed from customs and processed properly by authorities? According to customs regulations, the deadline and limitation period for the process of paying tax on imported goods is 30 days. If the period exceeds 30 days, 5% of the profits of the goods will be taken as an infringement tax in addition to the import tax. If the import tax payment period exceeds the 60-day mark, the goods belong to the state. In this instance, this process was ignored and the goods were kept at customs for a running total of 90 days (August 11th, 2015, to April 26th, 2016). Due to customs authorities’ ineptness in collecting tax on goods and docking an additional 5% within the 30-day initial period, FM estimates that the state lost out on income from taxes totaling approximately $526,545.36. For this instance, FM estimates the taxes and additional 5% docked from the company would add an additional $5,478.00.
1. The Ministry of Finance issues audits for customs service in order to discover irregularities and unlawful conduct that continue to occur inside the department.
2. The Ministry improve its mechanisms of the custom service in order to prevent further internal irregularities in the coming years.
3. Further investigations be made into the cases mentioned above, in which the aforementioned parties and Customs officials have been engaged in multiple instances of irregular conduct
For more details, please contact:
Executive Director of FM
Phone (+670) 7737-4222 or (+670) 77561184