Dr. Juha Hintsa & Dr. Sangeeta Mohanty. Cross-border Research Association, Switzerland

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1 12th Annual WCO PICARD Conference, Tunisia, September 2017 Panel titled Cost Measurement in Customs Administrations What Can Be Measured, How, on What Cost, and with Which Benefits? Dr. Juha Hintsa & Dr. Sangeeta Mohanty Cross-border Research Association, Switzerland Discussion points for the panel What types of customs costs can and cannot be measured? Why is knowledge of costs useful? What types of decisions can knowledge of costs help inform? What are the limitations of the presented methodologies? Are there any alternative methods and systems for measuring the costs of a Customs administration? How can cost measurement systems be implemented in practice? What challenges can such initiatives face? What are the implementation costs? 1

2 Cross-border Research Association, CBRA, Lausanne, Switzerland :: Past studies / partners / customers include: 2001 & 2005 > > 60 Our FP7-projects include:

3 Introduction Cross-border Research Association (CBRA) carried out a study during years on The import VAT and duty de-minimis in the European Union Where should they be and what will be the impact?. The main research question of this study was What are the economically optimal VAT and duty de-minimis levels for imports into the EU, considering the cost of tax collection for public administrations and the cost of import processes and procedures for the private sector? The main outcome of the study was VAT de-minimis should be raised to 80 EUR from the current 22 EUR this is due to the fact that the total cost of collection faced by Customs administrations and the private sector currently exceeds the revenues collected. In this PICARD2017 panel presentation we share select outcomes from this study, highlighting how well aware are EU Customs administrations about the cost of processing import declarations? *** Hintsa, J., Mohanty, S., Tsikolenko, V., Ivens, B., Leischnig, A., Kähäri, P., Hameri, A.P., and Cadot, O. (2014), The import VAT and duty de-minimis in the European Union Where should they be and what will be the impact? Final Report, Brussels, Belgium*** 3

4 Big picture on Border-crossing Metrics THIS PANEL Border agency internal processes: Cost Time Quality Facing the supply chains: Speed & variation Interventions Administrative costs Customer satisfaction Interconnected Facing the society & citizens: Prohibitions Restrictions Indirect taxes 4

5 Next slides O p t i m u m 5

6 Letter campaign Round1 As a key part of this study, CBRA research team approached relevant public institutions and administrations in all EU27 member states (this was before Croatia joined the EU), seeking for information and data in cost of import duty and VAT collection. The first letter round was sent to all Customs administrations, Ministries of Finance and Courts of Audit in EU27. The main question in round1 letter was the following: Does your country collect data and have reports available on the cost of administering the collection of duties and taxes at import, including VAT? If yes, is this data publicly available and could it be shared with us? If yes, could you please supply us with this data or kindly point us to the most relevant reports, web-resources etc.? Altogether 22 member states replied to us (by minimum one of the three institutions; few countries by all the three institutions) and on the next slides we share short extracts from six select countries: 6

7 Letter campaign Round1 (cont.) C8: the precise calculation of collecting duties and import VAT had, so far, not been undertaken and no separate estimation of the costs of collecting revenue specifically for low-value imports is available. only data on the total costs of administering imports could be acquired C15: the Ministry of Finance itself was not in a position to provide us useful data on the costs of collection of revenue on imports as it was not a performance indicator for internal controls in the organisation... C12: the organisation did not make separate assessments of the different tax administrative processes, such as the costs of collecting duties and taxes at import the total costs of tax administration were determined by summing up the expenses of the budget programme of the national Tax Administration measured against the total tax revenue collected in the given period 7

8 Letter campaign Round1 (cont.) C13: the office did not collect data on costs of administering the collection of duties and taxes at import or possess any reports on this the standard approach was a calculation of the ratio between the collected amount of duties and taxes, and the appropriations from the budget C4: since the collective costs of the customs and tax administration processes were taken into consideration, there was no data available on costs of running individual processes. C2: the Court of Auditors claimed to have taken several initiatives on the state tax system but there were no recent findings on the costs of managing import duties and taxes the audit tasks did not cover the collection processes of import taxes, such as customs duties, VAT and excise 8

9 Letter campaign Round2 intro All in all, during letter Round1, we did not receive much proof on cost awareness on import declaration processing within the EU27 and therefore we moved to the second round of letters, this time with focused data collection customs, targeted for Customs administrations only. Note: although we did highlight relatively low value consignment (shipment value under 1000 Euros) importation activities due to the study mandate to optimize de-minimis values for duty and VAT in EU the letter campaign Round2 remains still relevant for all imports, independent of shipment values. 9

10 Letter campaign Round2 intro (cont.) Now, in February 2014, as our final round of governmental research, we are seeking from each Customs administration detailed data relating to matters such as: customs annual budgets; number of personnel; average salaries; number of declarations per year; working time spent per declaration; and so forth. This data is crucial for the de-minimis study in order to be able to accurately calculate the current and the optimal balance between VAT and duty revenue collected by customs versus total resources spent for the collection all this in the context of relatively low value consignment (shipment value under 1000 Euros) importation activities. Following specific parameters (next slide) were included in the Round2 questionnaire, with the purpose of collecting tangible inputs to estimate the cost of import tax collection for Customs administrations across the EU27: 10

11 Letter campaign Round2 parameters indicated / data asked Total Customs budget; Average total annual working hours per employee; Average annual total cost per employee; Overhead cost multiplier; Average annual total cost per employee; Number of (full-time) personnel in Customs; Number of personnel working in import declarations; Total number of imports versus all declarations; Data admin costs per import declaration; Working time spent per import declaration (below VAT de-minimis); Working time spent per import declaration (above VAT de-minimis - below duty de-minimis); and Working time spent per import declaration (above duty de-minimis). 11

12 Letter campaign Round2 data received x = full data Parameter // Country C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 Total Customs budget x x x x x x x (x) x x x Average total annual working hours per employee x x x x x x x x x x x x x Average annual total cost per employee x x x x x (x) x x x x x x x Overhead cost multiplier x x x Average annual total cost per employee x x x x x (x) x x x x x x x Number of (full-time) personnel in Customs x x x x x x x (x) x x x Number of personnel working in import declarations x x (x) (x) x (x) x Total number of imports versus all declarations x x x x x x x x x x Data admin costs per import declaration x x x Working time spent per import declaration (below VAT de-minimis) (x) x (x) x x x x x x (x) = Working time spent per import declaration (above partial VAT de-minimis) Working time spent per data import declaration (above duty de-minimis) 12 (x) x (x) x x x x x x (x) x (x) x x x x x x

13 Discussions and conclusions Although only a few of the Round2 participating 14 EU Customs administrations were able to share the (pre-calculated) cost per import declaration, we learned that most administrations have at least some numeric data available to support at the estimation of import declaration costs: Vast majority of administrations were able to share annual working hours per employee (13/14), total operating budget (12/14), average annual total cost per employee (12/14), number of full time personnel (11/14), and, total number of import declarations (10/14). 13

14 Discussions and conclusions (cont.) Working time spent per import declaration, under three categories (below VAT de-minimis (<22 EUR), between VAT and duty de-minimis ( EUR), and above duty de-minimis (>150 EUR) was known to half of the administrations (plus, partially known to another two administrations). Other cost parameters, which could be used for import cost calculations, were less well known: number of personnel working in import declarations (4/14), data administration costs per import declaration (3/14) and overhead cost multiplier (3/14). 14

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16 Maximum O p t i m u m M i n i m u m 16

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Non-paper on the withholding tax for discussion at the Expert Group on barriers to free movement of capital 28 September 2016

Non-paper on the withholding tax for discussion at the Expert Group on barriers to free movement of capital 28 September 2016 EUROPEAN COMMISSION Directorate-General for Financial Stability, Financial Services and Capital Markets Union INVESTMENT AND COMPANY REPORTING Free movement of Capital and application of EU Law Non-paper