Corrupt customs service<\/p>\n
Indonesia's customs service is certainly no less corrupt than
\nthe tax office. After all, they are both part and parcel of a
\ngovernment that has been perceived to be one of the most corrupt
\nin the world.<\/p>\n
Collusion to avoid or reduce payment of import duties is
\nsimply a reflection of the generally low level of tax morality in
\nthe country. Understandably, companies whose tax payments are
\nbased on negotiations with corrupt officials, rather than on
\nactual incomes and expenditures, see it as sensible to extend
\nsuch collusive deals in their payment of duties on their imports.
\nThe risk of being caught is quite small, as can be seen from the
\nfew cases of tax evasion or manipulation brought to court even
\nthough the tax ratio and taxpayer base in the country are the
\nsmallest in Asia.<\/p>\n
A nationwide diagnostic study on corruption conducted early
\nthis year under the sponsorship of the World Bank and United
\nNations Development Program also confirmed that the customs and
\ntax services are the most corrupt public institutions in the
\ncountry.<\/p>\n
But why the sudden fuss about the corrupt customs service,
\nwhich prompted President Megawati Soekarnoputri last Wednesday to
\nmeet with the executive board of the Indonesian Importers
\nAssociation (Ginsi)?<\/p>\n
The difference in the urgency of the issue lies in the impact
\nit has on the economy. The most damaging effect of malfeasance
\nwithin the tax office is state losses of revenue as the
\ngovernment gets much less than what is due from taxpayers.<\/p>\n
But corruption within the customs service has a more far-
\nreaching effect on the economy. Besides cutting government
\nincome, violations of customs rules also cause distortions on the
\ndomestic market because foreign goods, on which lower duties and
\ntaxes than what is mandated by law are paid, pose unfair
\ncompetition on domestic products. Outright physical smuggling,
\nwhich is also believed to be rampant given the vast coastal lines
\nacross the archipelago, also has a similarly devastating impact,
\nbut preventing this contraband trade is the joint responsibility
\nof the customs service and the military.<\/p>\n
The corruption-infested customs service was stripped of its
\nimport inspection authority in 1985, when the government
\nintroduced a preshipment inspection system for imports and
\nentrusted the system to the Geneva-based Societe Generale de
\nSurveillance (SGS) and later to a state-owned company.<\/p>\n
As Ginsi chairman Amiruddin Saud told reporters after his
\nmeeting with President Megawati, the state loses almost Rp 30
\ntrillion (US$3 billion) a year due to the underinvoicing of
\nimported goods. But more damaging is the unfair competition
\nimposed on domestic manufacturers at a time when they have to
\ndepend more on local demand.<\/p>\n
Businesspeople insist that corrupt mentality, rather than
\ntechnical incompetence or lack of equipment, seems to be the core
\nproblem. But it is almost impossible to expect the customs
\nservice to be an incorruptible island in an ocean of corruption.<\/p>\n
As soon as the new customs law was enacted in 1995, the
\ncustoms service promised dramatic improvements in import
\ninspection if it regained its import inspection authority. The
\ncustoms service promised to minimize corruption by introducing an
\nelectronic data interchange (EDI) system that would allow all
\ncommunications between officials, importers and banks in the
\ndetermination and receipt of customs duties and tax by modem
\ntransmitted to the customs EDI clearing house.<\/p>\n
However, improvements lasted barely one year after it regained
\nits inspection authority in 1997 and the system within the
\ncustoms service was back to the corrupt \"business as usual\"
\nmentality that dominated the customs service before 1985.<\/p>\n
Corrupt mentality is a disease that cannot be cured within one
\nor two years and cannot be treated in isolation from other
\ngovernment and state institutions.<\/p>\n
But the problem within the customs service is crucial,
\nrequiring urgent, bold measures.<\/p>\n
The customs service plays an important role not only in
\npreventing underinvoicing but also in facilitating the smooth
\nflow of imports, which is vital for the domestic manufacturing
\nindustry due to its heavy dependence on imported materials and
\ncomponents. In fact, almost all export-oriented factories depend
\nlargely on imported materials, as reflected in the domination of
\nindustrial materials in the country's import composition.<\/p>\n
The government therefore should seriously consider reapplying
\nthe preshipment inspection system, like the one enforced in 1985,
\nwhich proved its great benefits: facilitating the smooth flow of
\nimports, thereby securing the delivery of materials to factories,
\nsafeguarding customs duty and tax receipts, preventing
\nunderinvoicing and manipulation in the shipment of imports and
\nfostering healthy competition between companies.<\/p>\n
Relaunching a preshipment inspection system would not be so
\ndifficult now that the government-owned surveyor company, PT
\nSucofindo, has had decades of experience and has gained a good
\ninternational reputation in commodity inspection services.
\nMoreover, importers have said they are willing to bear the cost
\nof inspection to secure on-time delivery of imports and create
\ncertainty in the determination and payment of customs duties.<\/p>",
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"sponsor": "Okusi Associates",
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