Customs disputes FABAG'S claims. But FABAG hits back

Page 3: Daily Graphic, September 3, 2010.
Story: Albert K. Salia
THE Customs Division of the Ghana Revenue Authority has disputed claims by the Food and Beverages Association of Ghana (FABAG) that Ghana is losing an estimated $40 million annually due to smuggling of rice into the country.
According to the division, there seemed to be conjectures and a deliberate distortion of figures by the FABAG in a bid to portray the Customs division in a bad light and also to serve the interest of the association.
It, therefore, challenged the FABAG to substantiate its allegations.
Reacting to the Wednesday, September 1, 2010 publication of the Daily Graphic in which the FABAG raised alarm about the activities of rice smugglers and their effect on revenue generation and business in Ghana, the head of Client Service Unit of Customs, Chief Collector Robert Mensah, said "the so-called 350,000 metric tonne rice imports did not give a time frame for such imports nor did it indicate the basis for determining how 100,000 metric tonnes of it are smuggled".
He said the FABAG did not also give a clear indication of how the $40 million revenue loss was calculated in terms of duty rates over the period, considering the fact that at various times in the past few years tariffs had varied from zero-rated to 20 per cent import duty in accordance with the government’s trade policy.
With tables and figures to support the position of Customs, Mr Mensah said rice imports from 2007 to August 2010 amounted to 2,770,348.28 metric tonnes with GH¢378.71 million paid as tax revenue, adding that for the year 2009 only, 779,125.38 metric tonnes of rice was imported with GH¢112.79 million paid as tax.
"Comparing the 2009 figures to 2008 and August 2010 figures, it is discernible that despite lower volumes in metric tonnes, duty collected in the two years was higher and this is explained by the fact that the government removed duty on imported rice in May 2007 and re-introduced it in January 2010," he said.
Mr Mensah said a total of 781,847.73 metric tonnes of rice was admitted for consumption in 2009 with GH¢97.29 million taxes paid while 1,001,848.90 metric tonnes of rice was admitted for consumption in 2008 with GH¢106.06 million paid as taxes.
As of August 2010, he said, 207,526.27 metric tonnes of rice had been admitted for consumption with a total of GH¢62.59 million paid as taxes.
"Thus, whereas importers took advantage of the zero-rated incentive to import more rice in 2008-2009, with the introduction of the rice tariff of 20 per cent in 2010, the volumes imported have reduced, yet the government obtains higher revenue," he added.
Mr Mensah said a closer look at developments at the Elubo border indicated a similar trend as more rice was imported in 2009 due to the zero-rated tax with GH¢1.90 million paid as duty whereas in 2010 for the period up to August, almost the same volumes have been imported but this time with a higher revenue yield of GH¢3.69 million.
According to him, the facts on the ground prove beyond doubt that imports increased over the years in Elubo despite the so-called manipulations and lower duty rates that had been alleged by the FABAG.
Touching on the incidence of smuggling, he said it was undeniable that with the nature of Ghana's borders characterised by waterways, jungles, mountains and ranges, as well as numerous farms and pathways, certain levels of smuggling occurred.
"Despite the shortcomings and incidence of smuggling, it is inconceivable to assert that as much as 100,000 metric tonnes of rice could be smuggled in and how such quantities could be ferried whether by road, waterway or footpath," he said.
Mr Mensah reminded members of the FABAG that there was a glut on the market and that was compounded by good harvest of maize and yam, stressing that "the way forward is not to contrive figures and scenarios to run down state institutions".
He also reminded the FABAG that freight alone on their imports increased their cost as against those who used the western corridors with less expensive mode of transportation.
Earlier at a press conference, the FABAG had reiterated its earlier position with their spokesperson, Mr John Awuni, saying that the disparity in tariff structure between Ghana and its neighbours was a major contributory factor to the woes of importers using the Tema port.
He, therefore, called on the government to push for uniformity in the tariff structure in ECOWAS countries as the prevailing system created room for abuse.
Mr Awuni said failure on the part of the government to address the challenges would result in job losses for legitimate importers and revenue loss to the state.
He said the quest to promote local rice consumption would also suffer since consumers would prefer the cheap imported perfumed rice and cited the problem of tomato farmers to illustrate his point.

Massive rice smuggling: $40m DOWN THE DRAIN

Front Page: Daily Graphic, September 1, 2010.
Story: Albert K. Salia
GHANA is said to be losing an estimated $40 million annually as a result of rice smuggled into the country.
Estimates compiled by the Food and Beverages Association of Ghana, for presentation to the Ministry of Trade, indicate that 100,000 metric tonnes out of the 350,000 metric tonnes of rice imported into the country are smuggled in, causing the country the millions of dollars in tax revenue.
The resort to the smuggling of rice is attributed to the high duty and other tariffs being implemented at Ghana’s ports as against the country’s West African neighbours.
In that smuggling adventure, Elubo, Debiso, Nkrankwanta, Dadieso and Enchi border areas are the most frequently used to bring in the 100,000 metric tonnes; 75,000 metric tonnes of which are described as high value perfumed rice.
The finding of the association, made up of about 20 local entrepreneurs, also revealed that rice sales for 2010 dropped by 25 per cent.
It also noted that duty on imported rice in Cote d’Ivoire was 12.5 per cent with no Valued Added Tax (VAT), while “On the contrary, importers in Ghana have to pay 20 per cent customs duty in addition to 12.5 per cent VAT and 2.5 per cent National Health Insurance Levy (NHIL) in addition to other levies totalling 40 per cent.
“So the inherent difference of 22.5 per cent in the landing cost of imported rice in the respective countries works to the advantage of the traders involved in the smuggling,” they added.
They explained that there was a difference to the tune of GH¢7 between a perfumed 25kg bag smuggled rice and the legally imported one.
According to them, the traders involved in the trade are able to manage the direct cost by manipulating the duty at the Ghana-Cote d’Ivoire border and hence the difference of GH¢7 per bag.
The players said there was also an under-declaration of customs duty to the tune of 50 per cent.
Citing high value perfumed rice as an example, they noted that the CIF price of Thai perfumed rice was $950 per metric tonne and customs duty of 20 per cent amounted to $190 per metric tonne, whereas duty paid at the Ghana-Cote d’Ivoire border was $95 per metric tonne.
They explained that the loss of revenue to the Ghana government on account of VAT on 75,000 metric tonnes was $6,412,500 annually while customs duty on the same quantum of imports was $7,125,000 annually, bringing the total loss of revenue on perfumed rice alone to $13.5 million.
They said the fear was that international prices of rice had started rising in the last four weeks, which was likely to promote more smuggling into the country, stressing that “rice prices have increased from an average of about $800 to $900 in the last four weeks”.