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  • 4 Department of Immigration and Border Protection

    On 1 July 2015, the new Department of Immigration and Border Protection (DIBP) was established, bringing together the functions of the Department of Immigration and the Australian Customs and Border Protection Service into one department. Its operational enforcement arm, the Australian Border Force, works to ensure revenue liabilities are payable and collected on imported goods. They do this by providing an assurance that revenue, including customs duty and indirect taxes, is correctly paid or deferred.

    DIBP employs an intelligence led, risk-based approach to the import and export of goods. The General Monitoring Programme (GMP) provides capability to assess risk in the import and export environment. The GMP is designed to monitor the accuracy of cargo reports and import and export declarations submitted to DIBP. This, coupled with ongoing use of profiles in the import and export environment, gives oversight of highest risk and assists in allocating resources appropriately in line with priorities.

    The establishment of a national customs compliance function in late 2015 is helping to ensure an appropriate organisational focus is maintained on identifying and addressing the range of customs compliance-related risks, including exports, balanced against the need to effectively manage high-risk border enforcement activity. As the volume of trade continues to grow, this national approach to compliance will mean that efforts are focused on areas of the highest risk.

    DIBP achieved the following results in 2015–16:

    • collected $3.5 billion in net GST and $25.7 billion in deferred GST on imported goods
    • cleared 4.0 million import declarations and self-assessed clearance declarations
    • processed 39.3 million import lines with an import value of $275.54 billion
    • cleared 1.5 million export declarations
    • processed 5.2 million export lines with an export value of $243.8 billion
    • administered 839,876 claims under the tourist refund scheme (TRS), approving 98.6% of the claims resulting in refunds of $194 million of GST and wine equalisation tax.

    DIBP works collaboratively with other key agencies to ensure that all revenue liabilities on imported goods are payable and collected. They do this by providing assurance that revenue, including customs duty and indirect taxes, is correctly paid and deferred.

    Pre-clearance intervention and post-transaction investigation functions

    Pre-clearance intervention (PCI) and post-transaction investigation (PTI) functions are key treatments for a wide range of border risks, including revenue leakage. Revenue leakage can occur through undervaluation, misclassification and non-declaration of goods, false claims for GST exemptions, preferential treatment under free trade agreements, duty refunds and concessions.

    DIBP conducts PCI activities before the release of the goods from customs control and PTI activities, including audits, after the release of goods from customs control.

    In 2015–16, DIBP compliance activities identified a total of $54.3 million in GST-related understatements. Voluntary disclosures, where importers voluntarily self-report errors to correct information they have previously provided, remains a major contributor to GST-related understatements (over 76% for the financial year). As voluntary disclosures rely upon self-reporting, fluctuations from year to year are common. While the current understatements are lower than previous years, DIBP will continue to strengthen its relationship with industry to enhance and encourage levels of voluntary compliance through education and awareness, while still addressing identified non-compliance.

    During 2016 DIBP is undertaking a campaign to test the application of behavioural insight concepts as an effective method of increasing voluntary compliance, compared to traditional compliance enforcement activities.

    Table 21: GST understatements 2012–13 to 2015–16

     

    2012–13

    2013–14

    2014–15

    2015–16

    GST understatements

    $151.5m

    $80.1m

    $130.1m*

    $54.3m

    Note:

    • 2014–15 includes a voluntary disclosure of $52.1 million; without this disclosure results would have been similar to those in 2013–14.

    DIBP is continuing to deploy measures to detect and deter serious revenue non-compliance, including complex fraud. Traditional revenue risk areas we will continue to focus on in 2016-17 include undervaluation, misuse of origin and concessions and misclassification and the links to serious organised fraud and other crimes. Globalisation creates interconnectedness, and it will continue to be a fundamental challenge. Patterns of trade are less predictable with goods sourced and delivered through increasingly complex chains of supply and ownership. Both trade liberalisation in the form of regional and bilateral trade agreements, and trade protectionism, increase complexity. Economic integration and complexity mean more opportunity to obscure sources, origins, destinations and actors. This affects DIBP as they assess the risk associated with trade, including revenue leakage, from this information.

    Analysis of the GST risk is that the landscape is relatively stable and that DIBP has in place an effective compliance program that is proportionate to the GST risk at the border. This is supported by revenue leakage estimates. However, a range of matters, including changes to policy and legislative settings, can affect the GST risk within a short period.

    The compliance activities undertaken by DIBP provide a level of assurance on revenue receipts for the purposes of DIBP financial statements, and a level of confidence in reporting compliance by importers who would not normally be subject to any form of compliance activity. DIBP applies Australian Accounting Standards (AASB 1031), which specifies 5% as the materiality level for measurement of revenue leakage. This standard is accepted by ANAO.

    Table 22: GST leakage 2011–12 to 2014–15

     

    2011–12

    2012–13

    2013–14

    2014–15

    GST Leakage ($ million)

    -$42.7m

    -$52.4m

    $15.0m

    $176.6m

    GST Leakage (%)

    (0.2%)

    (-0.2%)

    (0.1%)

    (0.7%)

    Notes:

    • These figures reflect the estimated maximum errors (both overstatements and understatements) at the 95% confidence interval. At time of publication of the 2013–14 report, the 2013–14 GST leakage estimate was not available.
    • The difference in the magnitude of figures between 2013–14 and 2014–15 is due to errors identified in 2014–15 being materially higher than those in 2013–14. However, it is not clear from data available why errors were not occurring at this magnitude in 2013–14. Analysis of the largest errors in 2014–15 indicates misreported currency conversions (eg using US Dollars instead of Japanese Yen), transcription errors (eg misplaced decimal points or repeating numbers) and misreported quantity of goods on import declarations, among other factors. Further, there were over a million more import lines in 2014–15 meaning greater scope for errors to occur.

    Pre-clearance intervention activities

    The customs value of imported goods assessed through pre-clearance intervention activities was approximately $15.8 billion, not including the value of imported goods subject to compliance activity.

    Targeted activities resulted in checks on 102,988 import documents (import declaration, self-assessed clearance declaration, air cargo report and sea cargo report), which identified GST understatements of $7.3 million and GST overstatements of $2.3 million.

    Random sampling activities resulted in checks on 6,139 import documents that identified GST understatements of $131,782 and GST overstatements of $1.9 million.

    Post-transaction investigation activities

    PTI covers a range of activities including formal investigations, audits, assessment of voluntary disclosures and checks of customs licensed premises.

    PTI – Formal audit

    • The customs value of imported goods assessed through formal audit activity was approximately $1.7 billion.
    • DIBP conducted 264 targeted revenue audits, which identified GST understatements of $5.1 million and GST overstatements of $908,503.

    PTI – Non-audit

    • The customs value of imported goods assessed through non-audit activities was approximately $4.4 billion.
    • Non-audit activities that assessed 49 complex voluntary disclosures identified GST understatements of $41.7 million and GST overstatements of $3.97 million.

    Other

    • Compliance activities resulted in the rejection of tourist refund claims with a GST value of $51,375.
      Last modified: 20 Apr 2017QC 51810