Revaluation of customs reference price -- valuation of goods for taxation purpose at customs point -- is a regular process. It used to be effected for few hundred goods only in the past. But the government recently raised the reference price of 3,000 items and those covered almost all imported goods ranging from foods, fruits, construction materials and other daily consumable items.[break]
That is not all. The revaluation has been done by a huge margin; in some cases like marble and hardware, the raise stands as much as cent percent of the previous valuation.
“The decision will help mobilize more revenue, bridging the existing collection-target gap,” said a revenue official. Although Department of Customs (DoC) has mobilized revenue of Rs 73 billion, its collection is some Rs 2 billion less than the target set for the period.
While shortfall in collection raised concern in MoF, which has been meeting the target with relative ease till last year, senior ministry officials during the customs officials meet last month had instructed DoC to meet the target at any cost. They had even instructed the department to raise the reference price if needed.
“The instruction led to timely revision of valuation. But it has diverted the priority of the revenue administration from the much needed control on illicit trade, which has soared like never before,” said the source.
Traders disclose that smuggling has soared sharply along the Southern border in recent months and estimate that it could have jacked up informal trade as high as 60 percent of the total formal trade.
Shanta Bahadur Shrestha, director general of the Department of Revenue Administration (DRI) agrees with traders. He also stresses on the need for more coordinated efforts and commitments from different agencies like customs, police, revenue patrol, local administration and local chambers to deal with the menace.
Instead of working in that direction, the government by hiking the reference price has rendered formal trade expensive and widened profit margin for illicit traders, traders said. “This has made control of informal trade still more difficult,” admitted DRI officials.
Some of the officials even argued that such across the board raise in reference price has indirectly functioned as change of customs duty.
“If done for limited goods, it was fine. But by changing it for items across the board, government has indirectly exercised authority that is otherwise exercised only by parliament,” said the source.
Director General of DoC Tanka Mani Sharma, however, denied such charges. “The number stood higher only because the revision was done after a gap of a year,” he said.
Sharma also said that there exists no firm correlation between rise in customs valuation and cross border smuggling. “Smugglings are happening even on zero-duty products. Our decision will not raise the market price as well,” he added.
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