The World Bank (WB) has informed the Federal Board of Revenue (FBR) that the government of Pakistan should demonstrate commitment to check corruption in the customs department for developing a system based on integrity to raise revenue collection.
In this regard, the WB has proposed to the FBR to issue a specific 'code of conduct' or ethics for the customs officials to effectively deal with the issue of corruption. To deal effectively with corruption, there must be a commitment from government to address the problem. With this commitment, steps can be taken to build a system that has integrity and that will produce the expected revenue results, the WB added. Sources told Business Recorder here on Friday that the WB review mission has submitted a report to the FBR on the issue of 'Customs Integrity' and measures to check corruption in the customs department.
The WB report has proposed measures to address corruption problems in the customs administration. The WB review mission has proposed to build a system to promote integrity in customs administration that requires both implementation measures to combat corruption and vigilance to ensure that the measures are being applied. These steps are clear, well-understood as technical policy framework is based on (1) a minimum number of tariff rates; (2) low rates; (3) minimum exemptions; (4) minimum non-tariff trade barriers; (5) an effective penalty regime; and (6) an independent appeal mechanism.
Simple, transparent customs clearance procedures should begin with self-assessment and include (1) a one-step process for the presentation of customs goods declarations: (2) minimal information and documentation requirements: (3) consistent and predictable interpretations; and (4) full computerisation of goods declaration processing procedures.
The WB has proposed a professional customs administration with clearly defined responsibilities and accountability, including (1) professional management; (2) adequate compensation and working conditions: (3) regular staff rotation; (4) appropriate and regular training: (5) merit-based promotions; (6) fair recruitment practices; (7) separation of responsibilities; and (8) complaint monitoring.
Performance standards that enable policy makers to ensure the expected performance is being met and problems can be readily identified. The standards should include (1) achievable revenue targets; (2) appropriate quality of service standards, particularly related to the time taken to release goods from customs control; and (3) effective enforcement standards and practices.
A Code of Conduct that clearly articulates expectations and the actions that will be taken when these expectations are not met: The code should include (1) prohibition on the acceptance of gifts or other favours; (2) the requirement to maintain confidentiality of commercial information; (3) a clear definition of conflict of interest; and (4) professional appearance and conduct standards, the WB said.
Effective internal audit should be designed to (1) ensure compliance with operational procedures; and (2) review the expenditure/use of government funds/ assets. According to WB recommendations, the FBR should use the integrity and code of conduct instruments developed by the WCO to guide a review and subsequent amendment of the FBR/Customs Code of Conduct. When a revised Code of Conduct is promulgated it should require all serving officers and new recruits to sign a statement acknowledging that they have read and understood it.
The FBR should develop a long-term integrity action plan for FBR in general and the customs service specifically. It must ensure responsibilities for enforcement of internal integrity and anti-corruption measures are separated organisationally from externally focused intelligence and investigative operational elements. The FBR should include a mandatory integrity element into all classroom-based training programs. The Board should mount an integrity campaign for client groups, the development of which should be based on principles similar to customs internal action plan.
The WB report said that the circumstantial evidence provided by international traders seems to suggest that customs integrity is a major problem. According to these sources, the human factor plays a significant role in expansion of smuggling practices. It is mentioned that the overwhelming number of cases relating to illicit transfer of cargo through national borders are committed using corrupt connections with officials associated with border controls.
Based on international experience, the most widespread illicit actions are usually associated with one or the other of the following: the issues are illegal exemptions or diversion of cargo from customs examination; documentary clearance of goods supposedly transferred through the national territory in transit, but which are actually sold within the territory; sealing vehicles and containers without examination of their cargoes; clearance of duplicate customs documentation; accepting blatant under-valuation of goods and clearance of non-existent goods or goods with deliberately inflated values intended for export, thus making it possible to obtain illicit GST refunds.
The WB said that a strong and specific code of conduct for the FBR and its customs wing is required. It is common for customs administrations to develop their own codes of conduct and ethics, additional to those of the wider public service or parent body. By way of example, it is possible in some administrations for a person convicted of a "minor" drug offence to be given either counselling or a warning under public service rules. However, the appropriate sanction in a customs environment would be dismissal or, at a minimum, transfer from the customs to another part of the public service. Guidance for development of such a code of conduct could be taken from the model Code of Conduct developed by the WCO, and from the WCO's Compendium of Integrity Best Practices and their Integrity.
Long-term sustainable improvement in levels of integrity of both officials and their clients will ultimately come for voluntary compliance based on positive reinforcement. This is not to say that strong enforcement is not a primary tool for tackling integrity issues. Nonetheless, authorities' actions should consider use of positive motivation to produce the desired changes in behaviour, as reflected in the language of the WCO's Arusha Declaration, with its emphasis on integrity rather than corruption, the WB said.
Responsibilities for enforcement of anti-corruption measures are mixed with core operational responsibilities. The department responsible for risk analysis in FBR, the Directorate General of Intelligence and Investigations, currently has a significant focus towards internal affairs rather than to combating major systemic revenue frauds. While this has some attraction in the context of an integrity action plan, it is likely to be to the detriment of its primary role, which should be intelligence profiling and assessment of external, operational risks related to revenue administration, imports, exports and other enforcement responsibilities.
Internal surveillance and investigation of staff for integrity purposes, which are integral components of management controls and therefore explicitly part of the headquarters structure, needs to be separated from assessment of operational risks, and placed in a dedicated internal affairs (or security) unit elsewhere in the organisation, the WB review mission added.
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