What Ever Happened to the Customs & Excise Legislation Re-write Project?
15 November 2013
Posted by: Author: Alison Van Den Berg
Author: Alison Van Den Berg (Malan Scholes Attorneys)
South Africa’s "Customs Modernisation Programme” is not just policy jargon nor is it a popular "buzz” phrase used by the South African Revenue Service ("SARS”) to boost its popularity. Real changes are visible and they are happening constantly. In August 2013, just for example, SARS implemented a major component of a customs management system which converted a number of paper-based systems into a fully automated and centralised processing system for all commercial trade across South African borders. SARS claimed in its media statement at the time that "the new Customs management system centralises the clearing of all import and exports declarations using a single processing engine. The new automated management system replaces a variety of older systems and paper-based, manual administrative processes. By managing Customs declarations and supporting documents in electronic format, the processing of cargo movements by land, sea and air will now be much quicker and more accurate”.
August 2013 also saw the "pre-certification version” of the draft new customs legislation, made available to the public (for information purposes only) on the SARS website. This version of the draft legislation had been reviewed by the State Law Advisors, and was the result of an extensive process of consultation between SARS and stakeholders. Finally, on 18 October 2013, the final version of this Legislation was published in the Government Gazette, together with explanatory memoranda. Although the Bills have now been promulgated, they only take effect and commence on an unknown future date to be determined by Presidential Proclamation in the Gazette.
In view of these recent developments, it is worth re-capping how this new legislation fits into the modernisation programme; how drastically it promises to change the landscape for stakeholders where SARS is in the customs legislative "make-over” process; and what is still to come. When the draft legislation was first published for comment, the SARS memorandum in this regard explained that the Revised Kyoto Convention provides a model framework for customs control and is regarded as the blueprint for a modern, efficient and cost-effective customs system. In view of South Africa having acceded to this Convention in May 2004, it was determined that a fundamental restructuring of our customs and excise legislation was required to, amongst other things, give effect to Kyoto and other binding international instruments.
South African Customs and excise legislation is currently contained in the Customs and Excise Act, 1964 (Act No. 91 of 1964), which provides for the levying of customs and excise duties, and also other taxes such as fuel levies, air passenger tax and environmental levies. SARS’ stated intention was to work on a completely new legislative framework, which will ultimately consist of three separate pieces of legislation to replace the Customs and Excise Act, 1964, being the –
- Customs Control Act (see the Customs Control Bill 45 of 2013, published on 18 October 2013) that establishes a customs control system for all goods imported into or exported from the Republic and that prescribes the operational aspects of the system;
- Customs Duty Act (see the Customs Duty Bill 43 of 2013, published on 18 October 2013) that provides for the imposition, assessment and collection of customs duties; and
- Excise Duty Act (see the Customs and Excise Amendment Bill 44 of 2013 as an interim arrangement also published on 18 October) that provides for the imposition, assessment and collection of excise duties.
SARS had clarified in the past that the re-write would be a project in two phases, the first phase being the drafting of the two Customs Bills and the second the drafting of the Excise Bill. The intention was then that, once the Customs Bills were enacted into law, the current Customs and Excise Act, 1964, would be retained for the continued administration of excise duties until the proposed Excise Act is put in place, and this explains the third Bill referred to under (c ) above..
SO HOW DO THE DRAFT CUSTOMS BILLS COMPARE TO THE EXISTING ACT?
The Customs & Excise Act of 1964, consists of 122 sections contained in 12 chapters. The Customs Control Bill, on the other hand, consists of 944 sections, spanning 41 topic-specific chapters. Extensive use is made of footnotes to provide background information and to connect specific provisions with the numerous cross-cutting provisions contained in other parts of the Bill. The legal status of the footnotes is also determined in the Bill, namely that they "do not form part of the Bill, but that they may be taken into account in the interpretation of the Bill as non-binding opinions on the information they convey”.
The main stated aims of the Control Bill are to serve as the legislative platform for the changes to policy, processes and technology that are to be delivered under the Customs Modernisation programme. For example, it contains provisions dealing with fast-tracking clearance and release procedures in respect of certain categories of persons or goods; and the introduction of advance binding rulings (private, class and general) on the interpretation or application of a provision of the Bills in order to create legal certainty.
The Customs Control Bill seeks to provide systems and procedures for customs control of all goods and persons entering or leaving the Republic; and of course "to enable the effective collection of tax on such goods imposed in terms of the tax levying Acts” – which refers to Acts imposing taxes on imported and exported goods and includes the proposed Customs Duty Act, the Value-added Tax Act, the proposed Excise Duty Act and the Diamond Export Levy Acts. What this means in practice, is that when the Control Bill comes into effect, it will have to be read with certain provisions of the existing act relating to Excise. In addition, it will have to be read with the new Customs Duty Bill and the VAT Act, to obtain a full picture of the legal position in respect of these indirect taxes – it remains to be seen how all the links work in practice and if the new acts really do simplify and clarify the position by detailing various procedure scenarios.
The Customs Duty Bill comprises 229 sections divided into 13 chapters. There are a number of significant provisions which effect subtle to dramatic changes, including provisions to give maximum effect to the principle of self-assessment with the role of the customs authority focused on verification of self-assessment rather than on assessing the amount of tax; provisions increasing the period of liability for duty from two to three years from the date of assessment; and provisions relating to binding advance rulings on the tariff, value and origin determination of goods to be cleared during a future period.
The new legislation also makes certain changes to terminology; categorises offences and penalties; adds to the detail on the power of officers and when warrants are required, and establishes a lien over goods for SARS in certain circumstances. What is not clear is when the rules/regulations which arise out of the main acts will come into play. The existing Act has extensive rules in place, whereas the draft bills make provision for Rules to facilitate implementation thereof.
This article was first published in TaxTalk Magazine - November/December