Draft design model

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Draft model design for an e-governance system integration, supporting combation with smugglers and counterfeited products.

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Draft design model

  1. 1. Combating Smuggling and Illicit Trade: An Option to Resolve the Issue © Robert Zeldy 2013 All rights reserved. Commercial use, reproduction or distribution of the contents without the reference to the author is prohibited. No part of this presentation may be modified or adapted without express and prior written consent of the author.
  2. 2. Estimated volumes of smuggling According to expert estimates, the share of goods illegally imported into Ukraine ("shadow imports” may equal up to 10-15% of the volume of official imports *, and for the certain types of goods (electronics, automotive supplies, consumer goods, etc.) this rate may reach up to 50%. * - http://kinto.com/files/articles/304/88_3.pdf ** - http://ukrstat.org/uk/druk/katalog/kat_u/publ10_u.htm 84658.1 mln USD 12698.715 mln USD Ratio of official and “grey” imports Volume of official imports**, 2012 г. Assumed volume of "grey" imports, 2012 г. © Robert Zeldy 2013 All rights reserved. Commercial use, reproduction or distribution of the contents without the reference to the author is prohibited. No part of this presentation may be modified or adapted without express and prior written consent of the author.
  3. 3. Effectiveness of traditional methods of combating "shadow" import In 2012 the customs authorities have initiated proceedings in 20,035 cases for violation of customs rules, where the total value of the illicit goods is 2.58 billion hrivnya* (or approximately 322.5 million USD). This represents approximately 2.6% of the estimated amount of the "shadow imports". Thus, it appears that traditional enforcement techniques lose their effectiveness against "shadow imports". Meanwhile, a noticeable improvement in this area would require a "qualitative" leap. 322.5 mln USD 12376.22 mln USD Ratio of identified customs offences to the estimated volume of “shadow imports” Number of initiated proceedings, 2012 Estimated volume of unidentified "shadow import", 2012 * - http://minrd.gov.ua/diyalnist-/borotba-z-ekonomichnoyu-zlochinnistyu- ta/informatsiyna-dovidka-schodo-rezultati/ © Robert Zeldy 2013 All rights reserved. Commercial use, reproduction or distribution of the contents without the reference to the author is prohibited. No part of this presentation may be modified or adapted without express and prior written consent of the author.
  4. 4. New approach of countering the illicit imports / production of goods The main purpose of illegal import / production of goods is their introduction to legal commerce. However, the state’s ability to control introduction of smuggled/counterfeited goods into trade turnover appears to be difficult, primarily because of the inability to identify the product at the domestic market: whether it was imported / manufactured legally or with evasion from customs / tax control. The solution to this problem is to create a significant barrier to counterfeited/smuggled goods: the criminals would not be physically able to introduce illegally imported/manufactured goods at the domestic market. This would destroy the economic benefit of the "shadow import", or "underground" production in any significant scale. Import of goods with concealment from customs control Illicit production Sale of goods (e.g., supported by forged or false documents) and consequently, sale to end- consumers © Robert Zeldy 2013 All rights reserved. Commercial use, reproduction or distribution of the contents without the reference to the author is prohibited. No part of this presentation may be modified or adapted without express and prior written consent of the author.
  5. 5. Monitoring introduction of goods in trade turnover: the Unified Tax e-Invoice Any transaction with the goods is always accompanied by a settlement document - either a receipt or other form of invoice. Considering this, experience of China* (including Taiwan**), and other countries in South-East Asia*** may be of certain interest. In particular, Taiwan uses a standardized form of invoices and receipts for VAT control purposes (also issued electronically). This practice, which is currently being implemented also by China, facilitates the administration of recently introduced VAT • - http://www.chinatax.gov.cn/n6669073/n6669118/9397406.html ** - http://www.futuregov.asia/articles/2010/dec/20/taiwan-govt-make-uniform-tax- invoices-electronic/ *** - http://www.futuregov.asia/articles/2011/mar/17/philippines-see-unified-invoice- system/ Customs Declaration applicable for imports of goods Service Acceptance Statements only for provision of services Invoice or receipt any taxable transaction © Robert Zeldy 2013 All rights reserved. Commercial use, reproduction or distribution of the contents without the reference to the author is prohibited. No part of this presentation may be modified or adapted without express and prior written consent of the author.
  6. 6. Monitoring introduction of goods in trade turnover: Ukrainian background As of today, Ukraine is more than capable to implement a national system of control over the introduction of goods into trade turnover. Various IT systems of the state authorities already cover large segments of the market, for example:  Customs databases contain information about trafficking of goods through the customs border (via e-declaration techniques)  The legal manufacturer/import of certain excisable goods (e.g., tobacco and alcoholic beverages) could be tracked via the license number and excise stamps purchased (information also available in IT systems of tax authorities)  Database of VAT invoices contains information about all the VATable transactions worth over UAH 10 000 (via electronic registration of VAT invoices)  In the near future, electronic cash receipts will be available, covering the sale of goods to end- consumers • - © Robert Zeldy 2013 All rights reserved. Commercial use, reproduction or distribution of the contents without the reference to the author is prohibited. No part of this presentation may be modified or adapted without express and prior written consent of the author.
  7. 7. Monitoring introduction of goods in trade turnover: difficulties of implementation Despite significant progress in this area, the implementation of a national control system for monitoring entry of goods in the trade turnover still faces system constraints: ► Low interaction levels between different IT systems (i.e., tax and customs databases) ► Low automatization of data exchange ► Different approaches to the coverage of taxpayers and logged operations, and as a consequence - difficulties in data reconciliation • - VAT invoice register VAT payers Electronic register of cash receipts stores, catering and public services Customs databases legal entities and individuals regardless of taxpayer status © Robert Zeldy 2013 All rights reserved. Commercial use, reproduction or distribution of the contents without the reference to the author is prohibited. No part of this presentation may be modified or adapted without express and prior written consent of the author.
  8. 8. Unified Tax e-Invoice (UTI): the concept The concept of the Unified Tax e-Invoice being developed by a number of governments*, would serve the needs for trade facilitation and at the same time improve combating the "shadow economy“ **. Certain prerequisites for the implementation of the UTI:  Required for any taxable transaction (subject to certain exceptions in the form of value threshold or non-critical goods)  Mandatory for all categories of taxpayers (including non-VAT taxpayers)  Contains information about all types of applicable taxes (VAT/GST, excise)  To be provided by electronic means to the revenue authorities • - http://ec.europa.eu/internal_market/payments/einvoicing/ ** - http://ec.europa.eu/taxation_customs/taxation/vat/traders/invoicing_rules/index_en.htm Import/production of goods UTI: reference to the item number in the import declaration Distributor UTI: reference to the item number in importer’s/manufacturer’s UTI Store Electronic cash receipt: reference to item number in distributor’s UTI © Robert Zeldy 2013 All rights reserved. Commercial use, reproduction or distribution of the contents without the reference to the author is prohibited. No part of this presentation may be modified or adapted without express and prior written consent of the author.
  9. 9. Unified Tax e-Invoice: benefits The state:  Minimizing the possibility of introduction of smuggled or counterfeited products (consumer goods, alcohol beverages, tobacco)into a trade turnover  Automation of data exchange between different IT systems of revenue authorities  Facilitation of returns used for tax and trade purposes  Improving the country's position in international ratings due to completely electronic worklow in tax, customs and trade • - The business:  Reducing the number of required documents (eliminating the need for the separate VAT invoice)  Reduction of costs by eliminating the need to use paper forms for accounting and tax purposes  Reduction of unfair competition (due to enhanced enforcement of intellectual property rights)  Reducing administrative burden (by expanding the base for electronics audits) © Robert Zeldy 2013 All rights reserved. Commercial use, reproduction or distribution of the contents without the reference to the author is prohibited. No part of this presentation may be modified or adapted without express and prior written consent of the author.

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