Five countries of the former Soviet Union—Azerbaijan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan—are receiving assistance from the IMF in strengthening their customs administration through a project financed by the Swiss Federal Office for Foreign Economic Affairs. The goal of the project is to help these countries improve their revenue performance, further liberalize international trade, respond to demands from international business for improved service, and introduce modern technology to assist customs control and facilitate trade.
Seminar launches project activities
In April 1998, IMF Managing Director Michel Camdessus and Swiss Minister of Finance Kaspar Villiger signed an agreement under which Switzerland provided a $2.5 million grant to finance IMF-executed technical assistance projects in these five countries. Project activities were launched at a seminar organized by the IMF’s Fiscal Affairs Department and held in Geneva from May 26 to June 3. Staff from the department delivered presentations, covering the role of foreign trade taxes, regional economic integration, new trends in the organization of customs administrations, preshipment inspection services, import control procedures, trade facilitation, import valuation, approaches for fighting corruption, computerization, and strategies for customs reform.
Other speakers represented the World Trade Organization, the World Customs Organization, the United Nations Conference on Trade and Development, the European Commission, and the Swiss and Turkish customs services.
Administrations need to change
Customs administrations are usually responsible for collecting revenue, administering trade policy, and reducing illegal imports and exports. Although revenue from import duties is generally falling in developing and transition economies, the revenue collection role of customs administration is not diminishing because revenue from other taxes on imports, notably sales or value-added tax, can be substantial. The challenge for customs administrations in the global economy is to have effective customs controls while at the same time reducing the costs imposed.
Reform strategy facilitates integration
The experiences of modern customs administrations in industrial countries provide a model for a reform strategy that developing countries might adopt to create an environment that facilitates increased compliance and reduced costs. Such a strategy should incorporate appropriate and transparent legislation; simple, up-to-date procedures; and enforcement based on an assessment of risk and selective controls targeted at high-risk goods and enterprises.
At the outset, the countries should make a conscious decision to align their legislation and procedures with international standards and practices, which will help ensure their integration with the world trading community. To support implementation of the strategy, changes will be required in computer systems, organization, management, recruitment and training, and services provided to importers and exporters. It was emphasized at the seminar that a large number of changes could not be implemented at once and that careful consideration had to be given to sequencing.
Features of the seminar
As part of the seminar, the Swiss customs administration arranged for the participants to visit its Berne headquarters and the border post between Switzerland and France at Bardonneux. The interactive sessions combined presentations, case studies, and discussions and enabled the delegations—senior officials from the five countries—to mix informally, encouraging them to open new lines of communication on customs issues. To promote the exchange of views, each country was asked to describe the state of its customs service.
The sessions enabled the participants to identify the main challenges they face in modernizing their customs services and to assign priority to the reforms they must undertake. Most of the countries have already experienced tremendous challenges in establishing their services. The Tajik customs service, for example, has grown dramatically over the past seven years, from 8 employees in 1 office to more than 1,400 employees in 86 offices. All of the countries have had difficulty monitoring and controlling exemptions and customs valuation and financing the replacement of computer software and equipment, which is largely obsolete and not Y2K compliant. All five countries also recognized that they needed to improve their revenue performance from the taxation of imports.
The seminar was considered successful in raising the awareness of the participants about the necessary elements of a modern, efficient, and effective customs administration. As the next step under the Swiss-financed project, the Fiscal Affairs Department will send technical missions to those countries that request assistance in identifying the specific changes they must make and in formulating a strategy and a plan of action to implement them.