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Fixing SL Customs

Fixing SL Customs

22 Nov 2023

The Sri Lanka Customs Department is at the leading edge of Sri Lanka’s border security, law enforcement, and state revenue raising. Yesterday (21) another Customs officer was arrested on allegations of being complicit in aiding the import of illegal narcotics worth Rs. 60 million. What is commendable is that the arrest was done by the Sri Lanka Customs themselves, who detected and apprehended one of their own breaching the laws of the land.

Despite the Sri Lanka Police force, being crowned as the most corrupt government institution in multiple surveys done by Transparency International, some argue that a visit to the country’s import and export hub in Colombo Port could definitely cast a cloud over that conclusion. Speak to any Wharf Clark, or veteran importer, and you will hear numerous tales of “the need to grease palms” to clear goods, or process documents, even if they are not in proper order. Many hands point fingers at the Sri Lanka Customs’ ill-gotten reputation for corruption. However, the sad reality is that many who point fingers are themselves complicit in keeping the system of corruption alive.     

One common well-known form of corruption within Sri Lanka Customs is the undervaluation and misclassification of goods. Importers often understate the value of their goods or classify them under lower tariff codes to pay lesser Customs duties. Such deceitful practices robs the Government of revenue that could be used for public services, welfare and development projects. 

Let’s not forget, that despite declaring bankruptcy and having hit rock bottom, with many public services, including critical ones such as health services affected, state revenue targets were not met this year. It is common knowledge that bribery and at times, extortion is widespread at multiple Customs checkpoints, be it at Colombo Port or at bonded warehouses. It is learnt that some officials often demand bribes from importers and exporters to expedite clearance processes or avoid unnecessary delays. Such corrupt practices create an uneven playing field for businesses, with well-connected entities gaining advantage over their competitors.

The IMF’s prescription for reform encompassed not only tax revisions, but also recognised the gravity of corruption within Customs and the Inland Revenue Department (IRD). Corruption within these institutions stands as a formidable barrier to revenue collection and, by extension, economic stability.

A recent corruption diagnostic report on Sri Lanka by the International Monetary Fund (IMF), pointed out that both Customs and Tax officials have themselves acknowledged there is “rampant state of corruption in their institutions with little risk or consequence of exposure”. Sri Lanka’s high import and excise tax rates, have been cited as fact that enables corruption  by some critics, who said the tax policies are a blueprint to increase corruption in related taxes as well as illegal manufacture of alcohol and smuggling of cigarettes.

“Both Customs and IRD officials acknowledge the rampant state of corruption in their institutions with little risk or consequence of exposure, and similarly few if any consequences when corruption allegations are made,” the report said, adding that “With more than 2,000 staff in each of the Customs and IRD Departments, no cases against corrupt tax officials have been made or reported in recent years… The 2021 Customs Department report noted 11 preliminary disciplinary cases being investigated but not concluded and two formal cases similarly still under investigation. With very few (if any) internally investigated corruption cases, unsurprisingly, few cases involving revenue officials, are subject to the independent investigation of CIABOC (anti-bribery agency) which acknowledges revenue-related cases are relatively rare.”

Given the vulnerable state Sri Lanka finds herself today, if the Government is serious about state sector reforms, an essential part of the IMF agreement and important to regain international credibility, it must enact robust reforms for the border control and revenue agencies, such as Sri Lanka Customs. A thorough vetting process for recruitment, oversight and accountability mechanisms, and routine integrity tests should be introduced. Sri Lanka Customs must be overhauled. 

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