Eleven importers who owed the Government some $1.2 billion in general consumption tax (GCT) and other taxes from 2011 were still able to get waivers valued at $4.2 billion in the last financial year.
This according to the findings of an audit of the Jamaica Customs Agency (JCA), which the Auditor General's Department (AGD) has used to raise troubling concerns about the granting of discretionary waivers.
Discretionary waivers have since been capped at $3.96 billion annually, and the power to approve them transferred from the minister of finance to tax department officials.
However, in its latest report tabled in the House of Representatives last week, the AGD indicated that the findings unearthed by the audit demonstrate that it is the waiver-approval process that is in need of an overhaul.
"We found that the process of approving waivers does not lend itself to detailed checks ... . We noted that the Revenue Protection Division conducts investigations after the waivers are approved," the government oversight agency noted.
"Therefore, the Government will not know whether the applicant is actively engaged in the stated sector or is operating lawfully or contributing to the economy," the AGD added.
As a result, the department has recommended that the Government implement an evaluation process for prospective waiver beneficiaries to capture financial, legal and other "pertinent information" that should be used to inform the final decision.
"The country does not stand to benefit as tax waivers represent potential revenue that the Government has given up. This, therefore, means that the GOJ is deprived of revenues both ways when importers who benefit from tax waivers are not paying taxes," the AGD observed.
No system to track items
The oversight agency said the audit also revealed that the JCA had no organised system in place to track items imported with a waiver.
Section 32 of the Customs Act stipulates that goods imported through special concessions cannot be transferred before three years, failing which the full duty becomes payable.
However, the AGD said the audit showed that 106 excavators, with a Cost Insurance and Freight (CIF) value of $1.2 billion, were imported at 100 per cent concession between 2011 and 2012, but "were not registered on any system to capture the stipulated conditions of the concession or restriction of transfer".
"Our review also noted that five forklifts, with CIF value of $11.6 million, were imported on conditions that they should not be disposed of within a year of acquisition. The forklifts did not attract import duty and we did not see where they were registered on any system to capture the restriction of transfer," the AGD noted.
"In the absence of a system to record the special conditions for importation of goods/equipment, it would be difficult to determine whether they were disposed of before the stipulated time frame. The equipment could also be sold by unscrupulous importers at windfall profits from which the Government would not benefit," the agency added.
Commissioner of Customs Richard Reese has declined to comment on the findings, saying the agency had already responded to the AGD and would need to respond to the Public Accounts Committee of Parliament before speaking with the media.