Revenue Board examining proposal to devise individual profiles of warehouse owners

ISLAMABAD (August 06 2003) : The Central Board of Revenue (CBR) is examining a proposal of tax consultants M/s Maxwell Stamps to devise individual profiles of all the private bonded warehouse owners for determining high/low risk rating of such licensees.

The role of custom officials/auditors would be minimum in case of warehouses having low risk profiles as compared to high-risk companies liable to punishment including cancellation of licenses.

The profile information of each licensee will be analysed to determine his risk rating.

The rating will be used to determine his category for audit purposes and his qualification for such “privileges” as green channel clearance.

The auditors would give priority to companies falling within the high-risk category as licences would be suspended/withdrawn or not renewed for those who do not reduce their high-risk status.

The tax managers are studying the pros and cons of the said proposal, which is part of tax reform strategy devised by the UK experts in consultation with the CBR.

Sources disclosed here on Tuesday that basic theme is to give some concessions to those licensees, who achieve and maintain a “low risk” status.

These benefits include withdrawal of posting of a customs official on a full-time basis; less frequent audits and physical stock inspection as compared to higher risk licensees.

Other benefits will accrue through green channel status for his import and export consignments and other such privileges.

As per strategy, the CBR will have the majority of warehouse licensees keeping reliable inventory and other records.

The customs would undertake regular compliance audits and spot inspections.

On the other hand, the physical presence of a customs officer to supervise the bond transactions will be rare exception.

In this regard, an IT system will automate the registration, profiling and risk assessment processes and report transaction data for auditors engaged in visiting each licensee.

Under strategic reform programme, the CBR will hammer out a procedure to register warehouse licensees and subsequently allocate them 'identifying number'.

The profiles will be developed of each licensee, including inter-alia records of previous import and export history, transgressions and offences, whether the licensee operates a computer or manual inventory management system, and such other information as will help determine the risk rating of the licensee.

The rules will be amended to prescribe the records each licensee must keep and to give the necessary powers to customs auditors. Licensees will be required to deliver periodic inventory returns to customs according to their risk status.

The law will require the periodic renewal of a license, at the discretion of the proper officer of Customs.

Renewal of the license will be subject to satisfactory performance and maintenance of an acceptable standard of records, and inspection of the premises to ensure that they remain secure.

The rules will include the format (in the case of manual records) and content (in the case of computerised records) in which inventories must be maintained and reported to Customs – inwards and outwards and, in the case of a manufacturing warehouse, consumption in manufacturing operations.

The new control procedures will be notified to licensees well in advance. A date will be set on which they become effective.

All licensees may be required to change on the same day or the change may be phased in Customs will deliver awareness and training sessions, which cover not only the new procedures and obligations, but also the records that must be kept to ensure that nothing is “lost” in the transition from old to new inventory methods.

Customs auditors will be selected or recruited, and trained and an audit programme will be designed based on the risk assessment of each licensee.

Low risk category licensees will receive frequent – unannounced spot checks, and any physical location of a Customs officer at the warehouse may be withdrawn. More detailed audits will be undertaken less frequently for this category.

High-risk category will be audited in detail.

Licences may be suspended or withdrawn or not renewed for those who do not reduce their high-risk status. Regular, cyclical, audits of less intensity than for high-risk licensees will be undertaken on the balance.

Customs officers may remain posted at these premises until they are satisfied regarding risk rating of such licenses.

Licensee profiles and risk assessment ratings will be held in the customs computer, and will be systematically updated by transaction data.

Audit and spot check findings will be analysed and the risk rating updated accordingly.

The import and export GD processing system will report into – and out – of warehouse transactions to auditors and “spot check auditors” so that they know in advance the stock that should be forthcoming in each warehouse.

This record will also highlight any discrepancies between the data and the audit officer's report, which then requires an explanation from him or the licensee or both.

“Desk audits” will also use this data to reconcile with licensees' periodic returns and highlight discrepancies for follow-up audit or spot inspection.

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