Presentation on theme: "Zambia Revenue Authority"— Presentation transcript:
1 Zambia Revenue Authority Post Clearance Audit (PCA)Presentation at the Symposium on Trade Facilitation for African CountriesNairobi, Kenya13 – 16 November 2012By: Reuben Kunda
2 OBJECTIVETo share information and experiences with other administrations on the set up of PCA in Zambia
3 Contents Brief History of PCA in Zambia Legal basis Post Clearance Audit, what it is aboutObjectives of Post Clearance AuditSources of AuditsThe Compliance Model
4 Contents Brief Audit Process Benefits to Customs and stakeholders Conclusion
5 BRIEF HISTORYChapter 6 of General Annex to the RKC - Customs Controls:Limited to that necessary to ensure complianceMove from transaction-based to audit-based or mixed controlsUse risk management techniquesUse trader’s commercial recordsApply compliance measurementUse MOU’s with trade and MAA’s with other Customs
6 BRIEF HISTORYIntroduced in 2000 under Audit & Business Risk section (ABR) with 12 staff.Now has an establishment of 30 officers
7 LEGAL BASISSections 9 (general powers of an officer) - power to enter any business premises and request for documents for examination.Section authority to enter and search of premises of licenced manufacturers and authority to seize documents.
8 LEGAL BASIS, Cont’dSection persons carrying on business to keep proper books and avail such to officers upon request.
9 What is PCA?A process aimed at providing assurance that businesses and individuals subject to Customs and Excise controls have complied fully with all relevant legislation and requirements through examination of internal controls, accounting systems and relevant documentation.
10 BACKGROUND OF PCAsOpportunities and challenges besetting international trade:Flexibility in facility set up and access to marketJust In TimeIncreased volume and speed of international trade.
11 BACKGROUND OF PCAsOpportunities and challenges besetting international trade cont’d:High revenue expectations by GovtExpectations of trade for quick and efficient customs clearance.Trade Facilitation, a legitimate expectation
12 RESPONSE BY CUSTOMSStrategies aimed at striking a balance between control and trade facilitation.Allow compliant businesses quick customs release.Enhanced customs control on less/non-compliant businesses.
13 RESPONSE BY CUSTOMS Use of risk management to customs control Use of audit based control called PCA.
14 Objectives of PCA Evaluate strength of client’s internal controls Determine client’s compliance levelsAssess any revenue shortfallRecommend improvements in clients internal controls to assure future complianceClient educationEvaluate effectiveness of Customs controlsRecommend adjustments in Customs controls (risk targeting, procedures, legislation, etc)
16 The Customs Compliance Model Introduce the Compliance Model. The left part is about understanding taxpayer behaviors and we haven’t got time to cover today.The right part is a model that shows us how to manage compliance. The majority of clients are at the bottom and are willing to comply, we just have to assist them by making it easy (our processes and systems) and telling them what we expect. We can’t expect people to comply with requirements we don’t tell them about.The left side shows the client’s attitude to compliance. As we move up the model we get increasing resistance, and we can see on the right hand side, as resistance increases, so does our compliance strategy, or treatment of the client.The comments I’ve heard for the limited number of people I’ve shown the model to since I arrived is – in Zambia it is upside down. The fat end is at the top and the pointy end is at the bottom!!! If that is the case, why? And what have we done to make it that way?
17 BISEP Industry factors: Industry definition Region Size, segment, participantsProfit marginsCost structuresIndustry regulationIndustry issuesCompetitionSeasonal factorsInfrastructureLabourBusiness factors:Structure – sole trader, partnership, trust, CompanyBusiness activities (type)-local, inter-region,-InternationalFinancial dataBusiness agePsychological factors:RiskFearTrustValuesFairness/equityOpportunity to evadeSociological factors:NormsReciprocityAgeGenderEducation levelEthnic backgroundA closer look at the left hand side of the model.Economic factors:InflationInterest ratesTax systemGovt policiesInternational influences
19 EXAMPLE OFAUDIT PROCEDURES & APPROACH Detailed audit plans are developed and subjected to peer reviews.Each audit area is approached by outlining ‘assertions’, ‘risks’ and detailed ‘tests’ aimed at treating identified risks.Below is an example for valuation area.
21 Audit Output Internal Report External Report Agent’s Advisory Letter Client’s risk profile and risk ratingUpdate of Incidence Register and ASYCUDA risk parametersRequest for investigation (fraud cases)
22 POST AUDIT PROCEDURESClient educationClient self-assessment
23 Benefits Trade facilitation Efficient use of resources Deterrent to non-complianceLong term and comprehensive compliance management focusClient educationOpportunity to understand client’s business
24 Benefits cont’dEffective implementation of the WTO Valuation AgreementPromotes the self assessment strategy (voluntary compliance).Provides feedback to customs ports to assist them in their risk profiling.
25 Conclusion cont’d Customs is facing the following challenges: Increasing trade volumesLimited resource baseIncreasing government and public expectationsDeclining duty ratesIncreasing exemptions
26 ConclusionEffective and efficient utilisation of WCO best practice instruments such as risk and audit based controls among others, is the only panacea to handling the ever increasing and complex business environment.