New Zealand Customs Service: Collecting customs revenue
The Auditor-General regularly reviews public sector entities that collect the Government’s revenue. Because the New Zealand Customs Service (the Service) collected about 15% of the Government’s total forecast revenue in 2006/07, we decided to provide assurance to Parliament about the Service’s revenue systems and controls.
The Service collects revenue from customs duties, excise, and the Goods and Services Tax (GST) on imports. This “customs revenue” becomes due when the Service clears imported goods and when excisable goods are moved from where they were manufactured.
The scope of our audit
Our audit assessed the Service’s arrangements for collecting customs duties, excise, and the GST on imported goods, and analysed in detail the performance of its electronic system to record import, export, and excise transactions (CusMod).
Specifically, we examined whether the Service:
- had suitable systems for collecting customs revenue;
- accurately received entries and calculated and collected the customs revenue; and
- adequately reported on its revenue-collecting performance in its annual report.
Our findings
Although we made five recommendations for improvement, we were satisfied overall that the Service’s systems for collecting customs revenue were sound, and that its information technology systems were performing effectively.
The Service uses a voluntary compliance regime for collecting revenue. Its systems supported the regime and were sound:
- Its credit and debt management schemes collected the revenue due for 97% of the entries lodged in CusMod (the remaining revenue was collected in cash).
- The Service carefully assessed the risk of applicants before admitting them to its schemes.
- The schemes had powerful built-in incentives for participants to comply with their customs obligations.
The Service regularly audited whether manufacturers were complying with their licensing conditions. This gave assurance that the right amount of revenue was being collected.
The Service’s method for fixing and notifying exchange rates was efficient and had traders’ support.
We scrutinised relevant parts of CusMod and the Service’s financial management information system. Our expectations for the Service’s systems and procedures were nearly all met.
Although the data used to report on the performance measures in the Service’s accountability documents was accurate and complete, the performance measures did not measure the whole compliance process. We could not assess whether there had been any compliance improvements.
The response to our findings and recommendations
The Service accepted and is putting in place all five of our recommendations. In summary, it is:
- raising awareness of customs obligations among importers by better using its Credit Control and Trade Assurance teams (who visit clients and educate staff), and by making its website more focused on the Service’s clients;
- improving its methods for setting exchange rates for working out the value of imported goods;
- updating its business rules for revenue collection as part of its new Joint Border Management System (to replace CusMod);
- updating its disaster recovery plans, and planning to progressively upgrade its Information Systems disaster recovery system; and
- enhancing its performance reporting measures to show how all its activities – including education, intelligence, and audit – contribute to the voluntary compliance regime.
We are pleased with the Service’s responses to our audit, and our auditors will continue to follow its progress during the annual financial audit.
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