Part 1: Introduction

New Zealand Customs Service: Providing assurance about revenue.

1.1
In this Part, we discuss:

The purpose of our audit

1.2
We carried out a performance audit to review how effectively the New Zealand Customs Service (Customs) plans and supports its revenue assurance activities.

1.3
We did so because customs revenue is an important source of revenue for the Government – about 15% of the Crown revenue base. In 2009/10, Customs collected $8.78 billion in revenue.

1.4
Because Customs checks that traders comply with trade requirements and pay the right amount of customs revenue, it can confidently help goods flow into and out of New Zealand's ports legitimately.

1.5
In 2007, we carried out a performance audit of Customs' arrangements for collecting customs revenue. Our report on that audit (New Zealand Customs Service: Collecting customs revenue) noted that the arrangements were sound. It confirmed that Customs carried out various assurance activities for revenue collection. However, the audit did not examine how Customs planned these activities. This report reviews this aspect of Customs' work.

About customs revenue

1.6
Customs is responsible for collecting customs revenue. Its other responsibilities include border protection, trade and tourism support, and community protection – such as by detecting and preventing the import of illicit drugs, illegal weapons, and objectionable material.

1.7
Customs revenue comes from goods and services tax (GST) on imports, customs duties on imported goods, and excise on alcohol, tobacco, and petroleum products made in New Zealand. The law outlines obligations for paying customs revenue.

1.8
Customs is entitled to collect revenue from imported goods when they arrive in New Zealand.

1.9
Excise is payable on excisable goods when they are removed from where they have been manufactured.

1.10
Customs' revenue collection regime relies on voluntary compliance. The Customs and Excise Act 1996, the Goods and Services Tax Act 1985, and the Tariff Act 1988 set out trader obligations and give Customs strong enforcement powers and the ability to impose penalties. Customs supports voluntary compliance but intervenes when traders do not meet requirements. Under the voluntary compliance regime, traders are responsible for enquiring about their compliance obligations and lodging accurate information with Customs about goods they are importing or exporting and excise goods they have manufactured and are removing. In doing so, they must accurately calculate any customs revenue due. Appendix 1 provides further information about Customs' voluntary compliance regime.

What we looked at

1.11
Trade Assurance is the Customs business unit responsible for giving assurance about trade-related risk for imports, exports, and excise goods. It gives assurance about trade activities and customs revenue. It does field and transaction audits to check whether traders have correctly declared how much they owe to Customs.

1.12
In July 2010, Trade Assurance had 71 staff in Auckland, Wellington, Christchurch, and district ports. Its budget for the 2010/11 year was $5.4 million.

1.13
We wanted to know whether Trade Assurance:

  • plans for revenue assurance work;
  • ensures that it has enough staff with the right skills and knowledge to carry out planned revenue assurance work;
  • guides staff on how to carry out revenue assurance work; and
  • measures and reports the results of its revenue assurance work.

1.14
We also wanted to know whether Trade Assurance's work results in useful information that other Customs business units can use. These business units are:

  • Client Services, which is the primary interface between Customs and traders, particularly in terms of educating traders;
  • Fraud and Prohibitions, which decides whether Customs should investigate traders suspected of fraud; and
  • Intelligence, Planning and Coordination, which manages intelligence information and intelligence-led operations for Customs.

1.15
Appendix 2 provides an overview of Customs' organisation structure and shows where the Trade Assurance; Client Services; Fraud and Prohibitions; and Intelligence, Planning and Coordination business units fit.

How we carried out our audit

1.16
We interviewed Customs staff in Auckland and Wellington. We reviewed many documents, including Customs' operational procedures and Trade Assurance's plans and information. We mapped Trade Assurance's process for identifying and selecting traders for particular types of audits. We reviewed 37 of Trade Assurance's audit reports, including six reports on bulk fuel imports.

1.17
Because we focused on Trade Assurance's current arrangements, we limited our review to documents it had prepared and work it had carried out in 2009/10 and 2010/11.

What we did not audit

1.18
Our audit focused on Trade Assurance's revenue assurance activities. We did not examine any of Trade Assurance's other activities.

1.19
Although we examined whether Trade Assurance's work provided useful information that other business units within Customs could use, we did not examine the activities of those business units.

page top