Customs revenue sees moderate growth

The PNG Customs’ actual revenue collection based on business-as-usual operations started well this year on the back of improved 2021 revenue outcome supported by a strong recovery in the global growth, combined with efforts to improve compliance, according to Chief Commissioner DAVID TOWE

PNG Customs Chief Commissioner David Towe, in its mid-year performance report, however, said the unexpected moderation in global growth in 2022 posted a downside risk on international trade outlook and related tax revenues.
He said PNG Customs total revenue outturn at mid-year was 44 per cent of original budget projection.
This signalled Customs revenue outturn was 6 per cent below target at mid-year.

Global trade update
The PNG economy, being an integral part of the global economy, is susceptible to conditions within the global economic environment through its international trade and financial linkages.
As such, up to date knowledge about the global economy forms useful insights for PNG international trade performance.
Growth in the value of global trade continues to increase relative to pre-pandemic levels.
According to the latest United Nations Conference on Trade and Development Global Trade Update report, global trade recovered strongly growing at 25 per cent in 2021 driven by a strong recovery in global output growth by 6.1 per cent combined with high commodity prices.
Growth in global trade was driven primarily by merchandise trade that grew by 27 per cent and supported by trade in service gain of 17 per cent.
This year, global trade growth is expected to slow reflecting factors including slower-than-expected world economic growth and global supply chains challenges amid new Coronavirus (Covid-19) lockdowns in major Asian ports and the Russia-Ukraine war-induced disruptions.
PNG Customs is the State agency mandated for the facilitation of PNG’s international (and intra) trading activities.

Customs trade facilitation activities
The PNG Customs continues to uphold legitimacy in trade facilitation and remain steadfast in ensuring a seamless and expeditious customs clearance process of exports, imports, transit goods and international travellers.
Over the first half of the year (ending June), Customs remained focus on maintaining effectiveness and efficiency in its use of available administrative platforms, business processes and resources, as well as deployed new measures undertaken to improve efficiency in facilitation of legitimate trade.
The Port Moresby Container Examination Facility is strategic for high turnaround in the execution of Customs inspection activities, hence speedy cargo clearance to owners.
A total of 459 inspections were conducted at the Port Moresby container examination facility (CEF).
The second CEF in Lae is at initial stage of construction.
The scanner shed facility design is awaiting approval by the Morobe Physical Planning and Building Board.
The number of active broker licenses is a contributor to improved trade facilitation.
The availability of brokers increases the opportunity for an increasing population of traders, such as SMEs (small-medium enterprises), to access Customs clearances services in an era where there is noticeable growth in across the border trade.
In the first half, there were a total of 42 broker licences re-issued together with 18 licences reactivated following earlier deactivation.

Volume of import and export
Through the trade facilitation roles, the volume of trade is determined based on the number of imports and exports entries processed and facilitated for any period.
All these data are kept in the Customs Asycuda System.
Given the difficulty in measuring volume of trade, the number of declarations facilitated and processed by PNG Customs is a useful indicator adapted and applied in this section.
The annual growth was driven by increases in entries including imports (10.7 per cent), exports (5.9 per cent) and local excise trade (13.8 per cent).
Value of merchandise exports in the first half of this year totalled K20.275 billion, higher by 19.8 per cent against same time last year.
This was driven by the relatively higher export prices of PNG major export commodities.
Value of merchandise imports over first half recorded K11.616 billion, representing an annual growth of 26.8 per cent from the same period last year. Of this, counter clearance was valued K32.91 million.

Border security and enforcement
As PNG trading activity increases, so is Customs vigilance to protect PNG citizens and businesses interests from unlawful trade and travel.
In the first half of this year, Customs observed an increase in activities undertaken at national border command, intellectual property rights interventions, investigation and prosecution and community protection reflected Customs efforts in promoting legitimate trade and travel, hence essentially, safeguarding PNG’s economic prosperity and national sovereignty.
At mid-year, a total of K7.4 million in duties and penalties was recovered as a result of enforcement operations.

2022 National Budget
The 2022 National Budget was framed around the assumption that the PNG economy in 2022 will expand, measured by a 9 per cent growth in nominal gross domestic product (GDP) value reflecting projected output growth of 5.4 per cent and an inflation rate of 5.6 per cent.
Based on this projected expansion, the 2022 National Budget projected PNG Customs total revenue for the 2022 fiscal year to increase by K615.92 million or 19.6 per cent from the 2021 revenue outcome.
Further, the growth in budgeted Customs revenue is against revenue measures including reduction to the excise tax bi-annual Consumer Price Index rate on tobacco and alcohol products, and reduced import duty on fuel imports.
The PNG Customs total revenue projection for 2022 is K3.756 billion, made up of K2.359 billion as Customs duties revenue from imports, exports and excise whilst K1.397 billion in import GST.
As usual, revenues from all Customs duties are Internal Revenue Commission (IRC).
Recent developments, mainly the Russia-Ukraine tension, has weighed on the global economy whilst in PNG had forced accommodative adjustments in the Government’s 2022 money plan.
This, as a result, had impacted on PNG Customs revenue projections.
Given the fact that fuel products are the main energy source in PNG, the exceptionally higher fuel prices had a direct impact on the citizens and businesses alike, causing the Government to absorb the inflationary effects by approving a fiscal relief package.
Customs plays an important role in making the relief achieve its intentions by implementing a six-month outright exemption on excise and GST levied on fuels namely diesel, petrol and zoom.
The relief is estimated to reduce PNG Customs revenue projections in the 2022 National Budget in total by K200 million – K150 million in excise revenue and K50 million in import GST.

Customs Chief Commissioner David Towe, a holder of a master’s degree in International Law and Customs Administration, started his professional career as a Customs officer in 2000