Evasion of customs and excise duties

Customs tax avoidance
Customs fraud
Carriage of contraband

Nature

When companies try to avoid paying taxes to the federal government in relation to the importation of goods brought into the country, it is customs fraud. This is a catch-all term for all kinds of fraud connected to tax evasion on imported goods. There are many different kinds of customs fraud, but the two major types are “antidumping” duties and “countervailing” duties.

Background

Evasion of customs and excise duties emerged as a significant global concern with the expansion of international trade in the 19th century, when governments recognized substantial revenue losses and economic distortions caused by illicit cross-border activities. Over time, increased globalization and complex supply chains have heightened awareness of the problem, prompting international cooperation and the development of monitoring mechanisms. Recent technological advances have further exposed the scale and sophistication of evasion, underscoring its persistent impact on national economies.

Incidence

To indicate their inexhaustible range, a list of some smuggled consignments could include butter, cocaine, machine guns, political manuscripts, escaped criminals, stolen art masterpieces, refugees, alcoholic beverages, protected species of animals, tobacco, abducted women and children, and diamonds. Because of the difficulty involved in detection, some countries (such as the USA and the UK) may have very few smuggling convictions when compared with the thousands of minor and hundreds of major undetected smuggling operations annually.

The USA Customs Service estimates that about 10% of all imports are fraudulent. In fiscal years 1984 and 1985, only 27% of the textile and apparel imports involved in customs fraud were even detected. In Italy in 1993, cigarette smuggling was estimated to have cost the treasury £685 million in lost revenue.

For several years a Japanese car manufacturer exported to the European Union, from Hungary, vehicles essentially Japanese in origin. The manufacturer claimed the cars were of Hungarian origin, in order to take advantage of the duty-free treatment enjoyed by Hungarian exports. The fraud was uncovered in 1998.

Claim

Evasion of customs and excise duties is a grave problem that undermines national economies, fuels corruption, and deprives governments of vital revenue for public services. It gives unfair advantage to dishonest businesses, distorts markets, and encourages criminal networks. Ignoring this issue threatens economic stability and social justice. Strong enforcement and public awareness are urgently needed to combat this pervasive threat and protect the integrity of our financial systems.

Counter-claim

Evasion of customs and excise duties is vastly overstated as a problem. In reality, these duties are often arbitrary and burdensome, stifling trade and innovation. The resources spent on enforcement could be better used elsewhere. Most individuals and businesses simply seek fairer conditions, not criminal gain. Obsessing over minor revenue losses distracts from more pressing economic and social issues. It’s time to stop exaggerating the significance of this so-called “problem.”