Customs Achieved 18% Revenue Growth Mid-Year of 2023

Exceeding Pro-Rata Projection by 4% of the 2023 National Budget
 14 August, 2023
Introduction

Customs recorded an impressive 18% revenue growth in its tax collections performance at the mid-year 2023, compared to the same period last year, 2022. This performance resounds Customs dedicated efforts to its enforcement, compliance and revenue collection activities; driven by its mantra to “Sustain the growth through resilience for year 2023.”

General Overview: Total transfers (WPA+IRC) above mid-year targets

Customs collected and remitted to the Waigani Public Accounts (WPA) & GST to IRC, a total of K 1,999.22 million, just under K2 billion in tax collections by 30th June, 2023. This result demonstrates a 54% achievement of the 2023 annual budget projections of K3,674.19 million. Customs total mid-year outturn exceeded half year target by K162.12 million or 4% of target. Based on current estimates, Customs is projected to exceed annual projections by K456 million.

Mid-Year WPA Transfers

For WPA transfers, Customs collected and transferred K1,216.41 million in duties (K1.2 billion) to WPA by 30th June, 2023. That is 55% outturn achieved against annual budget projection of K 2,212.89 million. Revenue transfers to the consolidated revenue fund at WPA exceeded by K109.96 million or 5% of the mid-year target.

Mid-Year Import GST (IRC) Transfers

For Import GST i.e. mid-year collections and transfers to IRC, K782.81 million was collected by Customs and remitted to IRC. That is 54% outturn against the annual budget projection of K1,461.3 million. Mid-Year outturn from Import GST collections/transfers exceeded our targets by K52.16 million or 4%.

Leading Revenue Tax Heads: Import GST, Excise Duty, etc.

Apart from Import GST, Excise Duty was the largest revenue earner for Customs bringing in a total of K576.26 million by 30th June, 2023, which was above mid-year targets by K23.41 million or 2%. Import Duties was the 2nd largest revenue earner with a total of K255.43 million brought in. This was above mid-year targets by K35.33 million or 8%.

Table 1: Mid-Year Collections for Customs Per Tax Head

Tax Head Mid-Year Collections
(K millions)
% of Total Collections % Over/Under(+/-) Mid-Year Target
Import Duties K255.43 12.78% +8%
Excise Duty K576.26 28.82 +2%
Export Tax K225.27 11.27% -6%
Import Excise K151.74 7.59% +48
Sundries K7.69 0.38% +206%
Import GST K782.81 39.16% +4%
Customs Total K1,999.22 (K2 Billion) 100.00% +4%

Export Tax record the 3rd highest collections (apart from Import GST) for Customs. Total revenue collected/transferred from Export Tax was K225.27 million. This was below mid-year targets by K29.32 million or -6%; decline is attributed to further 20% increase in duty rates for round log exports, implemented this year.

Revenue Foregone: Excise duty exemptions for Petrol, Diesel and Zoom

A total of K627.15 million in revenue was forgone in duty/tax exemptions granted by the State in the first half of 2023. Of this, K110.69 million was on account of fuel excise tax relieve granted to businesses and individuals to ease the pressure of inflation. The forgone revenue could have otherwise formed part of Customs collections and is regarded as indirect investment by the government to develop the economy.

Challenges Faced: Funding delays and BSP system issues

Key challenges were inflation and foreign exchange issues that affected importation. Addition to these were the delays in the release of operational funding that impacted negatively on the implementation of planned work programs. Customs records show that only 33% of monthly G&S warrants and development grants were disbursed. The introduction of the new BSP system in April, 2023, also had negative impacts on revenue inflows, due to incompatibility between new BSP Flexcube system and Customs e-payments and receipting systems.

Conclusion: Customs set to exceed annual targets in 2023!

2023 Mid-Year results showed that Customs exceeded its mid-year target for the period by K162.12 million or 4% of the target. Tax collections to date is K368 million (18%) higher than the same period last year, June 2022. Based on recent revenue forecasts and mid-year results, Customs end-of-year revenue collections is estimated to surpass 2023 annual projections by K456 million.


Authorized by
David Towe
Chief Commissioner of Customs
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