By NEIL HARTNELL
Tribune Business Editor
The Ministry of Finance’s top official yesterday warned invoice fraudsters and tax evaders that their time is up, as he pledged: “The days of friend and favour are over at the border.”
Marlon Johnson, pictured, acting financial secretary, said there was no turning back from Customs’ new Electronic Single Window (ESW) platform for the clearance of imports as he warned against any deliberate efforts to undermine the system’s continued roll-out.
Speaking to Tribune Business after the Ministry of Finance said the online portal, known as Click2Clear, had failed to process just five percent of some 93,600 declarations, Mr Johnson said much of the resistance to its introduction seemed to stem from “resistance to change” and “nostalgia” for the old way of doing business.
This, he added, included reliance on the so-called “buddy” system, where a minority of importers and brokers dealt with certain Customs staff to “facilitate their transactions” - a practice that frequently resulted in under-invoicing, premature releases of goods and other forms of tax evasion, avoidance and fraud that potentially cost Bahamian taxpayers millions of dollars.
“I think we have all heard stories where there have been instances of some brokers and business people having alleged relationships with Customs officers, and people they’re comfortable dealing with, and those Customs officers work with them to facilitate transactions, often because of familiarity,” Mr Johnson said.
“This created a very cosy relationship. One of the things the new system does, because it is automated and assignments are selected randomly for officers, the ability to manipulate and edit information in the system, a lot of that has gone away.
“There is some measure of discomfort, we suspect, as persons are unable to evade and minimise taxes and the like. That is one element in the system that’s largely been disrupted.”
Mr Johnson acknowledged that resistance to Click2Clear was coming from within the Customs Department as well as the private sector, and attributed some of this to persons being “accustomed to doing things a certain way” and “nostalgia for the old system”.
“Brokers around a long time could write things up by rote without having to think much,” he added. “This requires more rigour with a digital platform and inputting things into the system.... There’s a resistance to change because change is difficult, but we’ve told the brokers and Customs staff that in a couple of months this will become routine.”
The acting financial secretary reiterated that the Artificial Intelligence (AI) component built into Click2Clear would detect “anomalies, like entries that are inconsistent with codes”, thereby enabling Customs to better - and quicker detect tax evasion and fraud, and identify brokers and importers that may require more frequent and in-depth inspections.
“It will start to flag things and look for trends,” Mr Johnson said. “Any person who who has been misstating invoices or any means of invoice fraud, those anomalies will be picked up by the system and flagged.
“The vast majority of importers are honest and do the right thing, but some are taking advantage of the sheer volumes of transactions Customs has to deal with to get away with invoice fraud. We want to let the small minority know the system will detect that.”
Mr Johnson said Customs and the Ministry of Finance had been “transparent” over the initial difficulties with Click2Clear, and he admitted that the system “has had some issues” coping with the volume of imports it has been handling while “tightening up and reviewing” reporting and processing elements.
“We certainly don’t want to paint the picture that some of the concerns raised are not legitimate,” he told Tribune Business. “There were growing pains, but 95 percent of transactions went through seamlessly without issue, and that number will go down as we get familiar with it.
“It will settle down. We will get past the peak of the learning curve. We will certainly get to that point. We will do all we need to do to ensure our customers, the taxpayers and importers, are comfortable with the system and it works optimally.”
But, pointing out that the private sector has “a duty of care” too to be properly prepared to use Click2Clear, and identify any problems with it to Customs, Mr Johnson added: “As we move into the New Year a lot of the concerns and angst will diminish.
“Over time, as we run reports and use AI, that will certainly assist us in detecting tax cheats, ensuring the Government gets its fair share of revenue from the system.”
Mr Johnson delivered a similar message to the private sector at a recent meeting, saying: “We know why some people inside and outside want to go back to the old way of doing things, but the days of friend and favor are over at the border.
“We have advised Customs brokers to tell their clients a lot of things people were casually able to get away with will not be tolerated any more. In fact, they will be detected automatically..... The best way to do things moving forward is the right way. While we can forgive mistakes, we will not forgive fraud.
“We are trying to grapple with a cultural change amongst customs officers and brokers. Brokers that once depended on knowing a Customs officer who they could call and get an override or have something overlooked, or run through an informal channel no longer have that facility,” he added.
“This is creating some resistance all around. We think the public can appreciate the importance of us fighting this battle to bring about cultural change internally and externally.”
Stephen Major Jr, in-house broker for Xtra Value, said: “Like any new thing you have to adjust and get used to it. Some people are rioting because they do not know how to work the new system. Everything can’t stay the same all your life, and Customs can’t just stay with the old system. It’s just like the self-checkout in the US. Some people like it; some people don’t. Things will settle down eventually.
“The system makes sense. It automates a lot of the steps and cuts back on opportunities for tipping and bribery, and I think Customs is right to want to do that. People could get away with a lot before; if they knew people in Customs they could get a [pass] on different things. Because of the new system it don’t work like that no more.”