3.4.1 Overview of the Current Situation
The importation of excise goods to the territory of the EU may be of a twofold type. The excise goods might be released for circulation in the MS of importation after the payment of import duties, and then stored in tax warehouse under excise duty suspension. In such a case, the importation procedure is a purely national matter with no other MS involved.
Under the provisions of the Directive, the excise good might be released for free circulation in another MS and might be moved from the country of importation under duty suspension (see Figure 37). In such a case, the importers could file for tax suspension at import, claiming in the EMCS that the goods will move under excise duty suspension but then move the goods to a different MS.
71%
1%
14%
5%
9%
National excise applicationEMCS export not followed by transit or STC
External transit Internal transit STC
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Figure 37: Importation procedure
Source: own elaboration, based on the Commission’s working documents.
When the goods are imported (from outside the EU), EOs need first to submit the customs declaration in the Import Control System (ICS). The ICS is the system of which the architecture has been developed by the EU for the lodging and processing of entry summary declarations. After the acceptance of the customs declaration, EOs send the draft e-AD (IE815) in the EMCS with a valid SAD number. As a rule, there is no cross-check between the data in the import system and the EMCS; however, a number of MS have developed a method for the verification of the data contained in the customs declaration with the data contained in the e-AD.
3.4.2 Problem Analysis
Since, in most cases, there is no cross-checking of customs declarations and e-AD at the border, the ability to ensure that an actual movement under duty suspension occurs after import is currently limited (see Figure 38). Under such a setting, fraud might be identical to the abuse of arrangements for VAT exemption (SAD Box 37, procedural code 42 - an exemption or suspension of VAT can be claimed when the customs declaration is submitted on the basis that the goods are not for use in the Member State of Importation). The evidence required to permit such an exception is not specified for excise, leading to the possibility of untaxed goods being introduced
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on the market. In addition, there are concerns that fraud could exist in instances where importers guess the VAT numbers of the consignee in the VAT information exchange system (VIES) or “steal” the VAT number of an EO that is unaware of the scheme.
Figure 38: Problems related to the import procedure
Source: own elaboration, based on the Commissions’ working documents.
A summary of identified causes, problems, and consequences related with the importation of excise goods is presented in Figure 39.
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Figure 39: Summary of problems related to the import procedure
Source: own elaboration, based on the Commissions’ working documents.
Even though a number of MS have implemented the cross-check, the current technical specifications of the EMCS are not aligned with current customs and excise duties legislation. Accordingly, the existing description of the connection between the importing procedures and the EMCS might be insufficient and inadequate.
3.4.3 Magnitude of the Problem
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The leading MS in terms of the value of imports of energy products and electricity in the EU are the Netherlands (EUR 47 billion), Italy (EUR 41 billion), and the UK (EUR 36 billion). Over EUR 1 billion of energy goods and electricity are also imported by Germany, France, Spain, Belgium, Poland, and Greece. In total, the importation of energy goods and electricity accounted for roughly EUR 313 billion, which is nearly 3.5 times more than the exports.
Figure 40: Import of energy products and electricity to MS
Source: own elaboration, based on Extrastat.
The import of energy goods amounted to over 98% of the value of imports of excise goods. The value of the import of alcoholic beverages was much lower and accounted for nearly EUR 5 billion in 2016. The main importing MS were the UK (EUR 1.79 billion), Germany (EUR 698 million), and the Netherlands (EUR 530 million).
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Figure 41: Import of alcoholic beverages to MS
Source: own elaboration, based on Extrastat.
The importation of manufactured tobacco products was less than 0.1% of the value of imports of all excise goods. The main destinations of imports were Germany (EUR 82 million), Spain (EUR 32 million), and Belgium (EUR 25 million) (for details, see Figure 42). In 21 MS, the value of imports of manufactured tobacco products did not exceed EUR 10 million.
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Figure 42: Import of manufactured tobacco products to MS
Source: own elaboration, based on Extrastat.
It is important for further analysis to determine the number of movements where goods, after being released for free circulation, are moved to other MS. In this study, we use two different sources of information to examine the volume and structure of import operations.
First, the Surveillance Database, which contains data on excise items in almost all import operations, is utilised. According to the database, the number of excise items in import declarations amounted to 644,388 in 2016. Every year during the analysed period of 2012-2016, the number of excise items in import declarations exceeded 600,000, reaching a record high of 688,584 in 2014 (see the evolution of excise items in Figure 43).
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Figure 43: Evolution of excise items in import declarations
Source: own elaboration, based on Surveillance Database.
As shown by Figure 44, the highest number of excise items (which may be from 1 to up to 999 per import declaration) was observed in Germany (212,890), the UK (101,307), and the Netherlands (53,455).
Figure 44: Excise items in operations by MS (2016) 560000 580000 600000 620000 640000 660000 680000 700000 2012 2013 2014 2015 2016
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Source: own elaboration, based on Surveillance Database.
The data contained in the Surveillance Database also allows for excise items to be split into different procedural codes, namely:
CPC 07 – Free circulation with simultaneous entry of the goods under a warehouse procedure (including placing in other premises under fiscal control);
CPC 42 – Home use with simultaneous entry for free circulation of goods subject to a zero-rated onward supply; and
CPC 45 – Partial entry for home use with simultaneous entry for free circulation and for a warehousing procedure including deposit in other premises under fiscal control.
The number of excise items in import declarations with CPC 42 in 2012 amounted to 53,640, which was roughly 8.3% of all excise items in import declaration. The number of CPC 07 and CPC 45, which is the amount of excise items in import declarations stored after import in a non-customs warehouse, was 249,946, roughly 39% of import movements.
As illustrated by Figure 45, the number of excise items in import declaration grew faster than the number of all movements. Over five years, the number of items with CPC 42 increased by nearly 42%, whereas the number of all items increased by roughly 7%.
Figure 45: Excise items with CPC 42 against all other codes (2012-2016)
212890 101307 53455 48741 30931 25778 22705 22482 14919 12733 12571 11695 8450 7982 7192 7164 7062 5996 5691 5343 4693 4028 2828 2580 2058 1769 1183 612 0 50000 100000 150000 200000 250000 DE UK NL PL SE ES BE FR DK LT IT LV HR EE RO FI BG CZ IE AT CY HU GR SK SI MT PT LU
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Source: own elaboration, based on Surveillance Database.
The second source of information on the type of import procedures used with excise goods was the questionnaire returned by MSAs. As the responses show, in several MS, there were no movements of excise goods after import under duty suspension to other MS. These MS were Romania, Slovenia, and the UK. The highest number of such movements in the sample of 16 MS was registered in the Netherlands, Germany, and Estonia (see Figure 46).
Figure 46: Import movements to a non-customs warehouse and to other MS under
duty suspension 0 10000 20000 30000 40000 50000 60000 0 100000 200000 300000 400000 500000 600000 700000 800000 900000 1000000 2012 2013 2014 2015 2016 All CPC 42
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Source: own elaboration, based on Surveillance Database.
In a group of MS importing over 60% of the total EU-28 import of excise goods, there were 15,720 import movements under duty suspension to another MS and 103,748 imports to a non-customs warehouse. It could be estimated that 13.1% of the duty- suspended imports are movements to other MS. A slightly higher ratio of 17.8% is obtained using the number of excise items in import declaration from the Surveillance Database.
Assuming that the MS that did not answer the question regarding the volume of import use have a similar structure of import movements, it could be estimated that, in 2016, 25,860 import operations were followed by movement under duty suspension to another MS.
MSAs also provided their forecasts of the change in the volume of the two types of import movements. Using 11 responses to the questions regarding the development of import movements, it could be estimated that the number of imports stored in a non- customs warehouse will grow much faster than the number of consignments moved under duty suspension to another MS. This will result in the share of movements under duty suspension to another MS to fall by roughly 4 percentage points (see Table 12).
Table 12: Outlook for import movements in 5 years
2021 vs. 2016 Share of movements 2 846 2712 1453 336 12 100 105 1 9 10000 123 0 0 21 0 0 5000 10000 15000 20000 25000 30000 35000
Moved under excise duty suspension into another Member State Stored in a non-customs warehouse
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(forecast) in 2021
Moved under duty
suspension to another MS +4% 9%
Stored in a non-customs
warehouse +44% 91%
Source: own elaboration.
DISCREPANCIES AND FRAUD IN IMPORT OPERATIONS
The question regarding the number and value of discrepancies detected in import operations was answered by five MSAs. The highest number of audits detecting discrepancies was declared by the Netherlands, where discrepancies were detected in less than 10% of movements. Discrepancies were very small, as their total value amounted to EUR 1 million. On the contrary, in Malta, five audits detected discrepancies worth EUR 12 million. In Hungary, no discrepancies were detected.
Table 13: Discrepancies in import operations
Indicator Irregularities
Sub-
indicators Number of audits Discrepancies
Unit Number/year EUR million/year
Lithuania 280 -
Hungary 0 0
Malta 5 12
Netherlands <10% of operations (<1120) <1
Slovenia 40 -
Source: own elaboration.
The value of fraud is very difficult to estimate and only the MSAs from the Netherlands informed us about their suspicions, which is less than 1% of movements. Assuming that 1% of movements in the import of excise goods is fraudulent due to the absence of automated cross-checks on importation, losses in excise revenue that could be reduced by efficient data cross-checks would amount to EUR 20 million.55 This number is, however, a rough estimate, and does not capture movements not registered by customs and excise—namely, illicit trade and smuggling.
The extrapolation EU-wide estimates of excise revenue loss in import operations, which is EUR 648 million56 leads to somewhat higher estimates. If we assume that the fraud on import operations followed by a movement under duty suspension is proportional to the number of operations, then the fraud would be equivalent to 8.3% of EUR 648 million, i.e. EUR 54 million losses in excise duty. From the two estimates, it could be concluded that the lack of cross-check in import operations leads to EUR 20-54 million losses in the EU.
As depicted by Figure 45, in recent years, the number of import operations using procedural codes has increased. Since 2012, the share of CPC 42 in excise items in import declarations has increased from 6% to 8.4%. Such an increase might have been affected by many factors, with one of them being diversion. This type of
55 Estimated with the use of EU-average excise rate on each product category (alcohol and alcoholic beverages, manufactured tobacco and energy products).
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unexplained change in the number of customs operations on excise products using procedural code 42 may signal that fraud in import operations is increasing.