4.8 Cross-Border Acquisition of Excise Goods by Private Individuals
5.1.1 Impact Analysis of Automated Data Cross-Check at Message Header Level
ADMINISTRATIVE AND ENFORCEMENT COSTS FOR PUBLIC AUTHORITIES
The implementation of automated data cross-check at message header level requires amendments in the processes of national EMCS applications, as well as additional processes in the AES. Although some MS have implemented cross-check at message header level between the ECS and the EMCS, the introduction of the AES would require modification of current cross-check processes.
The following chapter presents the result of the analysis of AES and EMCS BPMs, carried out to determine the enforcement cost of automated data cross-check at message header level.
The numbers listed in the following and two subsequent subsections, namely, Impact Analysis of Automated Data Cross-Check at Message Body Level and Impact Analysis of Automated Process Synchronisation Tables, are in accordance with readily available AES BPMs. In the absence of BPMs for the EMCS, the exact and precise mapping of tasks and information exchange between the AES and the EMCS was not possible. The number of processes, tasks, and messages for the EMCS has been determined to the most accurate extent possible.
The number of processes, tasks, and messages may differ in MS due to the fact that the EMCS has been implemented by each MS individually, and thus may be somewhat higher or lower in comparison to the calculations presented in this document, depending on the development in the respective country.
The number of processes, tasks, and messages for automated data cross-check at message header level are described in Table 28. The effort in man-days is summarised in Table 29 and Table 30.
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Table 28: Number of processes, tasks and messages for automated data cross-check at header message
Application Description No. of
processes No. of tasks messages No. of
AES Handle e-AD request 1 3
EMCS Accept e-AD 1 3
EMCS Reject e-AD 1 3
AES IE516, nIE532, nIE906,
nIE801 4
EMCS Response to nIE532,
nIE906, nIE801
3
Source: own elaboration.
Table 29: Effort of implementing automated data cross-check at header message in AES
Description Number Effort (man-days)
Number of processes 1 50
Number of tasks 3 105
Information exchange 4 140
Total number of man- days
295 Source: own elaboration.
Table 30: Effort of implementing automated data cross-check at header message in EMCS
Description Number Effort (man-days)
Number of processes 1 50
Number of tasks 3 105
Information exchange 3 105
Total number of man- days
260 Source: own elaboration.
All in all, the effort of implementing automated data cross-check in the EMCS amounts to 555 man-days, which is equivalent to a 5-year TCO of ca. EUR 310 thousand per MS.76
Thus far, three responses providing numerical values for the implementation of automated data cross-check have been received. Two MSAs provided information about the expected five years of TCO. According to Estonian Authorities, the cost would amount to EUR 250 thousand. According to Slovenia, the cost would amount to 35 thousand EUR. Other MSAs share information on budgetary costs solely for implementation expenses (without maintenance) of currently operational cross- checks. Belgian MSAs declared that only the implementation cost of automated cross- check was budgeted, at EUR 400 thousand.
Some MSAs were unable to provide their estimates of TCO over 5 years, as technical specifications in the EMCS were insufficient, or it was impossible to disentangle costs of implementing the cross-check for the already functioning systems. In addition, MSAs from the UK mentioned that the cost of implementing the cross-check would be minimal, as it would only require the adaptation of the currently functioning cross- check.
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All in all, the answers provided by MSAs prove that the TCO of the implementation of automated cross-check at header message may vary significantly between MS. The cost, estimated with the use of the IT cost model, is ca. EUR 310 thousand, which is roughly the average of the estimates provided by MSAs.
The introduction of automated data cross-check would bear the fixed implementation cost, and lower maintenance costs significantly. The reduction in administrative costs may top the enforcement and IT maintenance costs, which may, in turn, be one of the core reasons for its potential implementation.
The administrative costs' reduction, according to MSAs, would vary from 2 in Estonia, up to roughly 400 man-days per year in the Netherlands (see summary in Table 31). MSAs expect savings at ports, airports, and within inland post assurance, as well as anticipate a reduction in manual paper processing costs.
Table 31: Administrative cost reduction due to implementing automated data cross- check according to MSAs
Indicator Administrative cost reduction
Unit man-days Estonia 2 Hungary >10 Netherlands 400 Slovenia 5 Slovakia 216
Source: own elaboration.
Extrapolation of the gains using MS share in all extra-EU export operations, yields an EU-wide figure of ca. 3,200 man-days. Assuming that the gains in MS that did not provide answers would be the same as in the sample 5 MS, the gain would be equivalent to EUR 725 thousand per year.77
COMPLIANCE, ADMINISTRATIVE AND HASSLE COSTS FOR EOS
Cost of Providing ARC and SEED
The plurality (38%) of economic operators assessed that providing ARC and SEED numbers would cost them less than EUR 500 annually. A further 25% believed the cost of providing this additional information fit between EUR 500 and EUR 2,000, 13% – between EUR 2,000 and EUR 5,000, and 6% – between EUR 5,000 and EUR 10,000.
77Note: on the basis of information provided by 5 MS the reduction of administrative effort per EUR 1 in export operation was estimated. To estimate the EU-wide cost, the ratio was multiplied by the value of all export movements from the EU.
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Nearly one fifth thought they would be required to contribute more than EUR 10,000 (and, roughly, one third of those, or 7% of all respondents, estimated the cost to exceed EUR 50,000) (see Figure 61).
Figure 61: Expected compliance cost for introducing automated cross-check at message header
Source: own elaboration. 38% 25% 13% 6% 13% 6% 0% 5% 10% 15% 20% 25% 30% 35% 40%
<500 (EUR, per year) 500-2,000 (EUR, per year) 2,000-5,000 (EUR, per year) 5,000-10,000 (EUR, per year) 10,000-50,000 (EUR, per year) > 50,000 (EUR, per year)
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In monetary terms, initial calculations using a limited selection of available data78 allow us to carefully estimate the per movement cost of providing ARC and SEED. On the basis of data provided by EOs, which have an estimated share of more than 15% of EU exports, it may be evaluated that the average cost of providing SEED and ARC is EUR 1.04 per export declaration. Based on the estimated number of all export movements in National Excise Applications and in the Common Domain of the EMCS, it is further estimated that the total cost of ARC and SEED provision would amount to
EUR 1.23 million each year.
The dispersion of the cost goes in line with the size of EOs that responded in the questionnaire. All companies that suspect of over EUR 10,000 cost per year conduct more than 5,000 export movements per year, which makes the cost for those companies always below EUR 2 per movement.
IMPACT ON FRAUD
The fraud on export of goods discussed in the following section includes all dealings that result in goods not leaving the EU and with no excise duty paid. As the exit of goods is supervised by customs, excise goods may also be diverted to the EU partially, with insufficient excise paid. Either of the three may happen: proof of exit may be insufficient, different goods may leave the EU, or there may be lower quantities, than those declared.
Cross-check at header message only would enable to verify those cases, in which the excise declaration has never been submitted. Potential instances, where the excise declaration has not been submitted, do not serve excise fraud directly, as excise is not paid on exports of goods.
The necessity of verifying also the quantity of goods in export and excise was confirmed by interviews and questionnaires. No MS pointed to potential reduction of fraud by implementing cross-check at header level only.
DISTRIBUTION OF COSTS/BENEFITS BETWEEN MS, AND MODULARITY OF THE POLICY OPTION
The cost of introducing the automated data cross-check at message header level are not proportional to the size of MS and the number of export operations. The costs of implementing automation might differ between MS due to factors like the price is architecture of the system in use, and the local cost of IT services, which is proved by the costs of introducing EMCS between 2007 and 2011 reported by MSAs.
The benefits for MS from the automated data cross-check would be proportional to the number of movements in EMCS with destination export. Assuming that fraud in export operations results in excise losses in the MS of dispatch, the percentage of gains by each MS could be as described in Table 32.
78 Using numbers provided by EOs who did not mark extreme ranges (0-50 or > 25,500). For both the number of movements and costs of provision of ARC and SEED numbers, simple averages were calculated.
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Table 32: Distribution of benefits from the automated data cross-check79
MS Benefits (% of all) Belgium 0.51% Bulgaria 1.54% Czech Republic 0.27% Denmark 0.63% Germany 13.09% Estonia 0.45% Ireland 1.12% Greece 5.16% Spain 7.94% France 13.09% Croatia 0.59% Cyprus 0.27% Italy 10.88% Latvia 0.47% Lithuania 1.76% Luxembourg 0.02% Hungary 0.54% Malta 0.00% Netherlands 19.53% Austria 0.51%
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Poland 0.98% Portugal 2.19% Romania 1.22% Slovenia 0.20% Slovakia 0.04% Finland 0.93% Sweden 3.82% United Kingdom 12.25%Source: own elaboration.
It could be estimated that 5 MS with the highest number of export movements in EMCS would take advantage of nearly 69% of benefits from introducing the automated data cross-check at message header level. On the other hand, only 0.53% of gains could be associated 5 MS with the lowest number of export movements in EMCS. The problem of unequal benefits from the automation could be balanced by allowing for derogations in a subset of MS. Such option, however technically feasible, would limit full gains from the automation. If a number of MS will not implement the automated cross-check, fraudsters may shift exit of the movements to the MS with weaker supervision. Such effect could not likely be expected in island MS Malta and Cyprus, as shifting the movements to exit via these MS would be costly.