TWINNING LIGHT PROJECT FICHE
1.Basic Information
1.1Programme: IPA 2010
1.2Twinning Number:BA10-IB-FI-01-TL-R
1.3Title: Strengthening the customs sector within the Indirect Taxation Authority
1.4Sector: Customs and Taxation
1.5Beneficiary country: Bosnia and Herzegovina
2.Objectives
2.1Overall Objectives:
To further develop the customs and taxation sector in Bosnia and Herzegovina, in line with the provisions of the Stabilisation and Association Agreement in order to improve trade relations with the EU.
2.2Project purpose:
Verification of Customs Declaration Processing System (Asycuda World) supplied by UNCTAD and preparation of technical specification for BiH customs laboratory.
2.3Contribution to National Development Plan/Cooperation agreement/Association Agreement/Action Plan
Stabilization and Association Agreement
Article 97 stipulates that "The Parties shall establish cooperation in this area with a view to guarantee compliance with the provisions to be adopted in the area of trade and to achieve the approximation of the customs system of Bosnia and Herzegovina to that of the Community..." and that "Cooperation shall take due account of priority areas related to the Community acquis in the field of customs."
Article 98 stipulates that "The Parties shall establish cooperation in the field of taxation including measures aiming at the further reform of Bosnia and Herzegovina's fiscal system and the restructuring of tax administration with a view to ensuring effectiveness of tax collection and reinforcing the fight against fiscal fraud...".
The IPA 2012-2013 programming priority for further development of Customs and Taxation recommended by the European Commission is „to align legislation with acquisand ensure effective implementation of legislation and Interim Agreement; to strengthen ITA's administrative and coordination capacity.“
Link with National Development Plan
The Indirect Taxation Authority of Bosnia and Herzegovina has adopted its overall business strategy for the period 2012-2016 and this project is aimed to support implementation of a certain elements of the strategy.
3.Description
3.1Background and justification
The European Commission 2012 Progress Report reports the following:
Limited progress was made in the field of customs. The customs tariff was updated in line with the 2012 version of the EU Combined Nomenclature. The International Convention on the harmonized System for Names and Codes for Goods was ratified. Rules of origin continue to be used in accordance with the Interim Agreement. The fee for processing customs declarations was abolished. Electronic prior declaration of data from the TIR carnet was introduced. Implementing legislation for customs enforcement of intellectual property rights was adopted. The customs law and legislation on free zones remain to be aligned with EU Customs Code. The lack of fully developed risk analysis results in frequent and poorly targeted customs controls. Progress on the use of simplified procedures and trade facilitation remains limited. Further efforts are required in this area,including development of the concept of “authorised economic operator”.
Little progress can be reported on taxation. Republika Srpska amended the Law on Profit Tax. Some changes concerning excise on tobacco products were adopted. Further alignment with the VAT acquis and the EU excise legislation is necessary.
A permanent formula for allocation of indirect tax revenue between the State, the Entities and the Brcko District remains to be agreed. Regarding business taxation, some measures continue to be incompatible with the EU Code of Conduct (e.g. legislation on free zones). The Entities introduced fiscal cash registers, but the Brcko Distict did not.
Some progress was made regarding administrative and operational capacity. The Director General of the Indirect Taxation Authority (ITA) was appointed with a four-year mandate. The overall business strategy of the ITA for 2012 to 2016 was adopted. Customs, IT and law enforcement strategies in line with the overall business strategy were agreed. The ITA has to prepare the implementation plan for strategies and to provide the resources needed for implementation. ITA established a unit for IPR enforcement in customs as well as a unit for analysis and strategic planning.
The IT system was upgraded to support the taxation work. No legal amendments were initiated to enable the ITA to share data with the Agency for Statistics of Bosnia and Herzegovina. This hampers production of reliable statistics. Further efforts are required in the areas of tax refunds, tax investigation, exchange of information and training. Data and information sharing, including a website with the business and taxpayers, should be improved. The functions performed by customs laboratories remain limited. Bosnia and Herzegovina should invest further in IT interconnectivity and interoperability with EU IT systems. It is not yet sufficiently prepared for accession to the Common Transit Convention (CTC) or the Convention on Simplifications in Trade in Goods. By expressing its intention to join the CTC and by planning the IT application concerned (NCTS). Bosnia and Herzegovina would achieve a milestone in IT interconnectivity with EU IT systems.
There was little progress in the areas of customs and taxation. Positive developments include the appointment of permanent management and the adoption of the overall business strategy of the ITA. Proper implementation of the business strategy and organisational changes remain to be ensured. Substantial efforts are required to align legislation fully with acquis, to ensure effective implementation of the Interim Agreement, to update the administrative and operational capacity, to improve IT and to provide better services to business and taxpayers. Overall, preparations are at an early stage.
The ITA has introduced the notion of "authorised exporter" in the field of goods origin and local (house) clearance at export. However, further assistance is necessary for the continuation of practical application of the mentioned simplifications to daily export procedures. In addition, it is necessary to start applying all other types of simplified procedures, including local clearance at importation and authorised consignee/consignor in transit procedure and centralised clearance. Furthermore, assistance is necessary in establishing the operational implementation of regulations for safety and security and for the preparations for status of "AEO – Authorised Economic Operator" with the support of economic operators in BiH, as well as in the operational introduction of incoming and outgoing summary declarations with appropriate IT support and training, which are important for safety and security. Bosnia and Herzegovina has to apply for participation in Common Transit Convention after which the NCTS will be one of the highest priorities for the ITA and for the Country.
It is necessary to continue to work on the permanent alignment of BiH legislation in the field of indirect taxes with the EU legislation and the most recent Directives in the field of VAT. Given that the existing law was drafted following the provisions of the 6th Directive, any further upgrade of EU Directives requires further work on harmonising national norms with the framework. Since there were some changes made to the Directive 2006/112/EC in the past, e.g. passing of the Council Directive 2008/8/EC of February 12, 2008 the obligation arose to further harmonise the Law on VAT therewith.
As regards excise duty and road toll, it should be emphasised that the Law on Excise Duty has been adopted and applied since July 1, 2009. The Law is in line with the EU Directive 92/12/EC which represents the starting framework for this field.
It is necessary to modernise the existing tax application ALICE which will be compatible with the customs application and EU requirements. Modernisation means an upgrade of the existing subsystem with the same but more modern software tools in programming terms which are compatible with the “up-to-date” hardware and software.
Support to strengthening the institutional and administrative capacities of the ITA will lead tothe improvement of the ITA functioning and creation of conditions for an increase in revenues collected from indirect taxes. The efficient functioning of an updated IT system will contribute to accomplishing the required standards for EU accession in the fields of customs and taxation and will also improve compliance with international standards (standards of World Trade Organisation – WTO, World Customs Organisation – WCO, EU Customs Blueprints, Convention such as Kyoto Revised, Council Directive 2006/112/EC).
The planned improvements to the IT will have immediate effect in improving the administrative capacity of the ITA and this will feed through the operational level. Integrity as well, will be improved within the ITA. The outcome will be a proficient and more effective Indirect Taxation Authority. Improved functioning of the ITA system will contribute to promotion of trade which in turn will lead to trade facilitation and increased prosperity and revenue yield. Further inroads will be made to the fight against cross-border crime, organised crime and corruption.
3.2Linked activities:
One of the key target areas of the EU financial and technical support has been public administration reform (including customs and taxation). The European Union launched the Customs and Fiscal Assistance Office Programme (CAFAO) in 1996 in order to support, inter alia, the establishment of a customs service in Bosnia and Herzegovina. The Customs Information System ASYCUDA 1.16f, financed by the European Commission, has been implemented in the Entity’s Customs Administrations during 2002. An information system created with modern tools and on a modern software and hardware platform for the support of introduction of VAT in BiH (ALICE) has been developed and implemented by the CAFAO European Commission Team during 2005 and was fully operational as of the 1st of January 2006, when the VAT was introduced in BiH.
After CAFAO mission a new project known as TACTA (Technical Assistance to Customs and Tax Administrations) was launched. Expert assistance in customs policy and procedures and VAT Policy within TACTA covered the following areas: Origin of goods, Customs procedures, Post-clearance Audits, Expert-legal assistance to the Legal Department, Governance, Internal Audit, Law Enforcement, Enforced Collection, IT support, VAT policy and procedures and provision of trainings.
The IPA 2008 Twinning project: “Support to further EU Acquis alignment of the Indirect Taxation Authority of BiH” was implementedfrom December 2010to December 2012. The purpose of the project is to support the modernisation of the BiH Indirect Tax Authority by further aligning Customs and Tax legislation, procedures and standards with the EU acquis.
The new Twinning project IPA 2011 “Further harmonisation to EU practices and acquis on customs and taxation" which represents the continuation of activities and results achieved in above mentioned project, commenced on 28th January 2013 for the duration of two years with the following components:
Component 1: Further alignment of legislation, procedures and practices of indirect taxation with the Acquis
Component 2: Transit procedures harmonized with the procedures in the EU
Component 3: Improved system of post-clearance customs control in organizational and procedural terms
Component 4: Improving the work of the Intellectual Property Rights Unit (IPR)
Component 5: Improved system of monitoring prohibitions and restrictions on imports and exports of goods
Component 6: Improvement of methodology for upgrading the risk analysis
Component 7: Development of the Law Enforcement Sector of the ITA, in line with the EU standards on law enforcement (customs and tax laws and regulations)
Component 8: Defined role of Internal Audit
Component 9: Improving Management and Human Resource Management
Component 10: The ITA IT systems provides the adequate support to newly introduces procedures
Component 11: Tax software upgraded
The ITA BiH is one of the agencies which, mainly through the Customs Sector, takes part in the implementation of the Integrated Border Managementproject.
Under IPA 2010 funds have been allocated for modernisation of Customs Declaration Processing System (CDPS). It is expected that the project will commence in the second half of 2013. It was determined in ITA Business strategy 2012-2016 to upgrade the existing application Asycuda ++ to Asycuda World application.
This twinning light project is expected to perform verification of Asycuda World functionalities (as per Activities listed under 3.4 below) and to prepare technical specification for BiH customs laboratory.
3.3Results
Result 1: Interoperability and interconnectivity aspects of Asycuda World assessed
Result 2: Technical specification for supply of customs laboratory equipment prepared
3.4Activities
Activities to achieve Result 1:
Asycuda World (AW) will be developed in compliance with the international standards and best practice in the Customs Sector and will support the implementation of the main international conventions/EU requirements in the beneficiary countries. Therefore, this twinning light project will be tasked to examine and verify functionalities of AW and in particular determine whether following functionalities of AW are in place and in function:
●Possibility of protection of intellectually property rights, combating counterfeit and piracy regarding withthe Council Regulation (EC) No. 1383/2003 of 22 July 2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights
●Possibility of drug precursors control regarding with:
The Council Regulation (EC) No.111/2005 of 22 December 2004 laying down rules for the monitoring of trade between the Community and third countries in drug precursors.
The Commission Regulation (EC) No.1277/2005 of 27 July 2005 laying down implementing rules for Regulation (EC) No.273/2004 of the European Parliament and of the Council on drug precursors and for Council Regulation (EC) No.111/2005 laying down rules for the monitoring of trade between the Community and third countries in drug precursors.
●Possibility of dual-use items and technologies control regarding with:
The Council Regulation (EC) No. 1334/2000 of 22 June 2000 setting up a Community regime for the control of exports of dual-use items and technology.
The Council Regulation (EC) No. 428/2009 of 5 May 2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items.
●Prevention of illicit trade of explosives, pyrotechnics , deemed substances, firearms and ammunition, radioactive substances and nuclear devices
●Assessment of control on compliance with environmental legislation,including application of
The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) - Council Regulation (EC) No. 338/97 on the protection of species of wild fauna and flora by regulating trade therein (the Basic Regulation) and Commission Regulation (EC) No. 865/2006 laying down detailed rules concerning the implementation of Council Regulation (EC) No 338/97 and
The Controls on ozone-depleting substances - Regulation (EC) No2037/2000 on substances that deplete the ozone layer.
●Assessment of implementation of the National Strategy on IBM (Integrated Border Management) in line with the EU Guidelines for Integrated Border Management in the Western Balkans (cooperation between border control agencies, exchange of data and pre-arrival Customs data, integrated multi-agency risk analysis, harmonization of operational procedures, joint controls).
●Assessment of transit, compliant with the NCTS technical requirements – including
-The Electronic pre-declaration (pre-arrival declaration)
-TIR operations, including TIR-EPD (Electronic Pre-Declaration) and TIR-RTS (Real Time SafeTIR);
●Valuation Control module – creation of a national valuation database, implementation of post clearance audit tools, value comparison facilities etc.
●Possibility of Integrated Tariff Management System (ITMS), compatible with the EU TARIC RDBMS requirements – including
-Improved taxation mechanism,
-Centralised quota management,
-Classification decisions,
-Codes replacement functions (change of Combined Nomenclature),
-Tariff assessment simulator, etc.
●Possibility of Excise Management and Control System (EMCS), compliant with the EU EMCS requirements – monitoring movements of excise goods under suspension of excise duty including:
-Authorisation of warehouse-keepers and approval of premises;
-Movement of excise products;
-Guarantee and payment management;
-Risk-management and selectivity;
-Reporting.
●Assessment of Export Control System (ECS), compliant with the EU ECS requirements
●Assessment of Import Control System (ICS), compliant with the EU ICS requirements
●Possibility of easier aggregation and processing of data regionally and nationally and, consequently, a sound basis for production of timely and accurate statistics and, implicitly, for better and faster economic decision-making.
●Possibility of fully supported trade facilitation, including increased services for trade community, e.g. all simplified Customs procedures (which are applicable in the EU), access via Internet, simpler documentation, automatic and fully electronic performance of customs clearance procedure, etc.
●Possibility of includes proper authorisation management system for all kind of customs and excise authorisations
●Possibility of full support of e-government and Single Window, and capability to inter-operate on-line with external/governmental systems and databases.
●Assessment of implementation of ISO, UN, WCO and WTO relevant standards, including WCO Data Model
●Possibility of full built-in capability to support specific national requirements and frequent changes, in an integrated system environment.
●Possibility of full document changes tracking. Full and complete audit history
●Possibility of full support of local and central risk management system within customs clearance procedures with proper reporting and evaluation of risk profiles
●Possibility of support central guarantees management system within all customs (including transit) and excise procedures in line with EU requirements
●Possibility of support rules and required data sets for filling in single administrative document in line with EU requirements
●Possibility of support implementation of safety and security standards and implementation of pre-arrival and pre departure declarations and AEO status
●Possibility of building the Central electronic financial management system of all needed payments according to customs declarations
●Possibility of including Economic Operators Registration and Identification data base which is in line with EU EORI requirements