Steel, rebar importers bend law to evade tax
Sector actors in the steel industry claim that finished products are flowing into the country disguised as raw materials taking advantage of the duty free scheme under the cover for investment. The regulatory body has disclosed that it is taking the appropriate measures on the illegal actors. It can be recalled that when the reformist government took power one of the measures it took was pausing the import of commodities under the cover of investment through duty free scheme. However, experts who closely follow the steel industry and construction sector argue that despite such activities being halted as of about four years ago, the rebar and other steel products are now being imported in a duty free scheme under the cover for investment, “while significant portion of the commodity imported in duty free are injected into the market.” They said that the behavior has been observed in the past few months but the trend has now expanded. Experts on the construction industry claimed that such products are sold without receipt, since it is illegally smuggled to the market, “it makes this difficult for contractors to get receipts for the product they buy.” Besides that, the sector actors argued that the rebar contraband has picked up pace with its main channel stemming from the eastern part of the city.
“The other dangerous behavior that we have been informed of is that finished steel products are being imported under the document of billets or scrap,” they added. They argued that illegal importers are using the changed harmonized code to import the finished construction materials, “This further affects the local industry besides bypassing the government import levy.” “The import customs duty is almost minimal when importing raw materials, which is far from the case for finished goods. Thus, illegal importers are using improper documents to steal from customs duties,” experts explained.
They said that the illegal actors misguide government with regards to import of raw materials.
“Data may show that the volume of raw material import is very high since the harmonized code document shows it is the import of input for manufacturing industries, but in actual sense the commodities are finished and directly channeled to the market,” one of the sector actors elaborates. As he described, such behavior creates false narrative on the sector development and expands the tax evasion. “Currently steel industries are operating below one fifth of their capacity but the import and the foreign currency allocation goes for finished materials, contrabandists, and for those who abused the privilege the country facilitates,” he added.
They advised the government to be alert
and stringent in mitigating this alarming issue. Mule Abdissa, Chief of staff, Customs Commissioner Office, said that regarding the duty free scheme, the government has a strong stand, while special but rare permits are given by the relevant government body, which is the Ministry of Finance.
“In the past, the duty free privileges were significantly abused due to that the government doesn’t allow such kinds of mischief to happen again. However, some exceptional permits do exist,” he told Capital. Regarding the contraband, he accepted that steel is one of the contraband commodities that the Commission is closely following.
Tegene Derese, Intelligence and Contraband Follow up at Customs Commission, recalled that contraband is damaging the country’s economy and affects the hard currency earnings and to this end government has drawn a line through which the higher body is tackling the issue. He added in collaboration with relevant bodies the Commission has achieved significant performance in the ended budget year, “but the impact is still there.” He said that misbehavior to import finished goods under raw material documents is being seized and some others are under investigation.
“The case is not only aligned to steel,” Tegene told Capital.
He insists that those who have information are supposed to share with the commission since it takes concerted efforts to capture the culprits.