Customs not up to speed on supercar scam
Bangkok shouldn’t be an ideal city for high-powered supercars. Given the city’s notorious traffic congestion, it is hard to imagine how people can maximise their supercars’ engine capacity by driving them at high speed. Yet, luxury cars are still one of the key items possessed by millionaires here.
However, a high number of imported luxury cars running on Bangkok’s roads are tainted by a tax scam. Many importers have falsely declared purchase prices of imported cars to avoid high import duties.
The tax scam could amount to a collective loss in state revenue of as much as a hundred billion baht. Which groups of people have benefited from such tax evasion? Who should be held responsible for such a loss of tax revenue; customs officials, importers or car owners?
Recently, the Department of Special Investigation (DSI) asked the Customs Department to assess the import duties of 300 supercars. Customs officials have sent back their appraisals of 250 vehicles, pointing out that the total unpaid tax is around 4.2 billion baht, or 17 million baht per car on average.
Nonetheless, this lost tax revenue could be the tip of the iceberg. The DSI has revealed that there could be as many as 10,000 luxury cars that could be subject to investigation for false declaration of purchase prices to avoid high import duties. The total loss in tax revenue could be as much as 100 billion baht.
The key question is: What has gone on at the Customs Department that has resulted in such a massive loss in revenue?
The department has come out to explain how it makes its tax assessment, saying it has issued a reference directory on the price of imported vehicles. Customs officials have used this price list as the basis for their tax assessment of different imported luxury car models. The reference prices are determined based on information the department acquires from within the country, overseas and from relevant websites.
The department has said it was unable to find out the actual prices of imported cars sold to importers in Thailand. This is because buyers in Thailand and sellers abroad can use their discretion in setting prices, the department said.
This directory, known as the Customs Department regulation No.317/2004, has been used for more than 10 years without any amendments made to it, even though there have been economic changes during this period of time.
The directory serves as a reference. This means customs officials can cite actual trade prices, which could be much higher than those listed in the directory, to evaluate import duties.
However, in practice, importers of luxury cars have managed to falsely declare prices by keeping them close to the figures listed in the directory and hiding the actual purchase values which are much higher.
As a result, customs officials have assessed import duties based on these falsified low prices. Importers have thus paid lower tax.
Over the past decade, the Customs Department has relied on this reference directory to assess tax. The majority of luxury car importers have managed to find out what the directory list price is for certain models of cars, even though this directory is supposed to be a confidential document accessible to customs officials only. Unfortunately, the prices have been leaked to traders who have capitalised on this knowledge to avoid paying the true tax amount.
Earlier this year, the DSI investigated cases involving the import of luxury cars without tax being properly paid. It received useful information on supercar market prices from foreign government agencies. The information exposed the tax scam. The actual market value of some models of car is more than double the declared prices.
This clearly shows the department’s reference directory, Regulation No.317/2004, has not been updated for over 10 years. It has become an outdated list of imported car prices which are much lower than the market value now. The breaking of the scandal has prompted the Customs Department to update its list based on the DSI’s information.
Many questions still need to be answered. Why did no one try to update the list before? Who else, in addition to car importers, could have benefited from keeping the prices of cars lower than market value? How was such confidential information leaked to certain importers?
The Customs Department has claimed that it was unable to gain access to information on the actual value of car deals made between individuals and therefore was unable to update the list.
But it is still questionable whether access to this information was as difficult as the department said it was. Or maybe it didn’t try hard enough to prevent a collective loss of over 100 billion baht in tax revenue.
Department chiefs now realise that the tax fraud was made possible by outdated information. They have updated it. But it took more than 10 years during which the tax fraud flourished.
Luxury car tax fraud is a chronic problem embedded in the department. The problem existed because it involved massive hidden benefits.