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Sedat GÜLER
Customs Consultant
The state needs sources of income to fulfill some of its social, economic, and political functions. Taxation has been one of the essential tools in carrying out monetary policy for countries in the past. The public obtains its revenues from direct and indirect taxes. Our country's largest share of indirect taxes consists of customs duties collected from customs, taxes with equivalent effect, Special Consumption Tax, and Value Added Tax. However, considering their functions, customs duties and taxes with equivalent effect are taxes imposed to protect the domestic industry rather than increase public revenues.
Like the Customs Duty, the Additional Customs Tax also takes its legal basis from the Customs Entry Tariff Schedule Law No. 474, dated 14.05.1964. Article 2 of Law No. 474 states, "The President may increase the customs duty rates and rates of the goods included in the Customs entry tariff schedule annexed to this law up to 50% or reduce them to 0 (Zero)." In the decisions regarding the Additional Customs Duty, it has been ruled that the procedures and provisions to which the customs duty is subject are also valid for the additional customs duty. For this reason, the requirements regarding the declaration, assessment, accrual, notification, collection, follow-up, objection, reconciliation, and refund of customs duty stipulated in the customs legislation are also valid for additional customs duty. In addition, the provisions regarding the customs liability stipulated for customs duty in Articles 181 to 193 of the Customs Law are also valid for Additional Customs Duty.
Although the Additional Customs Duty is applied as a deviation from the standard customs tariff (OGT) applied to third countries with OKK No. 1/95, which creates the Customs Union between Turkey and the European Union (EU), it has its agenda both not applying this tax to goods originating from the EU and in updating the Customs Union. There is no clear objection to additional customs tax applications from EU countries, as they have yet to be able to do their homework.
Especially during the COVID-19 pandemic, the issue of Additional Customs Duty (IGV) has come to the agenda again; IGV was used as an essential policy tool to reduce imports due to the foreign exchange shortage in the country. With the 8 Presidential decisions published in April and June 2020, IGV was placed on approximately 5700 goods items. Meanwhile, all old IGV decisions were consolidated with these new decisions, and the IGV rates in the lists contained in these decisions were increased. The IGV decisions published in the Official Newspaper published one day after the mentioned decision dates are as follows:
- İGV Decision No. 2424 dated 18.04.2020
- İGV Decision No. 2425 dated 18.04.2020
- İGV Decision No. 2429 dated 21.04.2020
- İGV Decision No. 2430 dated 21.04.2020
- İGV Decision No. 2565 dated 19.05.2020
- İGV Decision No. 2682 dated 27.06.2020
- İGV Decision No. 2705 dated 29.06.2020
- İGV Decision No. 2683 dated 27.06.2020
- İGV Decision No. 2819 dated 04.08.2020
According to the regulation, customs duty and IGV will be collected from goods shipped directly from countries included in the "other countries" group in the customs tariff. In contrast, IGV will be collected from goods of non-European Union and Turkish origin imported from the EU accompanied by an A.TR Movement Document.
For goods coming from the EU accompanied by an A.TR Movement Document: No additional Customs Duty will be charged if a Certificate of Origin is submitted for goods originating in the European Union or Turkey and a Supplier Declaration for goods originating in countries in the cumulation systems that include Turkey. Likewise, IGV will not be collected if the goods originating from the countries with which Turkey has a Free Trade Agreement come directly from that country and proof of origin such as EUR.1, EUR.MED, Invoice Declaration, Certificate of Origin, and Declaration of Origin, which provides tax reduction by the agreement between them, is submitted.
There are two lists in the decisions published in mid-April, and it is stated that the second lists show the IGV rates to be applied after October 1, and the first lists show the IGV rates to be used until September 30. Such a distinction was not made in the IGV Decision No. 2819 dated 04.08.2020, published after October approached.
According to the lists in the IGV decision, as of October 1, 2020, IGV collection will continue to be between 1.9% and 40% for a longer period.
Undoubtedly, countries have the right to take measures to protect their industries or restrict foreign trade. However, it has been seen from experience that customs duties and taxes with equivalent effect must also be collected at a reasonable level. If taxation exceeds reasonable levels, some people may attempt to import goods illegally instead of importing legally.
It is understood that after October 1, 1.9%, 5%, and 10% IGV will be collected from the imports of many final consumption goods or goods used as product inputs. IGV collection at these rates is not seen as a tax high enough to drive these people to illegal ways. However, the Additional Customs Duties of 20%, 30%, and 40% in the same lists can be considered attractive rates for the entry of these goods into the country through smuggling.
In other words, the saying "the stone you throw should touch the frog you scare" is also valid in smuggling attempts. For an item to be smuggled into the country, the amount of taxes avoided must reach significant levels. However, in these cases, making substantial profits from smuggling may be possible.
In this regard, decision-makers should always face the "Additional Customs Duties - Smuggling Risk Dilemma," and this dilemma should be considered. Therefore, when preparing IGV decisions, care should be taken to maintain IGV within reasonable rates, considering the current socio-economic structure, especially in our southern borders.
Source:
474 Customs Entry Tariff Schedule Law
Customs Law No. 4458
5607 Anti-Smuggling Law
Customs Regulation
İGV Decisions
Ministry of Commerce website
Internet news portals
QUESTIONS AND ANSWERS
Question 1. What is the difference between Customs Duty and Additional Customs Duty?
Answer: Customs Duty Rates for industrial products The rates in the Common Customs Tariff of the European Union are applied; Türkiye determines the Customs Duty Rates of agricultural products with its own will. However, the important element is the obligation to notify the World Trade Organization of these Customs Duty Rates as binding. Additional Customs Duty is a unilateral tax that is implemented entirely in Turkey and is not notified to any international union or organization.
Question 2. Is there a legal basis for Additional Customs Duty?
Answer: According to the third paragraph of Article 73 of our Constitution, "Taxes, duties, fees and similar financial obligations are imposed, changed or abolished by law." Therefore, Additional Customs Duty is also included in the 2nd article of the Customs Entry Tariff Schedule Law No. 474 dated 14.05.1964, "The President may increase the customs duty rates and rates of the goods included in the Customs Entry Tariff Schedule annexed to this law by up to 50% or reduce it to 0." It is put into effect based on the provision "may reduce it to (zero)".
Question 3. Did the COVID-19 pandemic period affect IGV regulations?
Answer: Yes it did. During the COVID-19 pandemic period, the issue of Additional Customs Duty (IGV) was brought to the agenda again; IGV was used as an important policy tool in attempts to reduce imports due to the foreign exchange shortage in the country; With the 8 Presidential decisions published in April and June 2020, IGV was placed on approximately 5700 items of goods, meanwhile, all old IGV decisions were consolidated with these new decisions and the IGV rates in the lists contained in these decisions were increased.
Question 4. How were the tax rates determined in the last 8 IGV decisions published?
Answer: In 2 of these published decisions, the old IGV decisions were consolidated and the existing IGV rates were increased. In addition to increasing the existing IGV rates in 557 of them, new product lists were determined and it was decided to collect IGV at a higher rate from some of them until September 30, and at a lower rate after October 1.
Question 5. Why should decision makers consider the “Additional Customs Duties – Smuggling Risk Dilemma”?
Answer: Additional Customs Taxes of 20%, 30%, 40% are considered as attractive rates for smugglers to enter the country by smuggling these goods. Therefore, when preparing IGV decisions, it is thought that care should be taken not to increase IGV above reasonable rates, especially keeping in mind the current socio-economic structure in our southern borders.
