2nd Report of the Market Access Ombudsman Council (March 14, 1995)

7-(2) Simplification of post-clearance examination of the Consumption duty on duty-free imports, etc.

1. Complainant: Keidanren

2. Ministry concerned: Ministry of Finance

3. Complaint:

Under the rules of the Consumption Tax Law, the tax assessment standard for consumption tax base on imported goods is the price subject to Customs duty plus the amount of Customs duties and other domestic consumption taxes except the consumption tax.

At the time of import declaration, in cases it is inappropriate to make the price subject to Customs duty only the price prescribed in the invoice plus transportation and insurance fees because ingredients have been supplied free of charge, or a special relationship, for example a parent company-subsidiary relationship, between the seller and the buyer in an import transaction affects the transaction price, a valuation declaration must be presented which shows the base for calculation of the price subject to Customs duty. Since October 1993, for imported goods Customs duty is zero or on which a specific duty is assessed, the requirement of submitting a valuation declaration was abolished, as part of measures to streamline clearance. However, at Customs, even if Customs duty is zero or a specific duty is assessed, based on the Consumption Tax Law, post-clearance examination of the items to be declared in the consumption tax is carried out as necessary to guarantee that import declarations are made appropriately. When this occurs, the related documents must be submitted to permit verification of whether the price subject to Customs duty was calculated appropriately.

The following complaint was raised in connection with the procedure.

Since importers are required to prepare all the documents necessary for calculation of the price subject to Customs duty when a post-clearance examination is to be made, eliminating the requirement to submit a valuation declaration when import declaration is made has not lightened the clerical burden in actual terms. Accordingly, where the consumption tax on imported goods is concerned, if the amount of tax to be paid at the time of import and the amount of tax to be paid when the imported product is sold are totaled, this ensures that the amount which is the selling price, multiplied by the tax rate, is paid, and therefore the consumption tax on goods for which Customs duty is zero should be taxed based on the invoice price. Alternatively, the post-clearance examination should be simplified, requiring only essential documents to be submitted for post-clearance examination, which would at least lighten the clerical burden.

4. Results of deliberation:

Regarding the consumption tax on imported goods, the ministry believes that because the total of the amount of tax paid at the time of import and the amount of tax paid when the imported product is sold does not always coincide with the selling price multiplied by the tax rate, it is necessary to require that the appropriate burden of the consumption tax be borne at the time of import, and regardless of whether Customs duty is assessed or not, that it is not appropriate to assess tax based on the invoice price. Where simplification of post-clearance examination is concerned, from the viewpoint of ensuring that this system is carried out appropriately, the appropriateness of the declared price is ascertained by checking ledgers and other documents as necessary through post-clearance examination, and when declarations are inappropriate, it is necessary to require the minimum amount of documents for post-clearance examination, to rectify declarations, maintain order in declarations and ensure appropriate and fair taxation.

According to the ministry, these documents are needed to calculate the declared amount, and they are usually prepared at the declaration stage and kept on hand.

To ensure appropriate and fair taxation, a certain clerical burden is unavoidable, but it is necessary to reduce the clerical burden concerning payment of the consumption tax on imported goods as much as possible.

Accordingly, the ministry, taking into consideration the complaint which has been presented, should continue to adopt a policy to require only necessary and indispensable documents for post-clearance examination from import declarer in the future.

Government decision (March 28, 1995)

7-(2) Post-clearance examination of Consumption Tax on tax-free imports, etc.

The policy to require only necessary and indispensable documents from import declarer will continue to be kept in the future.

Follow-up (May 27,1996)

7-(2) Simplification of post-clearance examination of the Consumption duty on duty-free imports, etc.

In order to ensure appropriate and fair taxation, a certain clerical burden on import declarer for post-clearance examination is unavoidable. However, taking their burden into account, the policy to require only necessary and indispensable documents will be communicated at meetings for officials handling post-clearance examination so that the policy will be ensured.