UNMIK/FR/0041/01
FEATURE RELEASE - May 25, 2001

Customs

Taxes are not customs duties
By Sergei Vinogradov

A widespread misperception exists, especially among Kosovo Serbs in the Mitrovica Region, that the taxes raised at UNMIK's Tax Collection Points on the administrative boundary line actually are customs duties.  

The fact that they were set up to levy internal taxes on goods entering Kosovo from Serbia was a detail unnoticed or unacknowledged by those responsible for the civil disorder in northern Mitrovica recently. They succeeded, at least for a while, in thwarting UNMIK's effective operation of tax collection points.

The law, however, is on UNMIK's side. "It is legitimate for us to collect taxes on the boundary line -- we discussed the matter with Belgrade and agreed taxes should be levied on all goods entering into Kosovo that originate in Serbia or Montenegro, because they have not been taxed there," explains Peter Walker, UNMIK Customs Director-General. 

Tax evasion and smuggling remain high on the agenda of the Customs Service. The majority of commercial vehicles, once they pass the border or boundary line, do not go to the appointed place to pay their taxes.  So the Customs Service had to position itself right on the roadway to ensure drivers pass the tax collection office.  Otherwise the high level of non-compliance would lead to significant tax evasion imposing unfair market competition on legitimate traders.

Meanwhile, smuggling remains a huge problem in Kosovo.  The most popular items are those that have the highest excise duties - fuel oil, tobacco, and alcohol -- because they yield bigger profits.  Much illicit business is under the control of organized criminal groups, which sell contraband goods on the black market, an activity that merely breeds more crime.
Such nefarious activities are not in the interests of the Kosovar people, UNMIK officials insist. Above all, organized crime kills democracy. But the smugglers are also illegal businessmen, who, if allowed to thrive, cause huge losses in taxes and customs duties that are increasingly detrimental to the economy. Presently, some DM 2 million per week is lost from Kosovo-wide tax evasion, according to Peter Walker.  That money is urgently needed to build roads and fix the infrastructure: without it, Kosovo cannot be rebuilt -- it is as simple as that.
Borrowing on international financial markets is not possible for Kosovo. Thus, the only sources for the budget are donor countries - which are limited in what they can give - and the revenues Kosovo can raise itself through taxation and customs duties. This is why effective tax collection is so important.
For its contributions to the Kosovo Consolidated Budget UNMIK, Customs Service has a target of DM 220 million this year, to be raised as taxes and customs duties.  This goal can be achieved if everyone in Kosovo society fully supports the work of the Service, and becomes intolerant to tax and duties evasion and smuggling.

 Contact: Peter Ellwood
(038) 504 604 Ext. 5471
E-mail: ellwood@un.org