THE COSTS OF CUSTOMS COMPLIANCE IN CROATIA IN 2001 Mihaela Broni Occasional Paper No 21 November 2004 Institute of Public Finance 2004 2 THE COSTS OF CUSTOMS COMPLIANCE IN CROATIA IN 20011 Mihaela Broni Institute of Public Finance Zagreb mihaela ijf hr Abstract The purpose of the paper is to show the size and the basic characteristics of customs compliance costs of importers legal entities and small business in the Republic of Croatia in 2001 The customs compliance costs comprise those costs that the customs payers incur in order to meet the provisions of the customs laws and the requests of the customs administration Only the amount of the customs duty paid and any distortion costs arising from paying customs duty are not customs compliance costs The research was carried out by the face to face interview method in the period from June to October 2002 It was concluded that the Croatian customs compliance costs in 2001 were regressive It was also concluded that costs were large in comparison with the total customs revenue and GDP It is estimated that customs compliance costs for importers legal entities and small businesses in RC in 2001 were around 1 006 million HRK That is 0 6 GNP and around 31 of total Croatian customs revenues in 2001 There is not unfortunately a single foreign research of the costs of customs compliance that could be used as a comparison What is more the research faced many problems e g non representative and small samples so one should be cautious when using its results For this reason we would conclude that the primary purpose of this research is to pose relevant questions related to the conceptual and methodological problems of customs compliance cost research Furthermore it should indicate possible size and characteristics of the customs compliance costs in the RC JEL Classification E62 H20 Key words customs compliance costs Croatia regressiveness 1 This research was supported by a grant from the CERGE EI Foundation under a program of the Global Development Network Additional funds for grantees in the Balkan countries have been provided by the Austrian Government through WIIW Vienna All opinions expressed are those of the author and have not been endorsed by CERGE EI WIIW or the GDN Additional funds were also given by the Institute of Public Finance Zagreb the institution that led the project Costs of Taxation in Croatia Administrative Costs and the Costs of Tax Compliance of which this paper is a part The questionnaires were carried out and in line with instructions statistically processed in PULS d o o Agency for Market Media and Public Opinion Research below PULS The PULS then is responsible for the processing of the data the author is responsible for everything else The author would like to thank the leaders of the project in particularly Helena Bla i from the Economics Faculty Rijeka Katarina Ott and Ivica Urban from the Institute for Public Finance employees of the Customs Administration particularly Oskar Cukrov and Ivana Soi certain agents employees of the PULS the reviewers and all those who have helped in the composition analysis and writing of this paper This article is published in Croatian in the journal Carinski vjesnik 13 1 2004 pp 3 32 3 1 Introduction The purpose of the paper is to indicate the size and basic characteristics of customs compliance costs CCC for importers legal entities and small businesses in the Republic of Croatia RC for 2001 After the introduction in the second part of this paper the concept of customs compliance will be defined in greater detail The third part of the work expounds knowledge obtained to date about the CCC and the reasons for which they should be investigated The fourth part of the work lists the basic hypotheses of the study Part five considers the methodological and conceptual problems of the elaboration of the questionnaire according to which the interviewing was done Part six explains the customs compliance costs investigative method the face to face interview The problems faced by the pollsters of the questionnaire will be listed too The results of the research are shown in part seven Finally come recommendations for a reduction of the CCC and a conclusion 2 Definition of the costs of customs compliance There are various classifications of the costs that incurred in a society as a consequence of collecting taxes 2 Most authors agree that these costs can be divided into costs to the tax administration administrative costs and costs to the taxpayer compliance costs Sanford et al 1989 Haughton 1998 Sanford 2000 Administrative costs are all public sector costs incurred during the administration of the existing tax laws These then may be defined as the costs of passing and implementing the tax laws including any proposals for changes in them Sanford et al 1989 They contain expenditures of the government institutions that deal with the administration of taxes 3 Compliance costs comprise those costs that the taxpayers incur in order to meet the provisions of the tax laws and the requests of the tax administration The costs of the taxpayer are all those costs that the taxpayer has to bear on top of the actual taxes Kesner kreb 1999 Sanford et al 1989 Allers 1994 Sanford 2000 In this paper customs duties one of the oldest forms of taxation are studied 4 There is very little literature concerning the customs compliance costs CCC hence for a more detailed definition of them works concerning tax compliance particularly VAT mainly Sanford et al 1989 Klun 2002 Allers 1994 have been used 2 Apart from the costs of collecting taxes administrative and compliance costs there are two other types of costs incurred in society because of the introduction of taxes Firstly there is the efficiency cost to the economy because taxes change the behaviour of taxpayer Secondly there is taxpayer cost related to the loss of part of his her purchasing power due to paid taxes Ott and Bajo 2000 3 For more about the administrative costs of taxation in transitional countries and the RC see Ott and Bajo 2000 Apart from this as a part of this project called Costs of Taxation in Croatia The Administrative Costs and Compliance Costs of Taxation Brati and Pitarevi 2003 deal with the administrative costs of taxation and customs in the RC 1999 2001 4 Customs duty is usually paid on goods that are imported Customs duty in the RC is paid in line with the Customs Tariff Law the Customs Law and a number of other provisions laws regulations
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