SACU Revenue Management
In the establishment of a Customs Union, a key decision which has to be made concerns the establishment of a mechanism for the collection and distribution of revenue from trade taxes. Part Six of the 2002 SACU Agreement establishes a Common Revenue Pool consisting of all customs, excise and additional duties collected in the Common Customs Area. Part Seven of the Agreement provides a formula for the determination of the respective shares of each Member State.
Annex 1 of the 2002 SACU Agreement details the Revenue Sharing Formula that is used for determining each Member State’s share out of the Common Revenue Pool. The Annex identifies the data that is required to apply the formula for determining revenue shares. In practice, duties are collected by all Member States and transferred to the Common Revenue Pool on a quarterly basis. Each year, revenue shares are determined by the Council of Ministers and payouts to Member States are made on a quarterly basis.
Important initiatives in implementing the Revenue Management initiative as contained in the 2002 SACU Agreement are:
- Trade Data
- Statistical Data Base
- Implementation of the new Revenue Formula
- Management of the Common Revenue Pool
The integrity of the key data, such a county’s GDP, population size; are important in the determination of Member States’ customs share of the Common Revenue Pool.
In 2006 the auditing of intra-SACU trade data was undertaken. The audit focused on the processes and systems for the collection, compilation and submission of data to the SACU Secretariat for purposes of determining revenue shares. In particular, the audit considered definition issues, accounting (valuation) principles as well as the processes for collection, capture and collation of trade data.
In order to facilitate the collection of data from Member States, the Secretariat has developed a template for the preparation of Economic Background Papers. This template specifies both qualitative and quantitative information analyzing economic performance in each Member State. During the year, Economic Background Papers are received from all Member States. In addition, a template for the submission of intra-SACU trade data has been developed for use by the Member States.
Implementation of the new Revenue Sharing Formula
The implementation of the new Revenue Sharing Formula as contained in the 2002 SACU Agreement began in 2006. The new formula has the following components:
The Customs component: Each Member State share of the customs component shall be calculated from the Cost Insurance Freight (CIF) value at border posts of goods imported from all other Member Sates into the area of each as a percentage of the total CIF value of intra –SACU imports.
The Excise Component: Each Member State’s share of the excise component shall be calculated from the value of its GDP in a specific calendar year as a percentage of total SACU GDP in such a year.
The Development Component: The development component shall initially be set at 15% of the excise component, but shall be reviewed from time to time and will be adjusted if agreed to by all Member Sates.
Management of the Common Revenue Pool
As part of the implementation of Article 33 (1) of the 2002 SACU Agreement, which stipulates that “A Member State or SACU Institution may be appointed to manage the Common revenue Pool”, a study was commissioned in November 2006, to evaluate the options on the management of the Common Revenue Pool.
The SACU Council is to make a decision on the revenue management option.