How smuggling syndicates use ‘order with me’ services to avoid customs and VAT in Namibia

The Namibia Revenue Agency (Namra) says smuggling cartels are avoiding the payment of custom duties and value added tax (VAT) by using ‘order with me’ platforms.

Namibians import different wares, including hair products, through small businesses, commonly referred to as ‘order with me’.

Namra commissioner Sam Shivute told The Namibian on Monday the syndicates are cheating the government out of revenue.

Shivute says these cartels’ operations involve systematic under-declaration of goods at customs, which deprives the Namibian government of significant revenue.

The operations start with a facilitator, who gets orders from different people to purchase goods from foreign suppliers.

“There is a cartel that has been working in the ‘order with me’ business. You will find someone who operates like a clearing agent, facilitating orders for different products and goods from foreign jurisdictions,” says Shivute.

The orders from multiple individuals are then consolidated into one bulk order and are shipped to Namibia. This is where the fraudulent activity begins.

“When the goods come into Namibia, some of those involved in the syndicate have connections at the port of entry – whether it’s at the airport or the port. They clear the goods, but the problem is, only a small fraction of those goods are declared to customs, or sometimes nothing is declared at all,” he adds.

According to Shivute, they do this to avoid paying the full VAT, customs duties and other taxes on imported goods.

“For example, a shipment of textiles that would typically be subject to 45% customs duty and 16.5% VAT could instead be cleared at a much lower rate or not declared at all,” says Shivute.

“The owners of these goods are then told to pay a lower, unregulated amount for VAT and customs duties, much less than what the actual tax rate should be.” Once the goods are cleared, they are moved to warehouses controlled by those facilitating the scheme, where the buyers are charged a reduced amount for duties and taxes.

“These payments are not in line with the prescribed customs and VAT amounts. That’s why it looks so affordable, and why it’s attracting so many entrepreneurs to this system,” Shivute adds. Due to the undervaluation or goods not being declared at all, the government has been robbed of revenue that should be coming from customs duties and VAT.

“This consolidated ordering method has robbed the Namibian state and the Southern African Customs Union of a lot of revenue because what is claimed to be customs or VAT isn’t actually going to the state,” says Shivute.

Additionally, this way of doing business is contributing to money laundering or the facilitation of illicit financial flows (IFF).

“For example, someone might order 50 items, where the proper cost is N$50 000. But when the invoice is presented to the bank to pay the foreign supplier, it might be inflated to N$1 million,” he says.

This overpricing allows the cartel to move large sums of money to other countries illegally.

“These inflated invoices help take money out of Namibia without raising suspicion, and that is what we call IFF.

“Not only are they evading taxes, they are also facilitating the illegal movement of money out of the country,” he says.

This illegal means of trade is pushing legitimate companies out of business because the cartels are able to offer lower prices, he adds.