MZUMBE UNIVERSITY

SCHOOL OF BUSINESS
DEPARTMENT OF ACCOUNTING AND FINANCE

ACC 321: PUBLIC FINANCE AND TAXATION

CUSTOMS

Question 1
On 28th March, 2014, Mr. Enny imported 8,000 pieces of used automobile batteries from
Red Rose & Partners in Europe where Mr. Enny is also an active partner. Goods were
immediately stored in a custom warehouse. The following costs relate to the goods
imported:

Direct material (per unit) Euro (ϵ)6

Direct labour (per unit) ϵ4
Variable overheads (per unit) ϵ2
Selling unit price ϵ20
Insurance ϵ1000

The following rates were applicable at the time of importation:

Imported duty 20%
Excise duty 5%
Exchange rate: ϵ/TZS TZS 1,920 – TZS 2,035

Other values relating to the goods imported are as follows:

Computed value TZS. 400,000,000
Fall back value TZS. 386,000,000
Deductive value TZS. 402,000,000

Due to unavoidable circumstances, Mr. Enny failed to settle all the custom duties within
the required time. The Commissioner for Customs gave several notices and decided to
sell the goods through public auction on 12th February, 2015. The goods were sold for
TZS. 320,000,000.

REQUIRED:
(i) Compute the transaction value of the goods imported.
(ii) Compute the custom duties payable thereof.
(iii) Determine how the proceeds of sale might have been distributed assuming Mr.
Enny had the following obligations to settle:

Freight charges TZS. 3,000,000

Clearance agency fees – Dar es Salaam port TZS. 450,000
Duties due to customs TZS. 102,000,000
Rent and charges due to customs TZS. 8,800,000
Port charges TZS. 4,500,000
Expenses of removal and sale of goods TZS. 2,600,000

(iv) To whom the balance, if any, is supposed to be paid to, assuming the terms of
importation of the goods imported were breached?
Question 2
Customs entry and clear procedures for imports depend whether the goods or persons
have arrived by an aircraft, a vessel, vehicle, pipeline or overland.

Required
a. Explain the customs entry and clearance procedures for imports

b. Explain the customs entry and clearance procedures for exports

c. KINAX imported a saloon car with 1,000cc on 1st January 2015 for business use,
the car was manufactured since 1st January 2003. During the VAT control
verification exercise, the Commissioner found that taxes were not paid in full as
they had been affected by importation of saloon. This has been found via (ERV)
which reflected the following;

 Import Duty = TZS 2,000,000

Excise Duty = TZS 4,000,000
VAT = TZS 5,000,000

 The saloon car was acquired for US$. 10,000 at V-WEST current retail
selling price after depreciation which is 100% of the aggregate sum of taxes
payable to customs department and 50% of CIF as wharfage charges.

 The tax rates at the time of importation were: exchange rate

TZS.1,500/US$, import duty 25%, excise duty 5% or 10% or 15% or nil
depending on the size of engine of the car and VAT 18%.

REQUIRED:
Determine the Total duties/tax paid to the Tanzania Revenue Authority.

Question 3
The EAC Customs Management Act, 2004, Section 122 and the Fourth Schedule to the
Act lay down the procedure of determination of the Customs value of imported goods
liable to ad valorem import duty.

Required
a. Define customs valuation
b. Explain the importance of Customs Valuation
c. Discuss the problems hindering effective customs valuation

Question 4
Section 122 and the Fourth Schedule to the EAC CMA, 2004 requires that the Customs
value of imported goods be determined using one of six methods of valuation.

Required
a. Identify conditions for use of methods:
b. Explain the methods of customs valuation and demonstrate their practical
application
Question 5
With examples, differentiate between the following terminologies: -
a. Identical and similar goods
b. Prohibited and restricted goods

Question 6
In determining Customs value under fall - back method, no arbitrary, fictitious or
prohibited methods of valuation are to be used. The Customs value should be fair,
reasonable, uniform and neutral, and should reflect commercial reality to the extent
possible.

Required
a. Explain the meaning of fall - back value method
b. Identify the restrictions set under the fall – back method
c. Provide examples of cases which can be handled under

Question 7
Smuggling is an act of importing, exporting or carrying coastwise, or transferring or
removing into or out of a country of goods with intent to defraud the customs revenue
or to evade any prohibition or restriction on, regulation or condition as to such
importation, exportation, carriage coastwise, transfer, or removal, of any goods.

Required
a. Explain the meaning of the term “rules of origin” and its importance as applicable
under the East African Customs Union Rules.
b. Explain customs procedures for prevention of smuggling
c. Explain four problems of implementing the East African Customs Union Rules.
d. Explain in what forms does smuggling occur and the problems associated with
smuggling.

Question 8
In readiness for Christmas day on December 25, 2018, a business lady had earlier on 10th
October 2018, ordered 2,500 Christmas Cards from India costing US $ 2 per card. When
they arrived, the business lady was required to pay 20% import duty, 10% excise duty
and 18% value added tax despite the trade agreement existing between Tanzania and
India. Assume the exchange rate applicable was TZS 2,300 to US $ 1.

Required
a. Calculate how much the Lady will pay as import duties, excise duty, value added
tax to the Tanzania Revenue Authority.
b. Assuming that the business lady in part (a) above has information to the effect
that according to the trade agreements between Tanzania and Indian
governments, she was not supposed to pay import duties except for Value Added
Tax and she wants to appeal.

Required
i. Which three players would be involved in the appeal case assuming the case
has gone all the way to the last player?
ii. Why is it important to have appeals procedures in a tax system?
 c. Discuss briefly any five methods of customs valuation under the new General
Agreement on Tariffs and Trade (GATT) valuation system that can be used to value
market goods in Tanzania.

Question 9
As earlier mentioned in Chapter 2, Section 122 and the Fourth Schedule to the EAC CMA,
2004 requires that Customs value of imported goods be determined using one of the six
methods, with transaction value being the first method to be attempted.

Required
a. Identify and briefly explain the stages under which the verification of custom value
can be conducted
b. Explain the verification of custom value under the six methods