When to knock: the problem that's exercising Customs

Once pin-up boys of the law, the Treasury's hit squads have been rapped for booze-cruise crackdowns and VAT scams, writes Paul Lashmar
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The Independent Online

A 72-year-old disabled English grandad and his son-in-law were stranded in a French port without his car or crutch, just because English Customs officers did not believe the amount of alcohol they were trying to take home was for "personal use". Cars were confiscated at Channel ports and sold off for as little as £20. Small businesses were bullied by an overwhelming VAT bureaucracy. The computer-processor brokering industry was brought to its knees during the summer.

A 72-year-old disabled English grandad and his son-in-law were stranded in a French port without his car or crutch, just because English Customs officers did not believe the amount of alcohol they were trying to take home was for "personal use". Cars were confiscated at Channel ports and sold off for as little as £20. Small businesses were bullied by an overwhelming VAT bureaucracy. The computer-processor brokering industry was brought to its knees during the summer.

Meanwhile, on Britain's streets, smuggled drugs have never been more plentiful or cheap. Billions of pounds of tax and excise are being stolen or evaded. In the mobile phone and computer industries, defrauding VAT has become so lucrative that armed robbers and other organised criminals are making it their crime of choice. What is going on over at Customs and Excise?

Glamourised in TV series such as The Knock, Customs, until recently seen as the pin-up boys of law enforcement, now seem to have taken a knock themselves.

Tobacco and booze continues to be smuggled into Britain on an industrial scale, damaging many legitimate British businesses as well as the Exchequer. But worse, hard drugs such as heroin and cocaine are more easily and cheaply available on the streets, causing immense social problems and fuelling a crime wave. Some observers are asking whether the drug smugglers have won.

Customs says it has the ability and resources to deal with these problems and is using new techniques to crack down on smugglers. "We are now getting sophisticated," said a Customs spokesman. "In the past things were more haphazard. If investigators now report a problem we do an analysis of the market. We are good at allocating our resources."

But many observers are sceptical. "It does not seem that way by recent events," says Don Mavin, a former senior Customs investigator and now a director of tax advisers WJB Chiltern. "It seems to be more a finger in the dyke approach." He does not believe Customs is equal to the growing challenge of drug dealers and criminals. "They need to upgrade and react to increase the quantity and quality of officers."

Over the last few weeks, a stream of stories have emerged about corruption investigations by the police into Customs and Excise. If there were evidence of corruption in Customs, it would be extremely worrying. Unlike the police, Customs has had a good record on corruption in the past and its investigators are seen as an elite. Tight management systems and a more academic recruitment policy have worked well.

Customs sources say these corruption cases largely date back several years and have not resulted in any charges as yet. But the publicity, including the suicide of one suspended officer, has not done Customs a shred of good.

From reading the papers you'd be excused for thinking that Customs and Excise is a heartless, inefficient and possibly corrupt organisation, harassing OAPs over a few hundred fags while drug smugglers have an almost clear run. Weeks of front- page campaigning by The Sun over Customs' treatment of cross-Channel trippers in a "booze and fags" crackdown apparently resulted in a government U-turn.

In the Commons on 29 October, Yeovil MP David Laws attacked Customs: "It is outrageous that, in a single market – and in a legal system such as ours, under which people are assumed to be innocent until proven guilty – control of cross-Channel trade in tobacco and alcohol by Customs and Excise should result in people having to demonstrate their innocence, rather than Customs being obliged to establish that they are bringing in alcohol and tobacco not for their personal use, which is not restricted under EU rules, but for on-sale to other parties."

In the debate, the Economic secretary, John Healey, announced that the Government was increasing the personal allowances for bringing tobacco and alcohol into Britain as this would help differentiate between regular travellers and smugglers. The Sun declared victory.

Customs admits that its image has taken a battering from The Sun. "But this was not a U-turn, but a decision that had been planned several months before. We did wonder if The Sun knew we were going to change the system and campaigned knowing they'd appear to win," a Customs spokesman said.

But Customs is involved in a number of controversies. Former Customs investigator Don Mavin's particular concern is the way Customs has dealt with a massive VAT scam known as "carousel fraud". Mobile phones or computer processors are bought in from the EU, where the no-border agreements mean no VAT is charged. The fraudsters, using a front company, then sell the phones to another buyer or trader, charging VAT at 17.5 per cent. After tens of thousands of phones have been sold, the fraudster simply disappears leaving Customs investigators with a "missing trader" and VAT losses of up to £100m a time or more.

Customs has admitted that an estimated £1.7bn-£2.3bn of VAT was defrauded from the public purse this way in 2000-2001. To disrupt the scam, Customs has virtually stopped the mobile phones and computer processor broking industries from functioning over the summer. Critics say this is typical of Customs' high-handed style, damaging the innocent as well as the guilty. Several legitimate companies have sought Mr Mavin's advice.

Customs actions will be challenged in a VAT appeal. "Whether the basis of the Customs challenge is sound we shall see shortly," he said. "I don't want to prejudge it but I don't think the Customs position will stand."

If Customs' image is taking a battering, what makes this more worrying is that it is only just over two years since a major shake-up of this massive organisation. Former merchant banker Richard Broadbent, then just 46, was brought in to replace the much-criticised Valerie Strachan as chairman of the board of Customs and Excise. He revamped the management structure at Customs.

Even back in the days of cutlasses and revenue cutters, Customs and Excise was a powerful and unpopular body. In the process of helping Parliament raise its income, it has become one of the largest government departments, employing 23,000 people scattered throughout Britain. Many are assigned duties to do with the collection of VAT and excise, the rest in preventing tax evasion and smuggling.

Mr Broadbent, in a series of appearances before select committees, has claimed that the huge bureaucracy is undergoing major cultural reform and modernisation. Mr Broadbent has a good reputation within Customs and the civil service as a whole.

"I think Richard Broadbent is more open-minded that some of his predecessors," says David Raynes, a former senior Customs investigator. "But I fear some of his line managers are not listening to the concerns of investigators. The National Investigation Service (NIS) has become a method of control, to warn and deal with all Customs' growing problems and it was never set up to do that."

Sources at the "coalface", Customs investigators, also suggest that managers at the top of the bureaucracy are slow to respond to their warnings about new crime trends.

And there is the suspicion that Customs, under ministerial pressure, tries to hide or play down the sheer scale of smuggling and taxes losses.

This Customs denies. But, for example, neither Customs nor the Treasury will produce more up-to-date figures than 2000-2001 for the cost of VAT carousel fraud. The suspicion is that the latest show enormous losses to the Government.

To improve its image Customs will have to shake off the perception it is an unwieldy and unaccountable organisation graced with immense powers.

A Customs spokesman denied that it is far less accountable than the police. "The chairman, as accounting officer, is accountable to the ministers and Parliament. We make regular appearances in front of a select committee."

But as The Sun debacle demonstrates, being publicly accountable means it is wise to treat your public – Customs' ultimate employers – with respect.

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