Transit reform moves ahead

Date: 27/03/1997

By Rory Watson

THE European Commission is putting the finishing touches to wide-ranging proposals to overhaul the Union's heavily overburdened transit system, which has become a lucrative target for fraudsters and organised crime.

An action plan due to be finalised at the end of next month will insist on the need to computerise an anachronistic system now totally based on paper. It will also stress the importance of negotiating a new convention with non-EU countries participating in the transit arrangements.

But critics insist the transit system cannot be reformed in isolation. The success of the exercise, they say, will depend on parallel moves to improve member states' customs services, complete the Union's internal market and extend fiscal harmonisation.

The Commission's strategy, which has been pieced together over the past two years, will be made public just weeks after the completion of the European Parliament's own comprehensive investigation into the failings of the transit system.

The high political profile which MEPs have given to a problem which costs the Union and national budgets millions of ecu every year has increased the chances of a radical overhaul of a system which is under increasing strain.

“The Commission has made several proposals in the past, but little notice has been taken of them. But thanks to the Parliament, the transit system is now seen as something that is politically important, not just something technical,” said one official.

The Commission intends to press member states to construct an extensive network of computer links which will enable customs offices to transmit declarations and other data to each other at the push of a button, instead of taking up to six months as it does now.

Work on the system is expected to begin early next year and be completed, linking the 22 participating countries, during 2000.

“Computerisation will allow authorities to monitor transit traffic in real time instead of carrying out controls after the event as happens now with the paper documents. It will get rid of delays, reduce the scope for falsifying papers, improve administrative efficiency and generally strengthen security,” explained one official.

But finance remains a major problem. The EU is spending up to 5 million ecu this year on the project, but this sum is a drop in the ocean compared to the 20 billion ecu which experts believe it will cost.

The Commission is expected to argue against the idea of a general moratorium on the huge debts which have accumulated over the years as customs administrations tried to reclaim unpaid taxes on goods - in particular cigarettes and alcohol - which have disappeared on to the black market.

There is a remarkable level of agreement about the shortcomings of the present arrangements, which involve the manual processing of some 18 million documents a year.

Experts point to a failure to apply existing regulations, a lack of coordination between different state authorities, a complex mosaic of separate national systems, the absence of reliable data and an inability to adapt the rules and procedures to the huge growth in demand.

But despite its many shortcomings, critics insist that the system is essential for the smooth running of the Union's internal market. They also acknowledge that the flexibility it provides by allowing the temporary suspension of taxes and duties is an important ingredient in the commercial strategies of many European firms.

But officials warn that fraud against the system does not only have financial consequences, but also has an economic and health impact by undercutting bona fide traders.

“In the long run, the main loser is the European citizen as a producer, a trader, a consumer and as a taxpayer, because the missing income due to transit fraud has to be made up somehow at national and EU level,” said one.