Corporate greed and political cunning have been significant issues for voters. There is a growing concern about the abuse of the Duty Drawback program, which was supposed to help exporters, and the flaw in the system.
The customs Duty Drawback system was set up to help traders recover the taxes paid on the goods they import but export. The idea was to make domestic firms more competitive in the world market, encourage trade and promote economic development. This system was a relief to firms that engaged in import and export business, as it eased the cost restraints.
However, these components of the Duty Drawback regime were also vulnerable to mismanagement and abuse because there was no proper regulatory scrutiny. The companies have abused this system to increase their profit margins. Most regulations are complex and are more likely to be misused in a program that distributes billions of dollars.
Greed is the mother of corruption, and it is the American working families who are left holding the bag. Some companies take advantage of loopholes in the Duty Drawback claims process and make money from that rather than from actual trading.
Many corporations are taking advantage of these loopholes in the Duty Drawback claims processing and earning a stream of revenue that is not connected with actual trading activities.
For instance, a company that imports goods but claims for higher duty reimbursement than it should would prevent the list from being audited.
Recently, some politicians, at the urging of greedy businesses, have been pushed to allow Duty Drawbacks for exporting different goods not related to the imported goods. On paper, the program looks legitimate. The program is supposed to refund customs duties, fees and taxes on goods that are then exported. A problem has emerged where the same imported goods are not exported.
A perfect system would abolish all these fees, duties and taxes for all importers to level the playing field, but there is too much revenue that will be lost by the federal government if they allow that to happen. Government loves to tax as much as it can to nickel-and-dime American taxpayers, whether that be on income taxes or a sneaky excise tax that most people don’t even know they are paying when purchasing an imported product.
During the recent election, there was public outcry at such systemic abuses. As a result, there are growing demands for transparency and accountability to ensure that government programs, including the Duty Drawback scheme, achieve their objectives. Robust oversight mechanisms are needed to prevent abuse but allow for proper use. This is not only a political requirement but also an economic one.
The Duty Drawback system needs immediate reforms and oversight to work correctly. Some are strict accountability, periodic audits and open procedures to prevent abuse.
The abuse of the program reveals a deeper issue of government and corporate graft that erodes institutions that are supposed to benefit the people. Real change will be possible only if the government, businesses and the public work together to ensure that these mechanisms contribute to economic growth and are not misused.
Congress is going to pass some version of the Trump tax cuts that expire this year. Concern is that the liquor industry will try to expand the Duty Drawback to allow the import of liquor from Scotland and Ireland to offset exports of American bourbon. I sympathize with them because nobody should be paying the tax, yet this expansion seems unfair on its face.
An excellent tax reform idea would be to study all excise taxes to see where they can be tossed aside to allow American businesses to not have to pass on expenses to consumers. In addition, collecting revenues from imports and then giving that money back to corporate importers allows the government to collect the cash instead of just letting companies keep the money. It takes the work of government auditors to figure out who gets a check. In the end, the taxpayers are the ones who lose.
Congress should abolish the tax and ensure that tax reform does not become a special interest grab for a sliver of the industry that imports products.
