Says no criminal culpability of public officials issuing ITLA

By: L.N. Reklai

April 27, 2017 (Koror, Palau) An audit report released by Office of Public Auditor (OPA) citing number of findings on collection of Import and Excise Taxes on Tobacco products, one of which noted that imported goods were released upon partial payment of taxes with an Import Tax Liability Agreement (ITLA).  ITLA allows importer to make partial payment on their import tax and sign an agreement to pay the rest in installments.


An opinion issued by the Office of Special Prosecutor (OSP) to the Office of Public Auditor on the criminal liability of issuing Import Tax Liability Agreement states that “OSP concludes that absent additional factual allegations, the practice of engaging in contracts to release imported goods and allow for post-payment of import tax is insufficient to create a violation of criminal laws by those public officials authorizing the contracts.”

However OSP recommends issuance of ITLA’s to stop.  Although technically within the authority of those authorized to permit installment liquidation or compromise of claims, OSP states the practice “largely violate the intent of the import tax.”

OSP further notes that the practice of issuing ITLAs create delayed revenue to national treasury  as well as interest free loans to importers for which the “Republic does not have established procedures to enforce subsequent collection.”

40 PNC 1801 gives the authority to the Director of Bureau of Revenue, Customs and Taxation on behalf of the government to “enter into binding agreements for the installation liquidation of any tax liability as deemed necessary” and including power approved by Minister of Finance to compromise claims and penalties and interests arising out of any levy.

OSP recommends that OEK consider clarifying 40 PNC Chapter 13 and Chapter 18 to clarify when and whether ITLA’s are authorized. “ITLAs remain impractical and contrary to the intentions of the OEK when it imposed the import tax,” stated OSP in its opinion.

Bureau of Customs and Border Protection agreed with OPA’s finding of conflict in legal mandate and agreed to work to realign and resolve inconsistencies.

Moreover,  BCBP’s responses to OPA’s draft report in 2016 were captured in the final audit report concurring with the auditor’s findings and recommendations.

The OPA findings include conflict in legal mandate, outdated rules and regulations, import and excise taxes not collected and reported fairly and evenly, quarterly financial report to Congress did not disclose open contract, new import tax rates not imposed on one importer, imported goods released upon partial payment of taxes, contractual agreement waived interest charges, tax records not effectively filed and maintained and lack of enforcement of import tax liability agreement. [/restrict]