The issues surrounding the Sri Lanka Customs such as corruption and financial mismanagement, which have remained a topic of discussion for years, have received more attention with the protest launched by the Customs officials over their control of the Customs’ Reward Fund.

Last week, Customs’ staff launched a work-to-rule trade union action in response to the Treasury’s decision to take control of the Rs. 700 million Reward Fund, which was previously under the purview of the Sri Lanka Customs. Even though the discussions that followed between the two institutions had led to the Finance Ministry expressing willingness to allow the Customs to keep Rs. 100 million for urgent payments while the Treasury kept the remaining funds under it, in accordance with the Finance Ministry’s agreements with the International Monetary Fund (IMF).

In this backdrop, through a recent audit conducted by the National Audit Office, certain discrepancies and flaws within the Customs have also come to light. The audit’s findings have raised concerns about a massive loss of government revenue as well as questionable rewards to Customs officials. As The Sunday Morning had reported, the findings have shed light on a systemic failure within the Customs’ enforcement mechanisms, potentially costing the Government a substantial amount of uncollected taxes. Moreover, the audit had highlighted a concerning trend where some imports for which penalties should have been levied, had not been properly scrutinised, resulting in the Government missing out on much needed tax revenue owed. The lost tax revenue had been treated as penalties, with an amount of 50% of the penalty amount being allocated for rewarding officials and informants.

Despite these discrepancies, it was reported, no investigations had been launched to address the situation, and all these concerns point to serious concerns, which have apparently been overlooked by the Customs’ administration.

While financial mismanagement and/or corruption are the obvious potential issues this situation has highlighted, it also shows how the Government suffered losses due to such irregularities or weaknesses. In this context, irrespective of the Government’s agreements with the IMF, the Government taking over the Customs’ Reward Fund does not look like a bad decision despite the Customs’ claims. On the contrary, theoretically, that move could help the Government to regulate and monitor payments made through the Reward Fund while reducing unnecessary or excessive payments through the same.

The magnitude of this issue was further shown by the said audit’s findings that rewards of around Rs. 3,924 million had been distributed during a period of mere five years, i.e. between 2016 and 2021. Alarmingly, that astronomical amount had been distributed among only top 100 officers, while five individuals are reported to have received payments exceeding Rs. 60 million during the same period.

It goes without saying that Customs is one of the most crucial state sector institutes, especially in the present economic situation, and there is nothing wrong with having in place systems to encourage Customs officials to improve their performance. However, at a time where severe scrutiny on public funds remains a key step in Sri Lanka’s economic revival, reward systems that pay in millions should be subjected to proper monitoring. The existence of such a massive reward system itself is questionable. it is one thing to reward parties such as informants that have no obligation to report illegal activities but do so, often taking a risk. It is another thing to pay officials whose job it is to take action based on the information that they receive. In situations where officials took a risk or went above and beyond their job description, they should be rewarded. However, if officials get paid millions in addition to their salary or other related perks for merely doing their job, such reward systems should be reconsidered. In a context where it has been observed that the payment of the said reward money to Customs officials had been on the rise, the Government should pay attention to ensuring the proper management of the income generated by the Customs.

Sri Lanka is slowly recovering from the biggest economic crisis it faced following Independence. To prevent the recurrence of a similar crisis, the country has to learn from the crisis, especially from what decisions and actions led to it. In this context, the Government should pay serious attention to institutions that have gone unchecked for decades but are not willing to be scrutinised.