This article appeared in the ‘Connecting Malta to mainland Europe’ supplement by ATTO published with The Sunday Times of Malta on April 7, 2024

The merger that brought together Inland Revenue, Value Added Tax and Customs Departments created the Malta Tax and Customs Administration (MTCA), under one Commissioner. However, as with the other revenue-generating sections, Customs also forms part of the wider EU picture, and it is therefore not only facing the challenges brought about by the merger, but also an EU-wide reform that will re-focus its counterparts in the Member States.

Christopher Magri

The local scenario change is one that was kicked off in 2012 when Parliament approved the Commissioner for Revenue Act. New impetus was given to this initiative in 2022, which culminated in the launch of the three-year strategy Delivering Transformation Strategic Plan 2023-2025 A new Strategy for Malta’s Tax and Customs Administration, in May 2023.

The strategy aims to transform the MTCA through modern technology into one that is suited for an evolving economy, enabling growth and competitiveness.  After a year of hard work, Customs is starting to reap the anticipated results.

How will this help it to prepare for the changes envisaged through the EU’s Customs Reform?

Perhaps it is worth taking a step back to understand how the role of customs departments across the world evolved over the ages. Traditionally, of course, their role was seen as a revenue-generating one for governments, charging customs duties and other taxes on import and export. However, this view has changed in recent decades, and the role of customs departments has expanded considerably. The World Customs Organisation simply defines the role of customs as one that facilitates trade while at the same time using border controls to protect the citizen and society.

Facilitating international trade has been proven to promote the growth of investment, which in turn leads to sustainable economic growth.

The key was, of course, to provide an efficient service without extra burdens for those customers who comply with the rules and procedures. Membership of the EU’s Customs Union has led to the abolition of routine controls at the internal borders of the EU, but in return has placed the burden of responsibility for its external border on those at its fringes. And it is not just international trade at those external borders that needs to be kept under surveillance: there are increasing threats to society resulting from activities of cross-border organised crime which threaten the security of the Union’s citizens.

The Customs Reform is built on three main initiatives: a new partnership with business; a smarter approach to customs checks; and a more modern approach to e-commerce

In these scenarios, even historically well-grounded customs institutions have strengthened collaboration with other law enforcement agencies such as the police force, and their counterparts in other countries.

Take Customs in Malta as an example: it is at the front line in the fight against smuggling, illicit traffic of weapons, drugs, cigarettes, money laundering, counterfeit goods, endangered protected species and works of art. Customs is also at the front line in the fight against the traffic of radioactive materials, hazardous waste, illegal or expired drugs, and goods which cause harm to health and environment. Customs also plays an important role in Malta’s contribution to international efforts, with systems in place to ensure constant monitoring of trade vis-à-vis sanctions.

It is against this backdrop that, in 2019, the European Commission President Ursula von der Leyen said it was time to take the Customs Union to the next level, equipping it with a stronger framework that allows better protection of citizens and the single market. The experience of the Covid-19 pandemic, and the war in Ukraine had shown that the management of crises at the European borders was essential. A strong Customs Union with a protective “one external border” is essential to Europe’s strategic autonomy and to Europe’s security and defence.

In March 2022, the Wise Persons Group on Challenges Facing the Customs Union presented its report on the future of the EU Customs Union. The report concluded that the Customs Union needs to be better prepared to address forthcoming challenges.

The Commission put forward proposals for an ambitious and comprehensive reform of the Customs Union. The principles underlying the reform include a data-driven vision for EU Customs, and significant simplification of customs processes for economic operators, especially for trustworthy traders.

The Customs Reform is built on three main initiatives: a new partnership with business; a smarter approach to customs checks; and a more modern approach to e-commerce –all things that the local Customs is already taking on board as part of the MTCA’s Strategic Plan.

Building upon digital capabilities, the Customs Reform will overhaul burdensome customs procedures and replace declarations with smart, data-led import and export processes. These will be complemented through the necessary tools and resources to properly assess and carry out the adequate controls which pose real risks to the EU’s economy, citizens and society. The reform also addresses the pressures for the Customs Union, particularly the large increase in trade volumes, the exponential increase in e-commerce, rising EU standards, prohibitions and restrictions that must be controlled at the border, and geopolitical considerations and crises.

A new Customs Authority will provide governance and supervision of the central EU Customs Data Hub. The latter will act as the new IT engine of the new system, replacing national existing customs systems, delivering on a coordinated EU approach, risk management and customs controls.

It is clear that Customs within the MTCA will be undergoing significant transformation in the years to come, reacting to customers’ needs and ensuring an excellent service, while at the same time ensuring that citizens and society – in Malta and across the EU – are protected and secure.