Customs Agents Raise Israeli Funds, Anxiety

As a disabled veteran of the 1973 Arab-Israeli War, Arik Vamosh belongs to one of the most honored groups in Israeli society.

But when the wheelchair-bound father of two tried to import a small elevator he needs to get around in his new multi-story home, the Israeli customs service demanded $8,000 in purchase and import taxes.

The stunned Vamosh, who paid only $7,500 for the elevator to begin with, has been trying since early this year to either have customs waive the fees or persuade the army to pay them, but his efforts are snarled in government red tape. Meanwhile, the elevator sits in a customs warehouse.

Vamosh might be called Exhibit A in the case of what is reputedly Israel’s most hard-nosed bureaucracy.

One of the veteran’s friends thought she might be able to help him with a dose of what the Israelis call “Vitamin P,” as in “proteksia” --better known in the United States as connections in high places.

The friend contacted an aide to Prime Minister Yitzhak Shamir, who agreed in principle that the situation was terrible and promised to do what he could. However, the aide added, “Don’t get your hopes too high.”

As the aide explained, Shamir himself had discovered that the customs service is not easily influenced. The prime minister received a gift of porcelain from the ruler of an unnamed South American country on a recent state visit, the aide related. Since Shamir had several more stops to make on his trip, his South American counterpart agreed to have the gift shipped back to Israel.

A Bill for Shamir

When it showed up some weeks later, a customs man called Shamir’s office and announced that the porcelain would be released only after the prime minister paid $400 in duties.

The argument that this was a gift to the government, not to Shamir personally, fell on deaf ears. “Either pay up or we’ll ship it back to South America,” the customs man insisted.

But that would be an insult to the donor government, Shamir’s office argued, suggesting as an alternate solution that the customs service donate the gift to charity and forget the $400. But the customs man stood fast.

In the end, Shamir paid the import duties. Call him Exhibit B.

Asked about the Vamosh and Shamir cases, Assistant Customs Director Shlomo Barkan explained in an interview that “only the president is exempt” from import fees. And he pointed out the applicable Rule No. 1 from a four-inch-thick volume of customs regulations to prove it.

“But why?” a reporter persisted.

“Why not?” Barkan responded.

Agency of Anxiety

All this illustrates why Israel’s so-called Directorate of Customs & VAT (value added tax) probably causes more anxiety among Israelis than any other branch of government.

It also helps explain why a relatively tiny department whose staff numbers only 1,640 of the government’s roughly 75,000 employees collects almost 25% of the money required to run the country--7.7 billion shekels last year, or about $5.1 billion. That’s exactly 154 times the directorate’s 50-million-shekel budget, presumably making it one of the great bargains in government.

The customs service’s reputation does not hinge on how much bang it delivers for the buck, however. The way Israelis feel about it depends much more on their own first-hand experiences the last time they re-entered the country from abroad, said Barkan, an affable 26-year customs veteran.

If they walked unhindered along the green line for people with no taxable items to declare, they say the service is good. If they got stopped trying to sneak a videotape recorder past the inspectors, “they, of course, have another opinion,” he said. “They don’t like us very much.”

‘30 Seconds of Fear’

“Thirty seconds of fear” is how Barkan characterized the stroll from the baggage claim area of Israel’s Ben-Gurion International Airport through the customs area to the terminal exit--and freedom.

Below Barkan’s second-floor office on Customs Square in central Jerusalem is the Tax Museum, including several displays of devices people have used in trying to smuggle valuables past alert Israeli customs inspectors.

There’s the silver bas-relief of “The Last Supper” in which thousands of dollars worth of diamonds were hidden; a life jacket used to smuggle drugs; a special vest in which an arriving airline passenger managed to conceal 390 gold watches, and a hollowed-out book used by an Israeli seaman to hide a tape recorder.

A tape recorder?

Hot Commodities

“Because of high taxes, we are a country with a greater smuggling potential than other countries,” acknowledged Efraim Aviram, director of the Tel Aviv district customs investigation department. “Abroad, customs usually deal with drugs, antiques and things like that.” But in Israel, consumer electronics are the hottest of commodities.

For example, there is a minimum 880-shekel (about $570) import purchase tax on a video recorder, no matter what it cost, said Barkan. That’s on top of a 25% customs fee and 15% value added tax. Israelis understandably consider such taxes, which extend to most types of consumer electronics, to be confiscatory.

“As a citizen, I think there is no doubt that taxes should be lower,” said Aviram. “Any novice economist knows it’s an economic distortion. But on the other hand,” he added with a shrug, “we have budget problems.”

Nobody knows how many of the estimated 400,000 video recorders in the country were smuggled past customs agents, but the percentage is no doubt significant.

An Israeli journalist who returned to Israel recently told of seeing a passenger on the same flight, who had a box prominently labeled as containing a video recorder, tell his young son to wheel a luggage cart containing the box along the green-line route. An agent stopped the boy and told him to have his father bring the cart through.

Lies and Fines

The father, who clearly had no shortage of chutzpah, also headed for the green line and then, when questioned by the agent, lied about the contents of the box. The customs man demanded 2,000 shekels (nearly $1,400) in taxes and fines on the spot. And when the father said he would rather just forfeit the recorder, the agent said that if he left the box behind, he would be charged the equivalent of a $10 daily storage fee.

On average, one million tourists and 500,000 returning Israeli citizens pass through one of five customs “gates” into Israel each year, according to Barkan. The busiest, in human terms, is the airport.

Individuals also pay enormous import fees on furniture, rugs, appliances and automobiles that they buy abroad and ship through one of Israel’s four seaports. Various taxes and fees on a new car with an engine larger than 2,400 cubic centimeters, for example, amount to three times the value of the vehicle, said Barkan. Even on the smallest cars--those with engines of 1,300 cc. or less--the purchase tax alone is 100% of its value.

Still, the customs man noted, individuals account for but a tiny percentage of both the fees collected by his directorate and the smuggling that it detects. Raw materials and industrial goods are much more significant.

Coal and Cassettes

Recently, Aviram said, his men found 2,500 combination radios and audio cassette players hidden in what was supposed to be a boatload of coal. A load of yellow sand concealed 328 video recorders. “One catch I make of a shipload is more than they catch at Ben-Gurion in a year,” he boasted.

Not long ago, his men cracked what he called “the Cyprus connection”--a ring of pilots who smuggled $6-million worth of video recorders and other consumer electronics from Cyprus to Israel aboard small private planes. The head of the ring was sentenced to seven years in jail--the longest jail term ever handed to a smuggler here, Aviram said.

Agents confiscate more than 100 million shekels ($65 million) worth of goods annually.

“‘We aren’t clerks,” the Tel Aviv customs man said proudly. “My investigators are tough!”

Defends Tough Approach

Barkan is slightly more circumspect, but he, also, makes no apologies for the customs service’s hard-nosed reputation. “The collection of duties, naturally, doesn’t have a good image,” he said. “I can understand it.”

The service tries to be as unobtrusive as possible about its duties, Barkan said, spending more time on what he called “document control” (making sure an importer has not undervalued the goods he is bringing into the country) and less on “physical control.”

At the airport, customs now uses X-ray machines rather than searching passengers’ luggage by hand. “Before, we checked about 5%,” Barkan said. “Now we do 20%.

“That is our success,” the customs official added with an obviously satisfied smile. “We check much more and we find less. People are becoming more afraid.”