Gov’t losing P250B in revenues due to illicit trade

THE PHILIPPINE government is losing at least P250-billion revenues a year due to smuggling, according to a business group.

“Smuggling is creating unfair competition for locally produced goods because it erodes the local market of cheaper, no value-added tax or undervalued and substandard imported goods displacing the locally produced commodities,” Fight IT (Illicit Trade) Chairman Jesus L. Arranza, who also chairs the Federation of Philippine Industries, said on Tuesday.

Citing a report from the Organisation for Economic Co-operation and Development (OECD), Mr. Arranza said revenues from global illicit trade combined are estimated at $870 billion per year, representing 1.5% of the global gross domestic product.

Smuggling also leads to job displacement due to production downsizing, exposes consumers to health and physical risks, and deprives the government of revenues from uncollected taxes and customs duties, he added.

Mr. Arranza noted industries directly hit by smuggling include textile and garments, tires, steel, liquified petroleum gas tanks, coconut oil, sugar, and cigarette manufacturing.

He emphasized the impact of cigarette smuggling, where around 14% of cigarettes in the country are considered illicit.

“If we have a market of 60 billion sticks, around nine billion sticks are illicit,” Mr. Arranza said.

The estimated revenue loss from excise tax alone amounts to around P24.7 billion, he added.

He said that most illicit cigarettes are shipped from Cambodia, Vietnam, and China, and enter through Sulu and Tawi-Tawi.

“In Mindanao, half of the stores sell illicit cigarettes, openly displayed. In Metro Manila, it’s not so bad. Some provinces it’s rampant like in Lanao del Norte,” he said. “It’s so enticing to bring in cigarettes, it doubles exponentially.”

Mr. Arranza noted that raising sin taxes on cigarettes only encouraged more smuggling.

“The increased tax made the smuggling of cigarettes an even more lucrative business. It may worsen the country’s problem on smuggling,” he added.

The group cited the recently approved House Bill (HB) No. 3917 as a step in the right direction towards stopping illicit trade.

“The approval of HB No. 3917 is a welcome development in this time that the country is in much need of revenues due to a somehow cash-strapped economy,” Mr. Arranza said.

The House of Representatives on Monday approved the bill, which amends Republic Act (RA) No. 10845 or the Anti-Agricultural Smuggling Act of 1996, on third and final reading.

The bill seeks to consider raw or finished tobacco products as agricultural commodities, which will make its importation as “economic sabotage.”

The measure also increased the jail term for smugglers to 30-40 years, as well as the fine twice the fair value and the aggregate amount of the taxes, duties and other unpaid charges of smuggled items.

“If the imports stop, (we return) to where we earn revenues from taxes…the government has to hit the whole supply chain. There are no sellers if there are no buyers,” Mr. Arranza added. — L.M.J.C.Jocson