In a span of five years, illicit traders were able to smuggle at least P904.6 billion worth of goods into the country, a multi-industry study by the Fight Illicit Trade (Fight IT) Movement revealed.
The total amount of smuggled goods that successfully entered the Philippines from 2011 to 2015 is pegged by the study at a much higher value, as the P900-billion figure only covers eight industries with so-called frequently smuggled products: petroleum, steel, resins, wood, cigarettes, sugar, palm oil and automotive batteries.
Fight IT, a movement launched in 2015 under the Federation of Philippine Industries (FPI), commissioned the study, which was conducted by the University of Asia & the Pacific (UA&P).
Fight IT presented the results of the illicit-trade research to officials of the Department of Finance during FPI’s 25th Silver Anniversary Assembly at a hotel in Manila on Friday.
The study identified massive gaps in the Bureau of Customs’s (BOC) fulfillment of mandate, with alarming government revenue losses due to illicit trade bared. For instance, the economic impact of illicit trade on the country’s GDP from 2011 to 2015 was valued at P495.5 billion. Furthermore, the decrease in domestic production or gross output was estimated at P1.1 trillion, while the number of displaced workers due to smuggling was at 291,070.
FPI and Fight IT Chairman Jesus L. Arranza expressed dismay over these “worsening” figures, citing that the prevalence of smuggling “deprives the government of rightful revenue that could be used for projects relating to poverty reduction and infrastracture development, among others.”
“Illicit trade cuts across all industries—from agricultural products to heavy industries. It is a crime against the economy and humanity that calls for a zero-tolerance approach from all of us. It is a serious economic problem that robs the government of billions of pesos in revenues, harms consumers and undercuts legitimate local manufacturers,” Arranza said.
Arranza cited the Fight IT research in identifying two methods of conducting illicit trade: outright smuggling and technical smuggling.
He said technical smuggling is more prevalent nowadays. Outright smuggling, he explained, happens when goods are brought into the country without the due knowledge of BOC officials. On the other hand, technical smuggling happens not only with customs officials’ knowledge of it, but at times even through their own orchestration. It is mostly characterized by undervaluation and underdeclaration of goods.
Either way, smuggled goods escape proper tax assessment, allowing illicit traders to offer and distribute goods at lower prices—effectively killing local manufacturers who pay the right taxes. Because of this, local manufacturers are unable to keep up with reduced prices of smuggled goods, subsequently forcing them to retrench employees or even close factories. Also, with huge government losses due to smuggling, unemployed and wage-earning Filipinos can hardly depend on social-welfare programs to get by, Arranza explained.
These bountiful and cyclical national issues birthed by the sustained prevalence of smuggling is exactly what Fight IT works to reduce, their commitment being “to protect consumers, safeguard government revenues, preserve jobs and ensure a level playing field among legitimate Philippine industries.”
Finance Assistant Secretary for the Revenue Operations Group Marc Dennis Y. Joven received Fight IT’s study on behalf of Finance Secretary Carlos G. Dominguez III. He commended Fight IT’s advocacy against smuggling, and promised to exert every effort “to make the BOC less vulnerable to corruption.”
“We will be relentless in reforming and reinventing the BOC. If we have to privatize certain aspects of the bureau to weed out corruption, so be it,” Joven said.
However, Arranza said he is not supportive of proposals to privatize the bureau’s operations.
“The corruption situation in the BOC is really bad, but I do not agree with privatization. Let it be government, but implement competitive exams and interviews to identify the rightful leaders—strictly no recommendations from anyone, ever,” Arranza said.
He also expressed faith in Customs Commissioner Nicanor E. Faeldon’s integrity in the face of controversies, the most recent of which is the successful slipping of some 600 kilograms of methamphetamine past the bureau’s supposedly strict security checks.
“I have talked to Faeldon, and I do believe he is trying to rid the BOC of corruption. However, if the problem is systemic, if an institution is corrupt to the core, one person will not be enough to fight it,” he said.
Image credits: Nonie Reyes