On the presumption of regularity, we will have to believe that Customs Commissioner Angelito Alvarez means what he says.
The new head of the second most important revenue agency says he will wage war against smuggling. We await the results with bated breath.
Alvarez has landed a tough job. The Bureau of Customs, which accounts for about a third of total public revenues, has been missing its revenue targets. Each time the target is missed, the budget deficit yawns even wider.
Yet everyday, in the streets, we are regaled with stories about how large an epidemic smuggling has become. Everything, from chicken parts to onions to oil to rice to sugar to luxury cars are spilling in, impervious to both the tariff barriers and all task forces formed through the ages to combat smuggling.
Wealth, especially illicit wealth, is difficult to conceal. Yet, it seems, those who made money smuggling stuff are only too eager to flash the cash — much like that guy the BIR has now dragged to court, a pawnshop owner who hardly paid any taxes and then drives around town in a handcrafted Italian luxury car valued at P26 million. That is assuming the proper customs duties were paid on the vehicle.
“Tough job” is an understatement. Alvarez is waging this battle with his back to the wall. There is simply no room for failure.
Over the immediate term, tariffs on a host of imported items will be lifted as part of our commitment to regional free trade arrangements. That will put pressure on the Bureau’s revenue goals.
The loss of revenue from the lifting of tariffs on a large range of commodities included in our free trade commitments must be compensated for by collecting every peso from everything dutiable passing through our ports. Otherwise, the collection gap will make the Bureau of Customs appear like a non-performing revenue agency.
Remember that we have also previously lifted tariffs on oil imports in an effort to appease public complaints about the price of imported oil products. That lifting is unwise. The beneficial effect for the consuming public is hardly palpable; but the fiscal wound inflicted by this policy decision is gaping.
Disagreeable as that decision to lift tariffs on oil might be, the deed has been done. It is now the problem of the Customs Bureau to find other sources of collections to cover the massive loss of revenue resulting from the lifting of tariffs on oil imports.
We can choose to look at it from the upside. Because customs duties on oil products have been lifted, oil smuggling is no longer a problem that created an uneven playing field in the entire fuel industry.
The downside, of course, is that the total revenues the Customs Bureau could collect have become significantly lower. That is bad news for all who wish we could diminish the need to incur even more debt to finance our government.
There is good news for Lito Alvarez, however: there is a large number of imported commodities that seem to so easily slipped through by means of technical smuggling.
The new Customs chief might want to take a closer look at the case of the controversial importation of Turkish flour. This made the news a few months back because the commodity is suspected of being contaminated. Now, traders of the commodity are accused of evading import duties.
According to the grapevine, a very detailed report on the smuggling operation of eight companies importing Turkish flour has been prepared and sent to Alvarez’s office even ahead of his formal assumption of the post. The report concludes that, from only one of the eight companies involved in the racket, at least P51 million in import duties and value-added taxes was denied government in the first five months of this year alone.
Two of the eight companies use the Manila International Container Port and employ similar techniques in evading payment of the proper duties. Both of them declare much smaller shipments to what actually passed through our ports. In one shipment by one company, for instance, imported 8,592 metric tons but only declared its importation as 5,389 metric tons. A second company, at nearly the same time, brought in 7,086 metric tons but declared its shipment as 4,961 metric tons.
In addition to understating the volume of their shipments, the unscrupulous importers also undervalue their shipments. According to the report sent to the Customs Bureau, Turkish flour is undervalued by as much as $24.77 per metric ton. Multiply that amount by tens of thousands of tons and the lost revenue will be very significant indeed.
The operation, involving substantial under-weighing of shipments and undervaluation of the commodity could not have become possible without the connivance of Customs personnel. Surely that connivance did not happen out of pure charity.
To be sure, collecting the proper duties due government from the suddenly hefty importation of Turkish flour will not even approximate the revenue loss from the faulty policy decision to lift levies in oil. But it is one major revenue recovery that, along with several other cases of smuggling, will somehow help offset the loss from faulty policy.
Granted, it might be very difficult to make the importers account for shipments already slipped out of our ports. But if the same racket continues under Alvarez’s watch, in an administration that has made fighting corruption a top priority, it will be difficult to continue believing he means what he says.
If the technical smuggling continues, the market will surely find out. The impact on commodity pricing and the resulting unfair competition cannot be concealed. All the brave talk about snuffing out the smuggling syndicates will sound hollow indeed.
The new head of the second most important revenue agency says he will wage war against smuggling. We await the results with bated breath.
Alvarez has landed a tough job. The Bureau of Customs, which accounts for about a third of total public revenues, has been missing its revenue targets. Each time the target is missed, the budget deficit yawns even wider.
Yet everyday, in the streets, we are regaled with stories about how large an epidemic smuggling has become. Everything, from chicken parts to onions to oil to rice to sugar to luxury cars are spilling in, impervious to both the tariff barriers and all task forces formed through the ages to combat smuggling.
Wealth, especially illicit wealth, is difficult to conceal. Yet, it seems, those who made money smuggling stuff are only too eager to flash the cash — much like that guy the BIR has now dragged to court, a pawnshop owner who hardly paid any taxes and then drives around town in a handcrafted Italian luxury car valued at P26 million. That is assuming the proper customs duties were paid on the vehicle.
“Tough job” is an understatement. Alvarez is waging this battle with his back to the wall. There is simply no room for failure.
Over the immediate term, tariffs on a host of imported items will be lifted as part of our commitment to regional free trade arrangements. That will put pressure on the Bureau’s revenue goals.
The loss of revenue from the lifting of tariffs on a large range of commodities included in our free trade commitments must be compensated for by collecting every peso from everything dutiable passing through our ports. Otherwise, the collection gap will make the Bureau of Customs appear like a non-performing revenue agency.
Remember that we have also previously lifted tariffs on oil imports in an effort to appease public complaints about the price of imported oil products. That lifting is unwise. The beneficial effect for the consuming public is hardly palpable; but the fiscal wound inflicted by this policy decision is gaping.
Disagreeable as that decision to lift tariffs on oil might be, the deed has been done. It is now the problem of the Customs Bureau to find other sources of collections to cover the massive loss of revenue resulting from the lifting of tariffs on oil imports.
We can choose to look at it from the upside. Because customs duties on oil products have been lifted, oil smuggling is no longer a problem that created an uneven playing field in the entire fuel industry.
The downside, of course, is that the total revenues the Customs Bureau could collect have become significantly lower. That is bad news for all who wish we could diminish the need to incur even more debt to finance our government.
There is good news for Lito Alvarez, however: there is a large number of imported commodities that seem to so easily slipped through by means of technical smuggling.
The new Customs chief might want to take a closer look at the case of the controversial importation of Turkish flour. This made the news a few months back because the commodity is suspected of being contaminated. Now, traders of the commodity are accused of evading import duties.
According to the grapevine, a very detailed report on the smuggling operation of eight companies importing Turkish flour has been prepared and sent to Alvarez’s office even ahead of his formal assumption of the post. The report concludes that, from only one of the eight companies involved in the racket, at least P51 million in import duties and value-added taxes was denied government in the first five months of this year alone.
Two of the eight companies use the Manila International Container Port and employ similar techniques in evading payment of the proper duties. Both of them declare much smaller shipments to what actually passed through our ports. In one shipment by one company, for instance, imported 8,592 metric tons but only declared its importation as 5,389 metric tons. A second company, at nearly the same time, brought in 7,086 metric tons but declared its shipment as 4,961 metric tons.
In addition to understating the volume of their shipments, the unscrupulous importers also undervalue their shipments. According to the report sent to the Customs Bureau, Turkish flour is undervalued by as much as $24.77 per metric ton. Multiply that amount by tens of thousands of tons and the lost revenue will be very significant indeed.
The operation, involving substantial under-weighing of shipments and undervaluation of the commodity could not have become possible without the connivance of Customs personnel. Surely that connivance did not happen out of pure charity.
To be sure, collecting the proper duties due government from the suddenly hefty importation of Turkish flour will not even approximate the revenue loss from the faulty policy decision to lift levies in oil. But it is one major revenue recovery that, along with several other cases of smuggling, will somehow help offset the loss from faulty policy.
Granted, it might be very difficult to make the importers account for shipments already slipped out of our ports. But if the same racket continues under Alvarez’s watch, in an administration that has made fighting corruption a top priority, it will be difficult to continue believing he means what he says.
If the technical smuggling continues, the market will surely find out. The impact on commodity pricing and the resulting unfair competition cannot be concealed. All the brave talk about snuffing out the smuggling syndicates will sound hollow indeed.
-Alex Magno
Source: http://www.philstar.com/Article.aspx?articleId=595565&publicationSubCategoryId=64
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