PH gov’t loses P905B in revenues to smuggling over five years
THE Philippine government lost about P905 billion in potential revenue over the past five years because of widespread smuggling of counterfeit, agricultural, and tobacco products, an industry group said.
The Federation of Philippine Industries (FPI) said the illicit trade also erodes public trust in the government, jeopardizes consumer safety, and stifles legitimate businesses.
“We are losing P250 billion of value-added tax to smuggling,” said FPI Chairman Jesus Lim Arranza, citing a study commissioned by the group.
Smuggled goods worth about P2.3 trillion enter the Philippines annually, the FPI estimated.
“The goods that came into the Philippines without paying the usual duties and taxes will be a value of about P2.3 trillion worth of goods. And how much are we losing? It has ripple effects. It is smuggling with ripple effects in the economy. As the saying goes, there can be no government without money,” Aranza said during the first National Anti-Illicit Trade Summit held at Manila Hotel on July 25, 2024.
Agriculture Secretary Carlos C. Carag said smuggling is crippling the agriculture and fisheries sector.
“Agricultural smuggling poses a significant threat to the livelihood of our farmers and fishery folk, and major risk for the consumer’s health and safety. Smuggled food products bypass quality control and inspection, payment of taxes to DOC, and discouraging local food production. It is an unfair trade practice and should be considered economic sabotage,” Carag said.
The Bureau of Customs has confiscated billions of pesos worth of illicit cigarettes and vapes this year, contributing to a decline in tobacco excise tax collection, said Paul Oliver Pacunayen, acting chief of the agency’s Intellectual Property Rights Division.
Pacunayen said the agency’s raids in the first half of 2024 targeted primarily cigarettes, illegal drugs, counterfeit goods, agricultural products, and general merchandise.
About 20 percent of cigarettes sold in the Philippines are illegal, the FPI said. Tobacco excise tax collection has fallen by P41 billion in the past two years, reducing funds for health programs and local development projects.
Cigarette smuggling intensified after the tobacco excise tax exceeded P50 per pack in 2021, said Bienvenido Oplas Jr., president of Bienvenido S. Oplas Jr. Research Consultancy Services and Minimal Government Thinkers.
Bienvenido Oplas Jr., president of Bienvenido S. Oplas Jr. Research Consultancy Services and Minimal Government Thinkers, said cigarette smuggling intensified after the tobacco excise tax exceeded P50 per pack in 2021. Tax revenue from cigarettes plummeted in subsequent years.
“Then things literally went south. At a tobacco tax rate of P55/pack in 2022, tax revenue was P160.3 billion or a P16.2 billion decline from 2021; at P60/pack in 2023, it was just P134.9 billion or a P25.4 billion decline from 2022 and a P41.6 billion decline from 2021,” Oplas said.
About 50 percent of tobacco tax collections fund the Philippine Health Insurance Corp. and health facilities. Another 5 percent goes to local government units producing burley and native tobacco, while 15 percent is allotted to LGUs producing Virginia tobacco.
The FPI urged regulators to strictly enforce President Ferdinand Marcos Jr.’s order to end smuggling and illicit trade.
“When industry and government work together, we can achieve remarkable results. Let us continue to build on this momentum. Let us advocate for stronger policies, support the modernization of our customs systems, and promote transparency and accountability at all levels,” said FPI president Jesus Montemayor.
