Legislators’ Forum on the Scourge of Smuggling

18 May 2011Dulcinea, Quezon City

• Smuggling is an illegal act of importing & exporting goods secretly without payment of legal duties or in violation of the law. It is considered a major threat for the following reasons:

• Smuggling kills jobs and livelihood• Smuggling pushes local industries to the brink of

closure• Smuggling robs government of revenues needed

for its operations and projects• Smuggling is sacrificing our farms and industry to

the altar of economic demise

Fortify the walls against smuggling

• Two kinds of smuggling

Outright smuggling: no documents involved, no import entries

Technical smuggling: undervaluation, misdeclaration, misclassification

    2009 2010              

Imports Documented ()   $ 46.39 $ 59.90

       

Assume documented is only 75.0%   

Therefore actual total imports equals   $ 61.85 $ 79.87

then outright smuggled is 25.0% $ 15.46 $ 19.97

Forex is assumed at 47.64   45.11

Outright smuggled amount is   736.63 900.70

Tax rate saved VAT 12.0%   

Ave.duty 5.0%   

Total assumed tax rate evaded 17.0% 125.23 153.12

Estimated government revenue lost

Of total documented imports, assume that 60.0%

is non-dutiable  

and 40.0%is dutiable         

Therefore, non-dutiable imports total  $ 27.83 $ 35.94

Dutiable imports total  $ 18.56 $ 23.96        

Of total non-dutiable, assume legitimate is 75.0%   

Therefore non-dutiable and non-legitimate is 25.0% $ 6.96 $ 8.99

       

Total assumed tax rate evaded 17.0% 56.35 68.90

Of total dutiable, assume tech. smuggling is 25.0%

$ 4.64

$ 5.99

Of total dutiable, correct importation is 75.0%   

      Total assumed tax rate evaded 17.00% 37.57 45.94

       

       

TOTAL taxes evaded  219.15 267.96       

TOTAL taxes due  500.91 612.47       

leakage (percentage)  44% 44%

According to the news • P1B in revenues lost in steel smuggling, July 6, 2010• Govt losing P60B yearly in oil smuggling, Sept 8, 2010

Other sectors affected by smuggling

• In the automotive industry, Toyota Philippines’ total sales in 1997 stood at 166,000 units. As of December 2002, only about 85,000 units were sold because of smuggling of auto parts. This is eating up 40 percent of the local manufacturer’s market share. Also, smuggling of motorcycles has caused massive layoffs in the legitimate motorcycle industry and shutdowns of motorcycle plants in Cebu.

• PhP5B revenues from rice smuggling every year

• The importation and smuggling of temperate vegetable have brought multi-million pesos loses to 250,000 upland vegetable farmers and families

• P30B in forgone revenues in the footwear industry for a period of 6 years

• Virtual collapse of the textile industry due to technical smuggling of yarn and textiles

• In the local Match and Lighters Industry, a record high of 4 million pieces of lighters enter the local market every month either undeclared or misdeclared as not being reported in shipping manifest or 48 million pieces a year. Our local producers were forced to trim down its labor force. The match industry is likewise affected due to the consumers shifting to cheaper lighters from China. The local match production has gone down by almost 50% because of cheap lighters.

• P2B revenue lost in the petrochemical industry annually

• Ilan ang dapat nagawang low cost na pabahay? Almost 1.25 million low cost houses per year.

(Data coming from the HUDCC reveal that we have a total housing backlog of 3,756,072 since 2005. We could have solved the housing problem in 3 years time);

• Quoting a study by the Center for Research and Communication, the BOI said housing has a 16.6 multiplier effect, so that every P1 million investment in housing would generate P16.6 million worth of economic activity

HUDCC estimates that one housing unit would require 8.3 persons to work for three weeks (2 persons for a year) = 2.7 million jobs per year

Ilang classrooms ang dapat nagawa? At P650,000 budget per classroom, the government could have built 337,153 classrooms or 14,607 school buildings composed of 30 classrooms with elementary and high school education ;(Currently, classroom shortage in the country stands at 27,124 according to Juan Miguel Luz, NIPS);

Ilang kilometro ng daan ang dapat nagawa? A. 24,345 kilometers of concrete road could be built every year (2 lanes Portland cement, 6.70 meters wide, including earth work and drainage system.) B. 31,301 kilometers asphalt road;

Ilang barangay health centers ang nagawa? 14,609 ang dapat na nagawang barangay health centers kada taon, with an area of 30 square meters and minimum equipment at P1.5 million each;

Ilan ang pwedeng naging subsidyo sa ating mga magsasaka kada taon? There is a minimum of 3 million farmers every year. Farmers could have received P73,036 annual farming subsidy per farmer.

more agricultural infrastructuremore domestic support for our ailing industries

FAIR TRADE ALLIANCE

Salamat Po