Smuggling in bed
Nobody can say if our beloved government officials are only snuggling in bed with crime syndicates, but nowadays they love to use such delicate and sanitized term as “illicit trade” that, to the guys down here, simply means “smuggling.”
On top of it, they also try to fool us by saying that “smuggling” hardly exists, which was in fact the diversionary tactic that Customs Commissioner Rozzano Rufino Biazon used, rather recently, against the furious demand of the business sector on the government to stop the rampant smuggling of pork products.
Our hero Rozzano Rufino, by the way, also pooh-poohed fear in business that the Aquino (Part II) administration would only exacerbate smuggling by imposing a 700-percent increase in the excise tax on local (i.e. Filipino) brands of cigarettes. A new excise tax system on tobacco and alcohol, tagged by media as “sin tax,” breezed through the House of Representatives last month under HB 5727, which is now under deliberation in the Senate. The question is, of course, whether or not the Palace can stuff the new sin tax into the independent-minded Senate like it did in the finger-puppet House, while some three million farmers and workers in the tobacco sector stand to lose their livelihood.
Various studies done in other countries, which the business sector actually cited in arguing against the House version of the new sin tax, already showed that excessive taxation on tobacco (i.e. cigarettes) would only encourage smuggling. As expected, our customs man Rozzano Rufino reportedly reacted with typical guile by saying that the concern was baseless, in much the same way he claimed that pork smuggling did not exist at all.
Remember, only a couple of months ago the local pork industry complained that more than 20 percent of hog raisers already lost their business due to unabated smuggling. The Aquino (Part II) administration initially ignored their complaint, perhaps believing the avowal of our customs champion Rozzano Rufino. Thus the industry threatened to hold a nationwide weeklong “pork holiday.” No more barbecue! When Malacañang finally admitted that indeed pork smuggling was a serious problem, our customs idol Rozzano Rufino capitulated by denying that he was not doing anything about the problem. In fact, he announced in media that he already ordered a 100-percent inspection of all “reefer” vans, or refrigerated shipping containers.
He did not say that his “order” would also punish all the legitimate importers of food products with infinite delay in the release of their shipments. He also did not tell us whether his people at the BoC actually followed his order, or they simply forgot to execute it, say, when it came to inspecting the shipment of actual pork smugglers. Come on—the BoC guys knew who the smugglers were all along. He also got back at the hog raisers, taking a dig at their “high cost of production,” which he claimed was the reason why they could not compete against imported pork.
Apparently, to our customs favorite Rozzano Rufino, our local industries must become so efficient that they could still trounce imported products even minus the prohibitive 12-percent VAT that smuggling eliminated for the imports. As everybody knows, except perhaps med-tech graduates who swung toward politics, Filipino entrepreneurs are already saddled with high costs of doing business not of their own doing, thanks to the high electricity rates, for instance, which are now the most expensive in all of Asia, not to mention graft and corruption such as the “tong” system.
Moreover, here is the deal, boss, with agriculture products from abroad, whether they come here through “illicit trade” or legitimate means: Most of our neighbors, including our new best friend China, subsidize their agriculture sectors quite heavily. And the Philippine government does not! And it is the fault of our businessmen that they cannot compete against smugglers? Where in “Gray’s Anatomy of the Human Body” is it written? By the way, as if on cue from somebody high in the administration, Internal Revenue Commissioner Kim Henares also dismissed the worry in business about smuggling. She even claimed that countries like Sweden, the United Kingdom and Singapore have limited “illicit tobacco trade” to only 2 percent of domestic sales in 1995. Look at that year—it was 1995. Our BIR chief used figures more than 17 years old, perhaps forcing Rep. Rufus Rodriguez (Cagayan De Oro) to comment that the government should look into recent—and obviously more reliable—data for something as ominous as smuggling. In Singapore, for instance, the government increased cigarette tax by 135 percent in 2000 to 2005. Now official figures showed that the volume of “illegal” cigarettes seized by Singapore customs actually increased from 8 million cigarettes in 2000 to 106 million in 2006. Subsequently in the years 2005 to 2009, the government froze the cigarette tax rates. It reported that smuggling declined by 45 percent in 2009.
The Singapore government admitted that its revenues dropped despite the high tax on cigarettes and not because people were smoking less but because smuggling went up. The Singapore Health Promotion Board, in a national survey in 2007, concluded that smoking incidence was virtually unchanged from 2001 despite the high tax.
According to Rodriguez, who once taught taxation law at the San Sebastian College, countries like the United Kingdom, Malaysia, Singapore and Ireland dropped punitive tax policies because of rampant cigarette smuggling. In the UK, which imposed high taxes from 1993 to 2000, making it the first European country to impose an excise tax system that automatically increased every year, at rates even higher than inflation, the government already slowed down on the tax increase. The UK found out that “smuggled” cigarettes accounted for 30 percent of the market starting in 2001, after it slowed down on the tax increase. At one point, smuggled cigarettes served some 40 percent of the market, which from 2000 to 2009 resulted in revenue losses of £45 billion.
To think, the tax increases in those countries were not even as high as the 700-percent increase in the Aquino (Part II) administration-endorsed HB 5727. That is probably why officials of the FPI, or Federation of Philippine Industries, which closely monitors cases of smuggling, even testified in the House hearing on the railroaded bill, warning about the certainty of an upsurge in cigarette smuggling. FPI believes that smuggling already denies the government yearly revenues of about P170 billion, which is even a conservative estimate, since the World Bank puts it at P240 billion. Now, how many jobs did smuggling destroy in such dead sectors as textile and tires, and how many jobs will it still destroy in the tobacco sector? And who cares? Basta, we have to accommodate some foreign cigarette company that has been dying to get into the Philippine market.
