Finance Secretary Carlos G. Dominguez III has ordered the Bureau of Customs to immediately double-check trade figures with its Chinese counterpart to get to the bottom of possible technical smuggling of goods from and to China, which deprives the government of billions of pesos in tax revenues.
In a statement Wednesday, the Department of Finance said Dominguez had asked Customs Commissioner Isidro S. Lapeña to meet with his counterpart in the Chinese government right away to check the narrowing but still significant gap between that country’s registered export volumes to the Philippines and import figures officially reported here.
“Official trade data show that the estimated discrepancy between registered Chinese exports to the Philippines and registered Philippine imports from China has been declining but still very large, with the gap reported at 60 percent in 2010, 57 percent in 2015, 48.7 percent in 2016 and 48 percent in the January-July period of this year,” Dominguez explained.
As such, Dominguez said he had asked Lapeña “to invite his Chinese counterpart to sit down and review the data.”
Citing Philippine Statistics Authority data, the DOF noted that as of July, imports from China supposedly reached $9.24 billion, which was 48-percent lower than Chinese figures showing exports to the Philippines at $17.77 billion.
“It is going down but it’s still large. These numbers, we’re not sure if they’re apples to apples. The definitive figure will come out from Lapeña’s sitting down with his counterpart and working it out,” Dominguez said.
Last month, the DOF quoted Lapeña as saying that the wide discrepancy between China’s recorded exports and imports to the Philippines might be attributed to the gross misdeclaration or undervaluation of goods in terms of either volume or weight.
Also, Lapeña had said that the discrepancy in trade figures was due to the possible use of “consignees for hire,” which leads to goods released to “hidden’ traders” and not to the consignees on record.
The hiring of consignees and hidden traders allowed the importer to evade the scrutiny of the Bureau of Internal Revenue, according to Lapeña.
“In both instances—misdeclaration or undervaluation and the use of consignees for hire—benchmarking and the submission of fake documents allow traders to get away with these underhanded schemes,” Lapeña explained.
Last year, Dominguez said the DOF wanted to sharpen its teeth against smugglers as the government loses about P231 billion annually to technical smuggling.
Dominguez noted that foregone revenue, which was reflected by discrepancies between the import volume reported by local traders and actual figures recorded by their overseas suppliers, accounted for 2 percent of the gross domestic product (GDP), highlighting the need to improve customs and the tax systems’ efficiencies.
The Finance chief had also cited UN Comtrade data showing a P1.8-trillion gap in 2014 between the value of importers’ shipments and those reported by the exporting countries.
Dominguez had acknowledged that such gap “could be the result of timing issues and the inclusion and exclusion of particular commodities in reporting, and not outright evidence of smuggling.”