Fuel remains top smuggled product

The government continues to lose as much as P200 billion in revenue yearly due to increasingly sophisticated forms of smuggling, with petroleum being the top product being smuggled into the country, according to the head of the Federation of Philippine Industries.

FPI char Jesus Arranza said the preferred method nowadays was the so-called “technical smuggling” where importers underdeclare the value of the products being brought into the country and, in the process, pay less duties.

“Based on our computations, and comparing these with International Monetary Fund data on (other countries’) exports to the Philippines, we lose P200 billion every year,” the antismuggling advocate said, explaining that these losses did not include the damaging impact of “multiplier effects” across the economy.

“Smuggling affects local industries,” he said. “They end up with reduced sales, and because of that, they reduce what they pay to the government.”

Apart from rampant smuggling of petroleum products—long the subject of complaints by large oil firms like Petron Corp., Pilipinas Shell and Chevron—Arranza said technical smuggling was also rampant with tobacco, cement, palm oil, wood and steel bars.

“There is rice smuggling, too, but that has abated recently,” he said, adding that government’s efforts had managed to deter some smugglers of late.

He explained, however, that the problem was “multifaceted” and smugglers had adapted their methods to evade government’s efforts. One such scheme is “warehousing” where the value of duty-free raw material imports meant for the production of exportable goods is underdeclared.

“The racket is underdeclaration or connivance with some government agencies where they tamper with formula of manufacture,” Arranza said. “They’ll declare an increased amount of wastage, for example.”

Arranza said the FPI’s own estimate puts the magnitude of the smuggling problem at P900 billion over the last five years, bringing it close to the P200 billion in yearly government losses estimated earlier.