NextGen Day

Smuggling costs the government PHP250 billion annually, thus an advocate is urging both the public and commercial sectors to unite in their opposition to the illegal activity.

Businessman and FIGHT Illicit Trade (FIGHT IT) Chair Dr. Jesus Arranza stated in a briefing on Tuesday that among the eight industries affected by smuggling, the manufacturing of cigarettes accounts for the largest share of tax leakage, with an estimated PHP24.7 billion annually just for excise taxes.

He said that smuggled cigarettes had been discovered in Cebu, Palawan, Basilan, Tawi-Tawi, and Zamboanga, while illegal cigarette factories had been searched in Cavite and Pampanga.

According to him, contraband cigarettes originated in Cambodia, Vietnam, China, and Indonesia.

According to Arranza, a reform was implemented that raised taxes on alcohol and cigarettes, but due to the influence of smuggling, the government was unable to adequately collect these revenues, which prevented the Universal Healthcare Program from receiving appropriate funding.

“The additional tariff made the business of smuggling cigarettes much more profitable. It might make the country’s smuggling issue worse, he said.

Other businesses impacted by smuggling include those that produce tires, steel, liquified petroleum gas (LPG) gas tanks, textiles, garments, coconut, and sugar.

Using data from the Organization for Economic Cooperation and Development (OECD), Arranza said that the yearly earnings from illicit commerce are almost USD 870 billion.

He pointed out that, among other things, domestic growth and the employment situation will continue to be significantly impacted if the public and private sectors stay divided on this subject.

For starters, he claimed that the local production of coconut oil, which must pay the 12 percent value-added tax, is being negatively impacted by the unlawful traffic in palm olein (VAT).

He claimed that imports of palm olein are VAT-free, but only if they are used to make animal feed.

However, he claimed that dishonest merchants either sell the imported olein as cooking oil or utilize it to make bio-diesel.

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