Taxes, smugglers and the poor

It’s a virtual gold mine that yields half a trillion pesos in income for the country every year. But because the government fails to operate the “minefield” in a trustworthy way, crooks deprive the government of P231 billion in additional revenues yearly.

A gold mine is the metaphorical equivalent of the Bureau of Customs (BOC), because of its capacity to produce vast wealth for the country annually. And the huge amount of wealth lost yearly is due to dishonest officials and businessmen responsible for smuggling and the misdeclaration or undervaluation of imports.

I serve as counsel to five domestic steel manufacturers who have been ringing alarm bells because they’re being driven out of business by rampant smuggling. Aside from frauds at the BOC, they complain of illegal importations in free port zones and bonded warehouses.

Smugglers deprive the government of billions of revenues because they don’t pay value-added tax and income tax, enabling them to unfairly sell cheaper products that drive legitimate companies out of business.

The huge revenues lost yearly from Customs irregularities have been on my mind because the Duterte administration has recently implemented the Tax Reform for Acceleration and Inclusion (TRAIN) Law. The new tax law aims to raise wealth for the government in order to fund its massive infrastructure program consisting of 75 “game-changing” projects such as rail transport systems, modern air and sea ports, expanded highways and new bridges.

The projects the government seeks to fund are noteworthy. But the funds that will be used are being sourced from a new tax law that, yet again, heavily burdens the poor. It is imperative that the government exert full effort to collect taxes that are due from rich businessmen, before imposing taxes that greatly affect the poor.

The P231 billion in revenues lost yearly from fraudulent Customs transactions are taxes due from unscrupulous importers. These lost revenues are almost double the P131 billion in expected tax revenues from the TRAIN Law this year. The poor need not be burdened by the TRAIN Law if only the BOC ran after unscrupulous importers.

This administration repeats the mistakes of past administrations by relying on the trustworthiness of new officials to fix loopholes at the BOC. The amount of “tara” (grease money) offered by smugglers to Customs officials is way too huge for many to resist. Under a past administration, the “tara” reportedly given regularly to a mere BOC deputy commissioner amounted to P20 million every week. That’s a whopping P1 billion in bribe money per year given to just one official.

The “tara system” still thrives at the BOC even under the current administration, according to Sen. Panfilo Lacson.

The only way for the government to eliminate fraud at the BOC is to minimize human intervention in Customs transactions, and to implement online transactions instead. The government should implement the long overdue modernization of the BOC computer system that was started by former Customs commissioner John Sevilla.

Sevilla started the bidding process to modernize the BOC computer system in order to minimize human discretion and maximize transparency in Customs operations. A joint venture company led by Omniprime Inc. submitted the lowest responsive bid, and it was poised to be awarded the contract when Sevilla resigned due to “political pressures.” The bidding project was canceled by his successor, Alberto Lina, for a flimsy reason that has just been declared unlawful in a case I filed at the Supreme Court (BOC vs Hon. Gallegos; GR No. 220832).

President Duterte was swept into power because of huge voter resentment at an economic system where the rich only get richer, while the poor sink deeper into poverty. The contrasting fortunes of importers who attain vast wealth by cheating the government of billions of taxes, and the poor who end up paying for the revenue shortfall, is a vivid example of what is awfully wrong in our country.

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