More than P2 trillion worth of smuggled goods, including counterfeit products, general merchandise, agriculture items, cigarettes and other tobacco products swamp the Philippines each year, depriving the government of revenues and weakening the local industries, according to the Federation of Philippine Industries Inc. (FPI).
“Smuggling and illicit trade are not just economic crimes. They are social menaces that erode public trust in our institutions and compromise the quality and safety of goods available to consumers and stifle the growth of legitimate business,” FPI president Jesus Montemayor said during the first National Anti-Illicit Trade Summit held at Manila Hotel on July 25, 2024.
Montemayor said that over the past five years, the government lost an estimated P905 billion in potential revenues due to smuggling.
FPI chairman Jesus Lim Arranza said that based on a study commissioned by the industry group, “we are losing P250 billion of value-added tax to smuggling.” Arranza said that as VAT represents 12 percent of the value of imported goods, around P2.3 trillion worth of smuggled products are unfairly competing against locally-produced products in the domestic market each year.
“The goods that came into the Philippines without paying the usual duties and taxes will be a value of about P2.3 trillion worth of goods. And how much are we losing? It has ripple effects. It is smuggling with ripple effects in the economy. As the saying goes, there can be no government without money,” Aranza said.
Assistant secretary Carlos Carag of the Department of Agriculture Inspectorate and Enforcement Office (DAIE) said smuggling also hurts the agriculture and fisheries sector.
“Agricultural smuggling poses a significant threat to the livelihood of our farmers and fishery folk, and major risk for the consumer’s health and safety. Smuggled food products bypass quality control and inspection, payment of taxes to DOC, and discouraging local food production. It is an unfair trade practice and should be considered economic sabotage,” Carag said.
Paul Oliver Pacunayen, acting chief of the Intellectual Property Rights Division of the Bureau of Customs, said the five most commonly smuggled products are cigarettes, illegal drugs, counterfeit goods, agricultural products, and other general merchandise.
He said this was based on the number of warehouses raided by BOC agents in the first half of 2024. The BOC confiscated billions worth of illicit cigarettes and vapes this year, which explains the drop in tobacco excise tax collection.
It is estimated that about 20 percent of cigarettes sold in the Philippines are illegal, with tobacco excise tax collection falling P41 billion in the past two years because of smuggling, depriving funds for the government’s health programs and local government units’ development projects, according to the FPI.
Bienvenido-Oplas Jr., president of Bienvenido S. Oplas, Jr. Research Consultancy Services and Minimal Government Thinkers, said in his regular newspaper column that cigarette smuggling intensified when the tobacco excise tax exceeded P50 per pack in 2021.
