Senate moves to plug massive tax leaks from car smuggling

By. Butch Fernandez – Business Mirror

Two Senate Committees are looking to craft remedial legislation aimed at making sure that tax-holiday incentives offered to investors are not misused in alleged technical smuggling activities by conniving customs officers and why car importers to dodge billion of pesos in taxes that should have gone to government coffers.

“We will see, we will find out whether the amount of jobs and the added value to the economy generated by the people given incentives is commensurate to the tax that we have given up because of the incentives,” Sen. Juan Ponce Enrile, finance committee chairman, told reporters following a public hearing on smuggling issues conducted by the ways and means committee chaired by Sen. Francis Escudero.

Enrile echoed suspicious that the switch in government policy from the progressive car-manufacturing program to the new motor-vehicle development program could be one of the sources of the tax leakage taking advantage of the government incentives originally intended to create jobs for local folks.

“We heard there is no more progressive car manufacturing. They’ve reportedly changed it into motor-vehicle development program. That’s why I’m asking: Why are they allowing entry of completely built cars, if we have car manufacturing here? We have assembly plants. SO we have to produce cars here that are sold in our country because it generates employment to our people, that’s why we are giving incentives to them. We are reducing their taxes in exchange for the jobs they generate for our people,” said.

But Enrile explained that this did not materialize. “But what this happening is, that’s not what we understand is going on. They allow the entry of completely built cars, which did not generate jobs for our people or use of local content, and they don’t benefit from the incentives given by the government,” he said.

Escudero agreed with Enrile that the tax leak could also be traced to a memorandum of agreement between the Bureau of Customs (BoC) and the Chmaber of Automotive Manufacturers of the Phils. Inc. which allows Camp to register several imported cars using only one certificate of payment (CP) of customs duties.

“There is the potential in the issuance of one CP to cover many cars. There is the potential leak when LTO (Land Transportation Office) receives inventory which is not prepared by a government official who has accountability, but only by an individual from the private sector with no liability in case there is an error in the inventory he submits,” Escudero explained.

During the hearing, Sen. Richard Gordon confirmed the lucrative smuggling schemes taking place at the Subic Bay Metropolitan Authority area, involving not just cars, but also liquor, cigarettes and even illegal drugs, as authorities uncovered recently.

Gordon revealed that he obtained reliable information that the so-called for the boys fund, amounting to at least P25,000 each, goes to officers of the Subic Bay Metropolitan Authority, the BOC and the LTO for every imported car smuggled out of the Subic Freeport.

“I have the documentation, I can prove this,” Gordon said, adding that the tax leaks were estimated at P4 billion for smuggled liquor; P13 billion for cars; and P9 billion for cigarettes. “What are the customs authorities doing to plug these tax leaks that allowed the continued flow of smuggled goods into the country without paying the right taxes?”