Believed to be haven for smuggling activities notwithstanding the hundred of billions in tax incentives granted to them by government, the country’s economic zones have been described in the House of Representatives as the country’s “trillion-peso blackhole” of unrealized revenues.
Albay Rep. Joey Sarte Salceda, chairman of the House Committee on Ways and Means, on Saturday, March 6, said the House panel will dig deep into the operations of ecozones amid accusations that these have become “conduits for big-time smuggling.”
The House panel launched its probe of the alleged smuggling activities recently after receiving reports that the ecozones have become busy areas for smuggling of agricultural products, fuel and cigarettes.
Salceda said Philippine Economic Zone Authority and other investment promotion agencies should “take smuggling enforcement seriously. During the series of hearings, Salceda noted that testimonies given by resource persons raised serious suspicions that ecozones may have become conduits for big-time smuggling. Salceda said this is on top of the use of ecozone tax privileges to commit transfer pricing.
“For tax incentives in 2017, the latest complete figure, we gave P504 billion in national government tax incentives. If you price in the smuggling that these freeport zones enable, easily, the annual cost to the taxpayer of ecozones is P695 billion for that year alone,” the administration lawmaker said.
“With higher excise taxes on fuel, cigarettes, and sugar-sweetened beverages, as well as very attractive prices for food smuggling, the present figure is probably very close to 1 trillion pesos every year,” he said.
Salceda stated: “Ecozones are the country’s trillion-peso blackhole. It’s where a third of government revenues go to disappear.” Last week, Salceda’s tax committee held hearings on tobacco illicit trade and agricultural product smuggling made easier by ecozone privileges.
Salceda placed the price tag on tobacco smuggling alone at P30 billion in foregone tax revenues annually. For fuel, Salceda earlier estimated the cost from 2010 to 2019 to be P357 billion in foregone tax revenues.
“We keep watching BIR and BOC on smuggling, but we never watch freeport zones. In Clark, it’s so easy to get cigarettes that do not have tax stamps. It’s Subic, throngs of would-be agents of smuggled fuel wait every day outside the zone to negotiate,’ he said.
Probe into smuggling of agricultural products will continue with the ways and means panel set to hold an executive session on Monday, March 8.