Fair trade advocates called on President Ferdinand Marcos Jr. to sign the Anti-Agricultural Economic Sabotage Act into law after it was ratified by the Senate and the House of Representatives on August 6, 2024.
Once enacted, the law will impose severe penalties on smuggling, hoarding, profiteering, cartel operations and other unlawful acts of market abuse involving agricultural products. The Senate and the House of Representatives ratified the bicameral conference committee report reconciling Senate Bill 2432 and House Bill 9284.
The Federation of Philippine Industries (FPI) said smuggling amounts to economic sabotage because it harms the local economy and steals billions of pesos in government revenue.
“Agricultural smuggling poses a significant threat to the livelihood of our farmers and fishery folk and is a major risk to consumers’ health and safety,” said assistant secretary Carlos Carag of the Department of Agriculture’s Inspectorate and Enforcement Office during the first National Anti-Illicit Trade Summit at the Manila Hotel on July 25, 2024.
“Smuggled food products bypass quality control and inspection, avoid paying taxes, and discourage local food production. It is an unfair trade practice and should be considered economic sabotage,” Carag said.
Cigarette smuggling alone has drained the country of billions of pesos in tax revenue, fueled crime, harmed consumers’ health and reduced funding for government health programs and support for tobacco farmers, the FPI said in its “Fight Illicit Trade” flyer.
The FPI also wants the smuggling of industrial products to be a nonbailable offense, mirroring a proposal to classify agricultural smuggling as economic sabotage.
Charlito Mendoza, Undersecretary for the Department of Finance’s Revenue Operations Group, said the Bureau of Customs confiscated 204 shipments worth more than P41.5 billion in the first half of 2024. The haul included P19 billion in counterfeit goods, more than P13 billion in smuggled general merchandise, and more than P5 billion in cigarettes and tobacco products.
Paul Oliver Pacunayen, acting chief of the Bureau of Customs’ Intellectual Property Rights Division, said the agency’s top five seized commodities in the first half of 2024 were cigarettes, illegal drugs, counterfeit goods, agricultural products and other general merchandise.
The FPI said 20 percent of cigarettes sold in the Philippines are illegal, with tobacco excise tax collections falling by P41 billion in the past two years because of smuggling.
Bienvenido Oplas Jr., president of Bienvenido S. Oplas Jr. Research Consultancy Services and Minimal Government Thinkers, said cigarette smuggling intensified after the tobacco excise tax exceeded P50 per pack.
Citing the Laffer Curve, Oplas said higher tax rates above a certain point can lead to lower tax revenue. Tobacco revenue reached P125.9 billion at a P30 tax rate in 2017 and climbed to P176.5 billion at P50 per pack in 2021.
“Then things literally went south. At a tobacco tax rate of P55 per pack in 2022, tax revenue was P160.3 billion, or a P16.2 billion decline from 2021. At P60 per pack in 2023, it was just P134.9 billion, or a P25.4 billion decline from 2022 and a P41.6 billion decline from 2021,” Oplas said in a newspaper column.
Oplas said the government also fell short of its tobacco tax revenue target by P49.3 billion in 2022 and by P109.2 billion in 2023.
The FPI said the Bureau of Customs seized 5,268 cases, or 53 million sticks, of smuggled cigarettes and heat sticks at the Manila International Container Port in May 2024. The products were smuggled from Singapore. The agency also confiscated P4.6 billion worth of “FLAVA” vape products from warehouses in Metro Manila after the Department of Trade and Industry banned the brand in March 2024.
