Philippines Cracks Down on Smugglers, to Raise Revenue

March 25, 2011 Taxation in Philippines

New 20 Philippine Peso BillThe Philippine’s two primary tax agencies are considering a new cooperative project aimed at reducing smuggling and tax evasion by companies registered in the Philippines.

In a statement released on March 24th the Bureau of Internal Revenue (BIR) of the Philippines announced its new proposal for the Bureau of Customs (BOC), which would require local companies to present their latest income tax returns before being granted clearance for their imports.

According to the BIR, the new obligations would allow the two tax agencies to cut down on the use of “dummy corporations” for tax evasion and smuggling. Finance Secretary Cesar Purisima commented on the proposal, saying; “…this is once again a sign of greater cooperation between BIR and Customs. Smugglers and tax evaders should take this as a warning that the government is serious in cracking down against them in order to raise revenues.”

The proposal follows a data matching project conducted by the BIR and BOC earlier this year, which compared data on the top 5 000 importers and top 5 000 taxpayers in the country. It was found that among the highest importers, only one third qualified as the top taxpayers. The BIR Deputy Commissioner Lilia C. Guillermo said that the comparison provided “indicative information of the importers activities”, and the data is being currently verified for signs of tax evasion and smuggling, while stronger actions by tax authorities is being considered.

At this stage of the investigation tax authorities have already processed information about 496 of the most obvious instances of tax evasion and smuggling. It is hoped that the new proposal will eradicate data mismatching, false reporting and uncompleted requirements.

The push towards greater tax compliance follows an announcement made earlier in March 2011, in which the government pledged not to raise tax rates or instate new taxes, and instead pursue revenue improvement through increased compliance measures.

Photo by Kelvin Servigon