Should gov't legalize it? "Ukay-ukay" trade thrives in Phl

CEBU, Philippines - The widespread proliferation of used clothing or "ukay-ukay" business in the Philippines is a clear proof that importation of these goods continues to exist despite the fact that it is prohibited by law.

The government has long been banning the entry and selling of second-hand clothing in the country.

But some government officials have proposed for the legalization of the business to finally stop the smuggling activities.

In fact, reports said authorities have suggested that making such business legal would generate tax revenues and at the same time protect the local garments industry.

'Review the law'

An official of the Bureau of Customs Cebu expressed calls to update and review Republic  Act No. 4653, an "act to safeguard the health of the Filipino people and maintain the dignity of the nation through the prohibition of the importation of used clothing and rags."

And that lawmakers should consider revisiting the law to weigh in circumstances on legalizing the activity.

"Personally, I think it's very wise that our lawmakers look into it again for review," said Lawyer Kenneth Kernn A. Sesante, the chief of staff of Customs Cebu adding that circumstances considered before may no longer be the case today.

He even cited that some congressmen, in the past, recommended to legalize the "ukay-ukay" trading in the country.

In  2011, Mindoro Oriental Representative Reynaldo Umali filed House Bill 5188 to encourage the Congress to finally allow the importation and sale of used apparel.

"As far as the BOC is concerned, in terms of legalization we will live it up to the lawmakers kay sila man gyod maghimo sa atong mga laws," Sesante said.

He explained that despite the ban, many would still bravely engage and take the risk in this business as it assures big profit considering many Filipinos still continue to patronize "ukay-ukay" goods since its inception many years ago.

Several people choose to shop at "ukay-ukay" because of reasonably priced items and most of these are actually branded.

Lack of manpower

The Customs official also revealed that lack of manpower is one factor why it's hard for them to totally check the bundles of these used clothing that pass through their agency: "That's why we need to improve our manpower."

"Naa gihapon tay gipang-seized nga mga used clothing,"Sesante said. "Smuggled ang items in the sense nga tagu-on siya from the legal items. In other cases, sa laing ports nila ipaagi."

The seized items are usually donated with the recommendation of the Department of Finance to the Social Welfare Department for distribution to calamity victims, he further said.

The chief added used apparel imports are only allowed if these are intended for donation especially to the poor and calamity victims.

Moreover, the BOC could also not identify the big suppliers of second-hand clothes, Sesante noted, although he emphasized the bureau is focusing more on profiling.

This aims to trace the background, origin and description of the importer and the consignees involved in the process, he explained, saying that as far as the BOC is concerned, their main task now is to confiscate whatever is smuggled.

He also said only importation of used clothing are banned in the country and that used curtains, blankets, towel among others are allowed.

He further said: "We only tax kadtong mga importable and regulated items. Prohibited items are not taxed but are seized." Tariff is the tax imposed on imported goods and services.

Taxing traders

On the other hand, the Bureau of Internal Revenue Cebu said it continues to do tax mapping to identify those involved in any kind of business tocomply with the tax obligation set by the government.

Once an enterprise owner earns P100,000 (the bureau's minimum threshold) or more as his gross sales per year, he must already comply with bookkeeping, business registration and the requirements needed by the bureau, said BIR Cebu's legal chief Neri Yu.

Ukay-ukay retailers who have stores are  required to pay the correct income taxes while those who only set up stalls on the sidewalks are not pursued by the bureau, he explained.

The tax mapping only covers those businessmen who have stalls and are spending for operating and overhead expenses, making them as regular taxpayers.

The legal chief even cited an example: "Modako na gani ang operation modako sad ang income. Duna na kay expenses sa abangan and purchases sa raw materials. Those are the things you should recover to achieve a break even."

A store reminder that says "Always ask for a receipt" and a Certificate of Registration proves that an establishment is duly registered.

The Tariff and Customs Code says BOC collect the VAT and other excise tax for articles being imported into the country.

"Sa among tax mapping apil na gyod nang mga ukay-ukay vendors ug naagian na namo ang uban," said HermenoPalamine, BIR Cebu regional director, adding only those marginalized vendors are exempted from the income tax.

He however admitted that the agency lacks people to make sure a wide coverage during the tax mapping.

Tax mapping is the bureau's activity in which personnel roams around a place to identify who are the new stakeholders in the community.

Those who have been issued business permits by the local government but have not been listed on agency's database are the target of the campaign.

"Basic gyod ana is that the law applies to all kadtong mga marginalized vendors who are not covered by our tax requirement," the director noted.

"Mao na silang naa sa underground economy kanang naa sa tabi-tabi mga ginagmay lang," Neri said. "Under our regulation di man na sila required sa pagresibo ug parehistruhon tungod lagi kay panginabuhi ra nila."

Meanwhile, Palamine claimed his office does not have direct information on the big suppliers of used clothing in Cebu, saying the Customs probably may have knowledge on the matter.

The BIR normally asks all kinds of import data not specifically on "ukay-ukay" because generally it is already included in the general merchandise, Neri shared.

"Mao nang di gyod mi maka-identify og suppliers sa ukay-ukay," he added.

He explained that smuggled items are those mis-declared as to the real description of the wares: "Para".

While the Customs Bureau is mainly focused on the regulation of import activities, the Internal Bureau, on the other hand, is keen on taxing the income of retailers.

The government computes its gross domestic product by relying on legitimate income reports from companies, individual taxpayers and non-profit organizations.

However, what is not included in the computation is the income generated by people who are part of underground economy which activities can be legal or illegal. (FREEMAN)