Gold

BIR Commissioner Kim Henares tried to sell a strange idea to the Senate. She claimed that the phenomenon of commodity smuggling is not related to high taxes.

Strange, indeed. Why else would anyone try to smuggle anything if not to avoid paying high duties and taxes? Are the smugglers, and there is an abundance of them, indulging in what they do just for the heck of it?

At any rate, Henares adds, the effective governance of the present regime will prevent the smuggling of cigarettes even if the excise tax on this specific commodity is raised by over 700%. She made the claim in order to convince the Senate to go along with the House and hike tax rates on so-called “sin products”. From the steep hike in excise taxes, government hopes to collect an additional P31 to P60 billion in public revenues.

Really?

Senate President Juan Ponce Enrile did not seem convinced at all, drawing from his long career in government, including service at the Bureau of Customs. In fact, the Senate President was willing to wager the theoretically derived volume of revenues projected by the eager exponents of a steep hike in taxes will not be met.

What is more likely is that smuggling will bring our tobacco industry to ruins and eradicate the source of livelihood of hundreds of thousands dependent on the crop.

In a recent survey of business perception, over 70% of respondents said government was not doing enough to stop smuggling. The disappointment of mainstream business men is understandable: the Customs Bureau is like a sieve, with everything from rice to garlic, from onions to gold, from vehicles to steel products are being smuggled freely. Legitimate Filipino manufacturers and our own rice producers are howling at the economic damage done by unabated smuggling.

In one wire report on the specific subject of gold being smuggled out of our economy in astounding quantities, Customs Commissioner Ruffy Biazon admitted his agency was helpless. He simply did not have enough personnel and smugglers have simply proliferated.

The case of gold smuggling is particularly revealing.

The Bangko Sentral reports that the total value of metallic mineral production in the country fell by 26% in the first half of 2012. This is due to an alarming 95% decline in its gold purchases.

Why did gold purchases drop so dramatically?

The Bureau of Mines and Geosciences (MGB) reports a drastic drop in gold purchases since the BIR began strictly imposing the collection of a 2% excise tax and another 10% creditable withholding tax from small-scale miners. The miners, for their part, say that if they pay the taxes demanded by the BIR, they would make no margin.

Consequently, they avoid the BSP buying stations and sell the precious metal in the black market. The data shows that purchases from small-scale miners fell by over 90% since the new BIR taxes were imposed. This happens even as the global price for gold is at its highest levels.

From black market buyers, gold is smuggled out of the country by every means possible. Much of the gold, insiders say, ends up in China.

With the gold black market operations, government not only fails to collect the taxes it intended. Government fails to accumulate the gold used to reinforce our reserves.

Only the black market operators and the smugglers gain a windfall from this prevailing situation. Henares’ claim that taxes do not influence the occurrence of smuggling rings hollow.

If government appears helpless before the large-scale smuggling out of gold and the smuggling in of rice, onions, garlic and finished steels products. Those who smuggle in commodities gain not only from avoiding tariffs and duties. They likewise gain from avoiding the 12% VAT from properly documented transactions.

Smuggling must be the fastest growing industry these days.

There is no other explanation between the large gap between the volume of rice we officially import and the volume of rice international data says we imported. For an agricultural country, it is a bit of scandal that there is so much smuggling of onions, garlic, chicken, pork and beef. What is left of our basic industries, such as steel, is in danger of being wiped out by products from capacity-surplus countries such as China.

In the face of the evidence, how might we be reassured that a steep hike in tobacco excise taxes will not precipitate a deluge of smuggled goods that will wipe out a major sector of our agriculture?

Gaston

Our friend Ray Gaston relocated to England many years ago. He since evolved into one of the best portrait painters there is, commissioned by so many heads of state and corporate moguls to do their official semblances.

What might be his most important work, however, is a mural that will be installed in a building at the Bonifacio Global City. It is the largest rendition of the Last Supper, 10 feet high and 30 feet wide.

Unlike the traditional Renaissance rendition of the event that had Christ and his disciples in it, Ray’s rendition has scores of people filling the large canvass space. Each face is a perfected portrait. This is not a lonely supper: it is an abundant Filipino fiesta.

Ray is in town briefly to open an exhibit of his works, including those currently displayed at the St. Patrick’s Church in Bristol, England. The exhibit will open tomorrow afternoon, August 31, at the lobby of the National Commission on Culture and the Arts in Intramuros.

Be there and appreciate the work of another Filipino genius celebrated globally.