Anti-Agricultural Smuggling Act of 2016

Janeth Parcon Tax Manager, PwC Philippines 04 Aug 2016

On 25 July, President Rodrigo R. Duterte delivered his first State of the Nation Address (SONA) as the 16th President of the Philippines, focusing on improved government services, tax reform, transportation, tourism and agriculture, and economic development, among others.

Taking up the SONA agenda, Agriculture Secretary Emmanuel F. Piñol has said that he is tasked with accomplishing two things -- to ensure that sufficient food for Filipinos; and to stop corruption within the agency. These objectives may be achieved with the help of Republic Act (RA) No. 10845, or the Anti-Agricultural Smuggling Act of 2016, signed by former President Benigno S. C. Aquino III on 23 May, which primarily aims to boost the productivity of the agricultural sector and protect Filipino farmers and agricultural enterprises from illegal traders and importers.

Currently, the Philippines is not self-sufficient in agricultural products such as rice in part due to the impact of climate change on the rice crop. As a result, the country depends on imports from neighboring countries. This dependency is seen by importers and traders as an opportunity to import and sell goods without paying the correct taxes and duties. Additionally, farmers and traders, particularly small and medium enterprises (SMEs), have seen their sales struggle due to unfair competition with contraband rice imports.

The Anti-Agricultural Smuggling Act considers large-scale smuggling of agricultural products as economic sabotage. It is committed by engaging in any of the following activities which involve at least P1 million worth of sugar, corn, pork, poultry, garlic, onion, carrots, fish, and cruciferous vegetables, in their raw state, or which have undergone the simple processes of preparation and preservation for the market, or a minimum of P10 million worth of rice, as valued by Bureau of Customs (BoC):

  • Importing or bringing into the Philippines without the required import permits from the regulatory agencies;
  • Using import permits or persons, natural or juridical, other than those specifically named in the permit;
  • Using fake, fictitious or fraudulent import permits or shipping documents;
  • Selling, lending, leasing, assigning, consenting or allowing the use of import permits of corporations, nongovernment organizations, associations, cooperatives, or single proprietorship by other persons;
  • Misclassification, undervaluation or misdeclaration upon filing of import entry and revenue declaration with the BoC in order to evade of the payment rightful taxes and duties due to the government;
  • Organizing or using dummy corporations, nongovernment organizations, associations, cooperatives or single proprietorships for the purpose of acquiring import permits;
  • Transporting or storing the agricultural product subject to economic sabotage regardless of quantity; or
  • Acting as broker of the violating importer.

The Act also imposes sanctions on large-scale smugglers, including those who knowingly aid them and allow the smuggled goods to get into the country, such as transporters or warehouse/storage, as follows: (1) Forfeiture of the smuggled agricultural products and the property used in smuggling in favor of the government; (2) A monetary fine equivalent to much as twice the fair value of the smuggled agricultural product and the aggregate amount of the taxes, duties and other charges avoided; and (3) Imprisonment ranging from 12 years to life depending on the violator/violation.

If the offender is a juridical person, criminal liability shall attach to its president, chief operating officer or manager who consents to or knowingly tolerates the commission of the crime.

If the offender is a government official or employee, the penalty shall be the maximum prescribed. Also, he shall suffer an additional penalty of perpetual disqualification from public office, to vote and to participate in any public election.

In case the offender is an alien and the prescribed penalty is not life imprisonment, he shall be deported after serving his sentence without further proceedings for deportation.

Further, any person, natural or juridical, found guilty under this Act shall also suffer be perpetually and absolutely disqualified from engaging in any business involving importation.

The harsh penalties are intended deter smugglers from illegal transactions. Needless to say, effective enforcement mechanisms and vigilance of various government agencies, especially the BoC and DoA, should strengthen the fight against smuggling.

The passing of RA No. 10845 supports one of the 10 points in the economic agenda of President Duterte, which focuses on the agricultural sector. By placing more safeguards on illegal importation, the Anti-Agricultural Smuggling Act will, in effect, provide small farmers more opportunity to market access and encourage them to increase their productivity with the help of development plans to be laid down by the current administration.

It is hoped that the implementing rules and regulations will be released soon so that the agricultural sector can finally say that change in the marketplace is at hand. It’s the same spirit of change that former President Aquino expressed when he said, “that I will leave something a lot better than what I found.”

The views or opinions in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.

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Janeth Parcon

Tax Manager, PwC Philippines

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