Think tank PIDS: Used car smuggling causing P21B in tax leak

Rampant smuggling of used vehicles is causing an estimated P21 billion in revenue loss or tax leak, apart from being a major obstacle keeping the automotive industry from realizing its full potential, government think-tank Philippine Institute for Development Studies said on Tuesday.

 

Traders use free ports and other special economic zones  to avoid paying correct duties and taxes when they bring in used cars, Aldaba noted. Smuggled cars—which sell 30 to 50 percent lower in the market—directly competes with the auto industry.

 

The study—“Can the Philippine Auto Industry Survive Smuggling? penned by PIDS senior research fellow Rafaelita Aldaba—noted significant statistical gaps in the number of registered vehicles and auto sales when comparing data from Land Transportation Office (LTO) and Chamber of Automotive Manufacturers of the Philippines. In 2009 alone, LTO counted 182,589 new vehicles that were registered against industry sales of 132,444 which showed a 27 percent discrepancy. 

 

The statistical gap in 2009 translates to P21 billion in revenue loss, according to PIDS. 

 

As catalysts for expanding the automobile industry, Aldaba cited an expanding middle-income population and billions of dollars in remittances from overseas Filipinos, plus the expectations of experts that the third wave of motorizaton in the Association of Southeast Asian Nations will happen sometime between 2015 and 2022 when the region strikes down trade barriers as a single market.

 

“All these potentials will be difficult to realize if smuggling and issues of importation of second-hand vehicles are not resolved swiftly,” she said in a statement.

 

However, a murky policy environment, the discrepancy in statistics on registered motor vehicles, and revenue losses in the industry bare government’s seemingly tepid efforts to curb smuggling of imported vehicles.

 

Executive Order 156 bans the importation of used cars, and parts and components except those for diplomats and Filipinos returning from abroad, according to the PIDS research fellow. 

 

But the Court of  Appeals in 2003 declared EO 156 unconstitutional, until the Supreme Court overruled that decision in 2006, according to PIDS.

 

EO 156 was tested anew in the first quarter of the year, when 200 imported used cars entered the country through Port Irene in Cagayan, PIDS alleged.  — VS, GMA News