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Clamping down on Customs corruption would be epoch-making for the country

Senator Panfilo Lacson’s detailed allegations on corruption at the Bureau of Customs (BoC), should prod President Duterte to clamp down on corruption in the agency with the same intensity as his war against illegal drugs.

If he does, and he succeeds, it would be epoch-making for the country, with the long-term beneficial consequences perhaps even larger than his war against drugs.

It is serendipity that the Senate probe into how P6 billion worth of shabu cleared Customs as well as Lacson’s exposé has put the public’s spotlight on BoC corruption, at the same time that Duterte is forced to address it, given the innuendos that his son Paulo is involved in it.

There are reasons why totally removing graft from the BoC will be a watershed for the country.

First, the BoC, based both on surveys on Filipinos’ perception and on deductions from statistics, is the most corrupt agency of government. If Duterte, as he has said several times, is as angry at corruption as he is against illegal drugs, he would have to target the BoC first.

It is the lessons in his battles to clamp down on corruption that he will see what are necessary to rid our government of corruption. A Duterte victory in making the BoC a graft-free agency would be the precedent in reforming the other agencies in government.

In the US, the breakthrough in that country’s campaign against corruption was the transformation of its Department of Agriculture, which had been notorious for graft, into an exemplary agency in the 1920s. In Hong Kong, it was the police department which was first rid of corruption.

The corruption at the BoC is the epitome of graft in this country as it is organized like a mafia organization and practically involves the whole agency. There is even a system for determining how the dirty money is to be collected and distributed. This involves the imposition of the so-called “tara”, or bribe money, for each container van the agency clears. This is then distributed to nearly all of the agency’s offices, starting at the agency head’s office. I was told that even security guards and clerks have their share in the “tara” distribution.

Revenue boost

Second, if the BoC collects the duties and taxes it is supposed to collect, the country will have such a boost in its revenues that it would be easier to fund such crucial anti-poverty measures as free quality education, socialized housing, and hospitalization.

The bribes Lacson claims are given to BoC officials per 40-foot container van total at least P100 billion per year. Since these bribes are given to evade or lower duties and the much bigger value-added taxes, a graft-free BoC’s revenues would easily triple, when it collects the right duties and taxes.

As in the case of illegal drugs, smuggling in the country went out of control during President Aquino’s term. Using direction-of-trade statistics of the International Monetary Fund, I quantified two years ago (in my column “Smuggling utterly out of control under Aquino regime: P4 trillion in last five years”) how much smuggled goods totaled from 2005 to 2009.

My conclusion: Nearly one-fourth of imports into the country from 2010 to 2015, or under Aquino’s watch, were unreported and therefore untaxed, totaling $94 billion – for an astronomical P4 trillion. That’s more than four times the estimated smuggled value of just $21 billion from 2005 to 2009, during President Arroyo’s term.

This is validated by the fact that the finance department’s statistics show that the BoC’s tax effort (or the ratio of its collections to the GDP) had gone down to 2.6 percent during Aquino’s time, from the 3-percent levels under Arroyo.

I estimated, using an average 6 percent import duties and the 12 percent VAT (which the BoC collects), that the country lost one trillion pesos in duties and taxes because of a corrupt BoC in the six years under the incompetent Aquino.

Other than Faeldon’s fellow mutineer Gerardo Gambala, the other BoC deputy commissioners were ranking officials in Aquino’s administration. Ariel Nepomuceno was already a deputy commissioner in the past administration. Teodoro Raval and Edward James Dy Buco were in other crucial posts in the BOC, while Natalio Ecarma was one of Aquino’s defense undersecretaries. Didn’t Duterte know this?

Third, If Lacson’s allegations are true, it is obvious that putting purportedly honest people—like the Magdalo mutineers and even a respected retired general—to reform an institution isn’t enough.

As Lacson himself noted in his privilege speech, the magnitude of graft money in the BoC is so great that it can buy even an honest man’s soul.

If his allegations are true, it is not such a mystery why a Marine captain who graduated from a second-class university like Faeldon would accept, as Lacson alleged, a ”welcome gift” of P100 million in cash so he would cooperate with the graft mafia in the agency. (Faeldon denies the accusation but reveals that he was offered P300,000 a week by an importer when he assumed that post. The question that arises though is why didn’t he report the bribe attempt, and file charges against the importer.)

Fidel Ramos had a magic bullet for reducing corruption at the BoC when he contracted the Swiss-based Société Générale de Surveillance to tell the agency how much the value of commodities from selected countries were, which gave the BoC little leeway to undervalue imports. That is the main reason why the BoC’s tax-effort ratio averaged 5 percent during Ramos’ term, a level never reached after, when the SGS stopped their services.

There are other approaches to reducing corruption in the BoC. Two of these have been initiated a decade ago, which however had not been completed. The government has been unable to install full computerization of the BoC’s work in determining valuations of shipments and other labor-intensive but repetitive aspects of importations. It also hasn’t provided enough X-ray machines for examining the contents of container vans.

Why has government scrimped on the funds needed for these when it can quickly recover such expenses in the form of higher revenues? Or is it because Customs officials haven’t really pushed for such needed funds and equipment as these obviously will reduce their loot?