Illicit trade syndicates funding organized crime groups – BIR chief

Bureau of Internal Revenue (BIR) Commissioner Romeo Lumagui Jr.

MANILA, Philippines — Bureau of Internal Revenue (BIR) Commissioner Romeo Lumagui Jr. has expressed alarm over reports that illicit trade syndicates may now support and fund organized crime groups, putting local and international communities in great security peril.

“In many instances, money generated from illicit trade is used to fund organized crime resulting in heightened security risks both locally and internationally,” Lumagui said.

The BIR chief also disclosed this “alarming situation” in a gathering of over 120 local and foreign policymakers, law enforcement officials, and business representatives meant primarily to discuss measures to address the global illicit trade problem.

Noting that the problem of smuggled goods has extended to digital spaces, the commissioner has also committed to intensifying enforcement of laws and regulations against illicit trade of unregistered and non-compliant vapes and heated tobacco products as they continue to be sold in online shopping platforms like Lazada, Shopee, and Facebook Marketplace.

During the event, dubbed the Global Anti-Illicit Trade Summit, held in Taguig City, participants extensively discussed the issue of illicit trade in the global economy. They cited illegal cigarette trade as one of its “huge” problems and the “most common item in cross-border,” but Lumagui’s statement gave them worse concerns to consider.

According to both local and international law enforcement agencies, organized crime networks are billion-dollar businesses operating in many crime-prone areas.

These illegal activities may include human trafficking, money laundering, drugs, armed robbery, fraud, and extortion and cybercrime, to cite a few.

The problem of illicit cigarette trade was the reason BIR incurred a 20 percent shortfall in its target excise tax collection, Lumagui said. Although he gave no figure, BIR’s excise tax collection target for the year’s first four months was placed at P112.37 billion.

“A large part of the shortfall is attributable to tobacco,” he told reporters.

Lumagui said many unregistered businesses—collectively considered the “underground economy”—are involved in the sale and trade of illicit goods, and being unregistered can avoid paying taxes.

The commissioner also noted that as consumer needs and buying practices have evolved through the years, “so too has illicit trade evolved apace, so much so that even the digital marketplace is not safe from illegal traders.”

He said greater emphasis should be paid to the strict enforcement of applicable laws and regulations against illicit trade, and efforts should be made to develop and pass into law new anti-illicit trade legislation.

Lumagui confirmed that illicit trade had affected economies in all regions of the globe during the pandemic. “The damage that illicit trade can wreak on an economy is dramatic and far-ranging.  Its most immediate impact is the loss of tax revenues urgently needed to fund development efforts.  But illicit trade also releases goods and items that do not meet quality standards into the market, placing people in the unfortunate situation where their hard-earned funds are given in exchange for substandard goods,” he said.

To counter the problem of illicit trade and the issue of organized crime groups, the Economist Impact, the network that sponsored the summit, presented its study entitled “Illicit Trade: Scale, Scope and Flows,” which compiled 1,6000 individual sentiments from 16 countries on illicit trade and counterfeit production.

The study noted that illicit trade is a “global struggle” that affects communities and businesses and will take large-scale, innovative action to ensure new forms of illegal activity are reduced significantly.

It cited the necessity to instate reforms and review the existing measures the world has adopted to counter the rampant illicit trade due to digital transactions.

With the fast-paced technology unfolding, the study further noted current activities taken must be re-evaluated, and more must be done to get to the root causes. “Consumer incentives and education, re-evaluation of policies, and collaboration among stakeholders are essential to foster reforms,” it emphasized.

In the Philippines, Lumagui said, the government has been implementing a four-point approach in addressing illicit trade, specifically involving tobacco products:

• Need for improved border control
• Enhancement of intelligence networks and inter-agency coordination between the country’s law enforcement agencies while agencies such as BIR, Bureau of Customs and the LGUs are also key players in the campaign to identify and prosecute illegal traders
• Development of comprehensive legal framework on the sale and trade of products not only in ”brick-and-mortar” stores but also those goods that are traded on e-commerce platforms and so-called “alternative markets”
• Greater emphasis should be paid to the strict enforcement of applicable laws and regulations against illicit trade and efforts should be made to develop and pass into laws new anti-illicit trade legislations.

Lumagui, however, admitted that the country’s irregular 36,000-kilometer coastline poses great challenge to the government’s effort to curb illicit cigarette trade, citing the fact the country is the 5th longest coastline in the world, the reason authorities have difficulty in efficiently monitoring the archipelago.

The BIR chief vowed to implement measures to address illegal trade in the country, such as the unceasing intensified trade enforcement activities, nationwide information and public awareness campaign and working to upgrade the agency’s existing track-and-race systems, to significantly monitor and regulate the sale of excisable products, particularly cigarettes.

Lumagui, however committed the agency’s resolve to achieve or even surpass the target. “We are doing our best and I am optimistic in the coming months, we will get that. We’re doing everything we can. We will continue doing raids and filing of cases involving illicit traders,” he said.

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