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Republic of the Philippines DAT ENG 2 2.202 2 22% hn

HOUSE OF REPRESENTATIVES
Quezon City

Nineteenth Congress
First Regular Session

(3917_

HOUSE BILL NO.

Introduced by: Rep. Ferdinand Alexander A. Marcos &
Rep. Margarita Ignacia B. Nograles

AN ACT
AMENDING SECTIONS 3 AND 4 OF REPUBLIC ACT NO. 10845, OTHERWISE
KNOWN AS THE ANTI-AGRICULTURAL SMUGGLING ACT OF 2016 AND FOR
OTHER PURPOSES

EXPLANATORY NOTE

The unabated smuggling of tobacco products by unscrupulous importers and traders is a
growing threat since it deprives the National Government of much needed excise tax revenues and
impacts the livelihood of millions of Filipinos.

In some areas in the Philippines namely Zamboanga del Sur and Misamis Occidental, it is
estimated that six (6) out of 10 cigarettes sold in the market already come from illegal sources.
Almost daily, there are news reports of seized illegal cigarettes by the Bureau of Customs in
Mindanao and this is just the tip of the iceberg. Even in the tobacco-producing region of Ilocos,
nearly 10% of cigarettes sold are illicit.

Estimates of the National Government's foregone revenues due to the rampant proliferation
of illegal cigarettes range from P30 to as much as P60 billion. Global think-tank Euromonitor
estimates Philippine government revenue losses to reach 26.2 billion in 2022 and another P31
billion by 2023 because of this criminal activity.

Thus, there is an urgent need to combat large-scale tobacco smuggling by imposing more
stringent penalties and deter the entry and sale of illegal tobacco in the Philippines. This bill seeks
to include tobacco, both in its raw form or as finished products, as among the agricultural
commodities the illegal importation of which can be classified as constituting economic sabotage.

This bill is timely as it is urgently needed. At a time when government needed funds for its
pandemic response, one of the main sources of substantial and predictable revenues was the
tobacco industry. According to the report published by the Oxford Business Group last June 2022
titled “Tobacco in the Philippines,” the industry contributed P150 billion in revenues in 2020, the


year the pandemic hit, and another P149 billion in excise taxes in 2021 as the country started to
recover.

In the same report, the excise tax contribution of the industry in 2020 equaled 6% of
revenues collected by the national government totaling 2.5 trillion. In the same year, “sin tax”
revenues comprised 58% or P94 billion of the total health budget — including Universal Healthcare
—of 172 billion. Tobacco collections are also reinvested into tobacco-producing regions via local
government units (LGUs). Nearly P25 billion were released to tobacco-producing communities in
2019.

The tobacco industry also generates additional economic activity and revenues for the NG
since it financially supports 2.2 million Filipinos who in tun pay income taxes, VAT and other
taxes on consumption.

As of end June 2022, the national debt stood at an unprecedented P12.79 trillion. The
previous government borrowed to boost state coffers to combat the COVID pandemic —
infrastructure for testing and isolation, providing cash aid to the most vulnerable sectors and
procuring vaccines to immunize the population — even as it implemented lockdowns to stop the
spread of the disease, restricting economic activity and revenue collection.

The continued proliferation of smuggled cigarettes is also inconsistent with the
government’s concen for public health since the current taxation and regulation only covers the
legal tobacco industry but allows illicit cigarettes to run rampant. Aside from directing concerned
agencies to strictly implement existing laws, legislators should also enact laws to plug loopholes
to control illegal tobacco.

If the entry and sale of smuggled cigarettes continues unrestricted, the National
Government stands to lose even more revenues. This will be detrimental to its pandemic recovery
efforts. Clearly, this is one of the biggest tax leaks that government needs to plug.

In view of the foregoing, the passage of the bill is earnestly sought.

Hon. Ferdinand Alexander A. Marcos
District Representative, Ilocos Norte, Ist District

Hon. Ma B. Nograles
Representative, PBA Partylist


Republic of the Philippines
House of Representatives
Quezon City, Metro Manila

Nineteenth Congress
First Regular Session

HOUSE BILL NO.

Tntroduced by: Rep. Ferdinand Alexander A. Marcos &
Rep. Margarita Ignacia B, Nograles

AN ACT
AMENDING SECTIONS 3 AND 4 OF REPUBLIC ACT NO. 10845, OTHERWISE
KNOWN AS THE ANTI-AGRICULTURAL SMUGGLING ACT OF 2016 AND FOR
OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Section 3 of Republic Act No. 10845 or the Anti-Agricultural Smuggling
Act of 2016 is hereby further amended to read as follows:

SEC. 3. Large-Scale Agricultural Smuggling as Economic Sabotage. ~ The crime
of large-scale agricultural smuggling as economic sabotage, involving sugar, com, pork,
poultry, garlic, onion, carrots, fish, and cruciferous vegetables, in its raw state, or which
have undergone the simple processes of preparation or preservation for the market, with a
minimum amount of one million pesos (P1,000,000.00), or rice, with a minimum amount
of ten million pesos (P10,000,000.00), OR TOBACCO, WHETHER
MANUFACTURED OR UNMANUFACTURED, INCLUDING FINISHED
PRODUCTS SUCH AS CIGARS, CIGARETTES OR HEATED TOBACCO
PRODUCTS, WITH A MINIMUM EXCISE TAX AND VAT PAYABLE IN THE
AMOUNT OF ONE MILLION PESOS (P1,000,000.00), as valued by the Bureau of
Customs (BOC), is committed through any of the following acts:

(a) Importing or bringing into the Philippines without the required import
permit from the regulatory agencies;

(b) Using import permits of 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 proprietorships by other persons;



(©) Misclassification, undervaluation or misdeclaration upon the filing of
import entry and revenue declaration with the BOC in order to evade
the payment of 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;

(h) Acting as A broker, AGENT, FACILITATOR, FORWARDER, OR
WAREHOUSE LESSOR of the violating importer;

() ALLOWING THE USE OF A PRIVATE PORT, FISH PORT,
FISH LANDING SITE, RESORT, AND/OR AIRPORT TO
PERPETUATE THE ECONOMIC SABOTAGE REGARDLESS
OF QUANTITY

@ IMPORTING FINISHED PRODUCTS SUCH AS CIGARETTES,
CIGARS, AND HEATED TOBACCO PRODUCTS, THAT ARE
NOT REGISTERED WITH THE BUREAU OF INTERNAL
REVENUE. FOR THIS PURPOSE, THE BUREAU OF
INTERNAL REVENUE SHALL PUBLISH AND REGULARLY
UPDATE THE LIST OF FINISHED GOODS THAT ARE
REGISTERED IN THEIR OFFICE, STATING THEREIN THAT
ALL UNREGISTERED PRODUCTS ARE ILLEGAL AND ARE
SUBJECT TO IMMEDIATE CONFISCATION.

(k) MANUFACTURED TOBACCO REFERS TO ANY PRODUCT
THAT CONSISTS OF LOOSE TOBACCO THAT CONTAINS
NICOTINE AND IS INTENDED FOR USE IN A CIGARETTE,
INCLUDING ANY PRODUCT CONTAINING TOBACCO AND
INTENDED FOR SMOKING OR HEATING OR PUFFING OR
ORAL OR NASAL USE. UNMANUFACTURED TOBACCO
REFERS TO AGRICULTURAL COMPONENTS DERIVED
FROM THE TOBACCO PLANT, WHICH ARE PROCESSED
FOR USE IN THE MANUFACTURING OF CIGARETTES AND
OTHER TOBACCO PRODUCTS.

SECTION 2. Section 4 of Republic Act No. 10845 or the Anti-Agricultural Smuggling
Act of 2016 is hereby further amended to read as follows:

SEC. 4. Penalties. - (a) The penalty of life imprisonment and a fine of twice the
fair value of the smuggled agricultural product and the aggregate amount of the
taxes, duties and other charges avoided shall be imposed on any person who
commits any of the acts enumerated under Section 3 of this Act. HOWEVER, IN
THE CASE OF TOBACCO PRODUCTS WHETHER MANUFACTURED
OR UNMANUFACTURED, THE PENALTIES TO BE IMPOSED ARE
THOSE SPECIFIED UNDER PARAGRAPH (E) OF THIS SECTION.


(b) The penalty of imprisonment of not less than seventeen (17) years but not more
than twenty (20) years, and a fine of twice the fair value of the smuggled
agricultural product and the aggregate amount of the taxes, duties and other charges
avoided shall be imposed on the officers of dummy corporations, nongovernment
“organizations, associations, cooperatives, or single proprietorships who knowingly
sell, lend, lease, assign, consent or allow the unauthorized use of their import
permits for purposes of smuggling.

(©) The penalty of imprisonment of not less than fourteen (14) years but not more
than seventeen (17) years and a fine equal to the fair value of the smuggled
agricultural product and the aggregate amount of the taxes, duties and other charges
avoided shall be imposed on the following:

(1) The registered owner and its lessee or charterer, in case of lease, of a
chartered boat, motorized commercial vessel of more than three (3) gross
tonnage, who knowingly transports the agricultural product subject to
economic sabotage, regardless of quantity;

(2) The registered owner and its lessee, in case of lease of six (6) or more
wheeler trucks, vans and other means of transportation, who knowingly
transports the agricultural product subject to economic sabotage, regardless
of quantity;

(3) The registered owner and lessee of a warehouse, or any property, who
knowingly stores the smuggled agricultural product subject to economic
sabotage; or

(4) The registered owner, lessee, president or chief executive officer of the
private port, fish port, fish landing sites, resorts, and airports who
knowingly allows the agricultural product to be smuggled into the country.

(d) The penalty of imprisonment of not less than twelve (12) years but not more
than fourteen (14) years and a fine equal to the fair value of the smuggled
agricultural product subject to economic sabotage and the aggregate amount of the
taxes, duties and other charges avoided shall be imposed on the following:

(1) The registered owner and its lessee or charterer, in case of lease, of a
chartered boat, motorized commercial vessel of three (3) gross tonnage or
less, who knowingly transports the agricultural product subject to economic
sabotage, regardless of quantity; or

(2) The registered owner and its lessee, in case of lease, of less than six (6)
wheeler trucks, vans and other means of transportation, who knowingly
transports the agricultural product subject to economic sabotage, regardless
of quantity.


(E) THE PENALTY OF IMPRISONMENT OF NOT LESS THAN THIRTY
(30) YEARS BUT NOT MORE THAN FORTY (40) YEARS AND A FINE OF
TWICE THE FAIR VALUE AND THE AGGREGATE AMOUNT OF THE
TAXES, DUTIES AND OTHER CHARGES AVOIDED BY THE
SMUGGLED TOBACCO, WHETHER MANUFACTURED OR
UNMANUFACTURED, INCLUDING FINISHED PRODUCTS SUCH AS
CIGARS, CIGARETTES OR HEATED TOBACCO PRODUCTS SHALL
BE IMPOSED ON THE FOLLOWING:

(1) THE REGISTERED OWNER AND ITS LESSEE OR
CHARTERER, IN CASE OF LEASE, OF A CHARTERED BOAT,
MOTORIZED COMMERCIAL VESSEL, WHO KNOWINGLY
TRANSPORTS THE TOBACCO PRODUCT SUBJECT TO
ECONOMIC SABOTAGE, REGARDLESS OF QUANTITY;

(2) THE REGISTERED OWNER AND ITS LESSEE, IN CASE
OF LEASE OF TRUCKS, VANS AND OTHER MEANS OF
TRANSPORTATION, WHO KNOWINGLY TRANSPORTS THE
TOBACCO PRODUCT SUBJECT TO ECONOMIC SABOTAGE,
REGARDLESS OF QUANTITY;

@) THE REGISTERED OWNER AND LESSEE OF A
WAREHOUSE, OR ANY PROPERTY, WHO KNOWINGLY
STORES THE SMUGGLED TOBACCO PRODUCT SUBJECT TO
ECONOMIC SABOTAGE; OR

(4) | THE REGISTERED OWNER, LESSEE, PRESIDENT OR
CHIEF EXECUTIVE OFFICER OF THE PRIVATE PORT, FISH
PORT, FISH LANDING SITES, RESORTS, OR AIRPORTS WHO
KNOWINGLY ALLOWS THE TOBACCO PRODUCT TO BE
SMUGGLED INTO THE COUNTRY.

PROVIDED, THAT FOR PURPOSES OF THIS ACT, THE
OFFENSE UNDER THIS PARAGRAPH SHALL BE NON-
BAILABLE.

In all cases, the smuggled agricultural products shall be confiscated and the
property used in agricultural smuggling, consistent with Section 2530 of the Tariff
and Customs Code and without prejudice to Section 2531 of the same Code, shall
be forfeited in favor of the government.

When 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 prohibited crime.


Any person, natural or juridical, found guilty under this Act shall also suffer the
penalty of perpetual absolute disqualification to engage in any business involving
importation.

In applying the abovementioned penalties, if the offender is an alien and the
prescribed penalty is not life imprisonment, he/she shall be deported after serving
the sentence without further proceedings for deportation.

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

SECTION 3. Repealing Clause. All laws, executive orders, presidential decrees, rules and
regulations and other issuances contrary to or inconsistent with this Act shall be deemed repealed
or modified accordingly.

SECTION 4. Separability Clause. — If any provision of this Act is subsequently declared
invalid or unconstitutional, the other provisions hereof which are not affected thereby shall remain
in full force and effect.

SECTION 5. Effectivity. This Act shall take effect fifteen (15) days from the date of
publication in the Official Gazette or in a newspaper of general circulation.

Approved,