Will e-invoicing curb smuggling at Bureau of Customs?

Second part

THE AGRICULTURAL group Samahang Industriya ng Agrikultura (Sinag), headed by Rosendo So, supports e-invoicing, saying it would help the agriculture sector which has suffered nearly P30 billion worth of losses due to agricultural smuggling since last year.

So said that at present, only the BoC holds the record for all incoming imports of agricultural products. This puts other agencies of the government on the blind side. So added that they have long been proposing that copies of the foreign inward manifest be provided to the Agriculture department, as well.

He also cited the widespread problem of undervaluation, misdeclaration and misclassification in the importation of meat products through the tampering with HS Codes.

“Tampering with the HS Code is very rampant. It is done by unscrupulous

importers in connivance with some corrupt customs personnel,” he added.

A 2021 report by the UN Comtrade Data on meat trade, covering HS Codes 0201 to 0210, showed that all countries reported exports to the Philippines amounting to $2,265,193,202. But the Philippines reported imports amounting only to $1,850,598,993 or a difference of $414,594,209, which is equivalent to around P20.730 billion.

The same report also showed a big disparity in 97 other different HS Codes between the amount of exports reported by countries to the Philippines amounting to $149,866,915,512 and the imports reported by the Philippines from these same countries estimated at $124,390,447,217 or a disparity of $25,476,468,295.

The World Customs (WCO) developed the HS Code, also known as Harmonized Commodity Description and Coding System, which comprises more than 5,000 commodity groups, each identified by a six-digit code, arranged in a legal and logical structure, and supported by well-defined rules to achieve uniform classification.

The WCO said the system is used by more than 200 countries and economies as a basis for their customs tariffs and for the collection of international trade statistics. More than 98 percent of the merchandise in international trade is classified in terms of the HS.

The HS also contributes to the harmonization of customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade.

HS codes are falsified to avoid payment of taxes and duties on gold imports. This could not have been possible without the collusion of customs employees, according to the report.

It said the Geneva-based GTransparency International (TI) got wind of the false HS codes while conducting a survey for its annual Corruption Perceptions Index (CPI).

At present, the BoC is going for full automation of its entire process to eliminate human-tohuman interactions and prevent corruption, but e-invoicing is not part of these reforms.

Not just from paper to e-documents

The introduction of e-invoicing simply reminds the BoC that digitalization does not simply mean converting paper documents into electronic ones.

To achieve the objective, the digital invoice and other commercial documents should be shared in a transparent ecosystem where they can no longer be changed or amended without the knowledge and awareness of all the stakeholders.

Maronilla stressed that the BoC strictly adheres to the guidelines of the WCO but pointed out that they were not privy yet to crossborder e-invoicing, which is being used by various European Union member countries, as well as in parts of Asia.

“It is new to us, but we are open to it. We can integrate it in our system,” Maronilla told The Manila Times, adding that “any innovation or upgrade in our system that would speed up trade and eliminate corruption is always a welcome development.”

Maronilla said the BoC has partnered with the United Nations Economic and Social Commission for Asia and the Pacific (UN Escap) to explore electronic trade data exchange.

The collaboration falls under the Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific (CPTA), a UN treaty that aims to expedite the implementation of digital trade facilitation measures for trade and development between Escap and the Philippine BoC.

Maronilla said the insights provided by the BoC during the joint consultative session were valuable for the feasibility study on the electronic exchange of trade-related data and documents in the Philippines.

The study delves into a comprehensive analysis of the technological capabilities, legal frameworks, and operational requirements necessary to implement electronic trade data exchange.

E-invoicing refers to the electronic authentication of tax invoices through an invoice registration portal. Each invoice is issued a unique invoice reference number, which is later used for invoice matching and auto populating tax return and waybill forms. This concept is the same in almost all countries that have implemented the system.

“There will be no opportunity for an importer to falsify the original description of the goods and thereby change the tariff code and the amount of duty payable. The most important feature of the proposed system is that the invoice will not only be digital but will also be shared in an integrated system. The lack of integration between the financial agencies is the weakness of the current system,” it added.

In Asia, Singapore is among the few Asian countries that has been practicing e-invoicing for over a decade. It implemented e-invoicing for all business-to-government transactions.

India, on the other hand, is making e-invoicing applicable only to business-to-business transactions. As it gained acceptance, it began to be rolled out in phases. India already applies e-invoicing to cross-border exports, and it is expected that imports will soon be included.

Japan, Vietnam and South Korea are also all set to implement e-invoicing.

In European Union member countries, e-invoicing on businessto-government transactions is already mandatory. Recently, Finland, Italy and France, among other EU countries, have expanded the purview of e-invoicing to business-tobusiness transactions.