A retailers’ group has proposed measures to address the negative effects of the existing de minimis rule on local traders, which exempts imported goods valued at P10,000.00 or less from tax and duties, fearing unfair taxation and the loss of government revenues.
The de minimis rule is in place supposedly to facilitate trade by reducing administrative burdens on traders but it is turning out to be counterproductive, the Philippine Retailers Association (PRA) said .
In a May 6 letter to Customs Commissioner Bienvenido Rubio, the PRA said the de minimis rule was implemented under Customs Administrative Order 2-2016 per the Customs Modernization and Tariff Act. A copy of the PRA letter was obtained by the media on Sunday.
PRA said the exemption provided under the de minimis rule “not only leads to substantial revenue loss for the government but also compromises the principle of fair taxation.”
The PRA added the rule also “raises concerns about counterfeit and low-quality goods entering the market.”
It acknowledged, however, that the removal of the de minimis rule on imports may be too aggressive a step and urged government to instead explore alternatives.
These measures include lowering the threshold rather than abolishing it completely.
Another measure, PRA said, is for the government to limit de minimis use per consumer per month and apply tax if the goods are for commercial resale, not personal use.
The PRA added the government may provide a certain limitation or threshold as it imposes tax on goods for commercial resale.
The de minimis rule originally intended to streamline trade processes and facilitate commerce particularly benefiting micro, small, and medium enterprises, while alleviating administrative burdens associated with all traded goods in small amounts.
However, PRA said the growth of electronic commerce has put local retailers at a disadvantage by creating a tax imbalance as the Philippine digital economy grows.
“It is clear that the prevailing de minimis rule causes the playing field to tilt in favor of digital merchants, whether foreign or local.
As such, these merchants often evade or pay lower customs or tax obligations compared to local retailers, enabling them to offer products at reduced prices which remain the primary factor influencing purchasing decisions by Filipino consumers,” PRA said in the letter.
The group added that while the rule has been proven effective in the past, it is imperative to revisit existing rules and policies to keep up with the current trends in retail and e-commerce.
“It is crucial for the government to reassess and update trade policies, especially concerning marketplace orders from China.
These transactions, though small individually, collectively resemble bulk smuggling, gradually harming local businesses,” the PRA said.
“While local retailers do not intend to turn its back from healthy competition for the greater benefit of the consuming public, it is also imperative that the playing field be leveled in order to encourage development and growth.
The implementation of this rule uniformly to all retailers – whether operating online or through physical stores — will help the Philippine government monitor businesses in the collection of their obligations,” it said.
