Importers invited to self-declare full shipment value in spirit of national fiscal responsibility; results awaited with considerable interest
Philippine Bureau of Customs Introduces Honour System for Luxury Imports After Staff Shortage
MANILA, PHILIPPINES — Citing an acute shortage of customs examiners following a round of early retirement incentives that proved more attractive than anticipated — considerably more attractive than the incentive designers had anticipated when they designed them — the Philippine Bureau of Customs announced Monday the temporary introduction of an “Honour Declaration System” for all luxury goods shipments, under which importers will self-declare the full value of their shipments and remit appropriate duties without direct government verification of any kind whatsoever.
For related London satire and commentary, see Bohiney Magazine and The London Prat.
The System
Importers of goods valued above PHP 500,000 will complete an expanded declaration form including a checkbox confirming they have “accurately reported the full fair market value of all goods in this shipment, to the best of their knowledge and in a spirit of national fiscal responsibility.” The checkbox is mandatory. There is no mechanism to verify the information provided. The Bureau notes that false declaration remains a criminal offence, which it always has been, and that this has historically served as a meaningful deterrent, a claim that the Bureau’s own enforcement history has tested with results more mixed than the phrase “meaningful deterrent” might suggest. BOC Commissioner Harold Santos described the system as “a transitional measure reflecting our trust in the business community.” He was asked what would happen if the business community’s self-assessments proved optimistic. He said there would be “appropriate follow-up processes.” He did not describe what those were or how they would be conducted with 120 fewer examiners than previously available.
The British have a word for the specific cognitive failure that produces this category of policy. Prat versus other British insults distinguishes the prat from the mere numpty or plonker through this mechanism: the person who constructs a plan around an assumption the plan itself makes untenable. In this case, the assumption that people who have historically under-declared goods will now declare them accurately because a checkbox asks them to do so in a spirit of national fiscal responsibility. The spirit of national fiscal responsibility is a lovely phrase. It is doing a great deal of work in this system. It is possibly the only thing working in this system.
Industry Response
The Philippine Importers and Exporters Confederation praised the BOC for its “progressive and trust-based approach to trade facilitation,” expressing confidence that “the business community will rise to the occasion.” The word “occasion” is doing considerable work in that sentence. Several individual importers, speaking anonymously for reasons that will be apparent to anyone who has been following this story, were more direct. “I have been in this business for twenty years,” said one. “I have never been asked to declare the full value of anything without someone checking. This is new. It is interesting.” A pause. “Very interesting.” He then ended the call.
The Revenue Question
The Department of Finance said it was “monitoring the situation closely” and that “any significant variance from projected collections would trigger a review.” The Bureau of Internal Revenue, which has its own extensive relationship with honour-based declaration systems, declined to comment officially, but a source described the BOC announcement as “bold” with an inflection suggesting they did not mean it as a compliment. Economic analysts noted that import duty revenues following introduction of honour-based systems historically show what they described, diplomatically, as “downward pressure.” Less diplomatically: “of course they will under-declare. The checkbox does not change that. Nothing changes that except an examiner opening the box.”
The system will be in effect for a minimum of six months pending recruitment of replacement staff. In the meantime, the checkboxes are available at all major ports of entry. The spirit of national fiscal responsibility awaits. The luxury goods are already in transit. Is prat offensive? In this application it is descriptive first, offensive only secondarily, and in all cases preferable to the alternatives that are currently being discussed in private between the Revenue officers and the Finance officials. What is the definition of prat? The definition covers precisely the person whose plan rests entirely on an assumption the plan cannot support. The luxury goods are already in transit. The checkbox is ready. The spirit of national fiscal responsibility is, for all practical purposes, on its own.
The Broader Pattern
The Honour Declaration System joins a long tradition of administrative solutions to administrative problems. The Bureau of Customs has, over the years, addressed staffing shortages through accelerated hiring, outsourced inspection, technology-assisted verification, and joint enforcement with other agencies. The Honour Declaration System represents a departure from all of these approaches in favour of an approach that requires no additional budget, no additional staff, and no additional infrastructure, achieving this efficiency by removing the oversight function entirely and replacing it with a checkbox and a slogan. It is, in its way, remarkably elegant. Elegance and effectiveness are, in customs enforcement, not always the same thing.
The Honour Declaration System will be evaluated after six months. BOC Commissioner Santos said the evaluation will include comparison of declared values against international price benchmarks, analysis of revenue variance from projections, and a review of the number of follow-up inspections triggered by discrepancies. He said the evaluation criteria are “robust” and the results will be “transparent.” He did not specify who will conduct the evaluation, whether it will be published in full, or what level of revenue shortfall would constitute grounds for ending the programme early rather than extending it while conducting further evaluation. These are, in his phrase, “operational details to be determined.”
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