STATE OF COMBAT TO ILLICIT TRADE IN CHILE

PROSECUTION OFFICE AGAINST

THE CLANDESTINE TRADE

CHILEAN TAX ADMINISTRATION

2012

Informal trade and smuggling are present in much of the world's economies, generating huge economic and social losses to countries that suffer these huge problem.

These illegal activities are led by criminal networks operating in different areas, hence the need for coordinated action between investigation and intelligence agencies and police for dismantling, as well as the active participation of the private formal sector.

These informal and clandestine trading activities infringe certain legally protected economic principles, such as equality before the law on economic, free competition, consumer protection, the economic order, and many others whose observance is the task of Tax Management Authority, Customs and others organizations.

ILLICIT TRADE AND ITS CONSEQUENCES

MAIN MARKETS AFFECTED

TOBACCO

The sale of smuggled cigarettes in Chile has been an increase in

recent years, which is partly due to a high tax burden, which

affects a higher value of consumption of tobacco products in our

country, which causes the consumer chooses alternative brands of

lower values .

This is confirmed by the highest number of seizures of smuggled cigarettes, ie products that have

illegally entered our country, for which they have evaded customs duties, VAT and excise duties

on such goods, producing a consequent expense in tax revenue in that item.

It seems that the shipments entering our country through border of the north, especially

Chacalluta Visviri, Chungará Colchane and Ollague, as well as 350 other crossings not controlled

by the customs authority, later to be sold in different parts of our country, but mainly in the

metropolitan area.

MUSIC, MOVIES,

SOFTWARE AND

CLOTHING

The profile of the person, in most cases, corresponds to people that directly counterfeit products through the use of personal computers at their homes.

These people show a lack of legal start-up and the sale of the CD and DVD species with different counterfeited titles and authors of music and movies, at fairs or directly on the street.

Regarding counterfeit clothes and accessories from different brands, it is common in Chile the sale of this type of clothes, which have their primary origin in Peru and China. In these cases, the sale of products is performed in established local, as well as at fairs or illegal sites.

TIMBER

The focus of illegal timber sale occurs mainly in regions VIII, IX, X and XIV of our country. In these regions, along with having a high timber production, there is a high level of robbery or theft of the product, which has led to the existence of a “black” market, in which the buyers acquired woods previously they have been stolen from their land.

BOOKS AND PUBLISHING HOUSES

The counterfeit and sale of books from different authors and publishing houses is common in our country. Based on the prosecution exercised by the Prosecutor Office against clandestine trade of IBS, it can be concluded that the marketing of these books were made in both local and on the street set.

SCRAP (COOPER CABLE)

With the increase in copper prices since 2004, a new economic focus raised in our country related to the export of copper scrap to processing countries such as China and the U.S. metal

While these materials were mostly recycling of waste products, there was a criminal situation, proportional to the increase in demand for this material: the beginning of a wave of robberies and thefts of copper containers materials (mainly power and telecommunications lines).

This caused damage to both private owners of stolen goods, as well as the general population due to the cutting of the basic service of electricity.

OTROS SECTORES

Cars Tobaco

Oil

Slot machines

Bovine

Corn

Salmon

- Clothing brand

- Software

- Jewelry

- Cellphone cloning

- Videograms

Cooper cable

Molluscs

- Watches

PROSECUTOR OFFICE

AGAINST THE CLANDESTINE

TRADE

MISSION Prosecute and punish the illegal exercise of trade or industry over goods without legal requirements regarding filing and payment of taxes on production or trade.

Through Resolution No. 03 of 11 January 2002, the Director of the Internal Revenue Service created the Bureau against clandestine trade (OFCCC)

FUNCTIONS

a.- Analyze the facts found in the work of ordinary controls, or the knowledge that is got from other sources, evidence emerges that the acts described in paragraphs 8, 9 and 26 of Article 97 of the Tax Code.

b. - management control of the work of departments and regional legal offices, relating to offenses under the numbers 8, 9 and 26 of Article 97 of the Tax Code, in accordance with criteria defined by the Office of Criminal Litigation .

c. - Taking direct litigation in criminal matters within its competence, which are made known to the Supreme Court, according to instructions.

d. - Coordination with internal and external entities as appropriate, on matters relating to permanent procedures for detecting and reporting the conduct constituting crimes under its jurisdiction.

e. - Collaborate with law enforcement agencies and investigation, in order to tend to the success of the measures that are identified in relation to the facts to be investigated by the competent authority.

f. - Taking direct criminal litigation in court cases followed for offenses under the numbers 8, 9 and 25 of Article 97 of the Tax Code, in cases expressly determined by the Deputy Head of Legal Department.

g. - Perform any other function that is specifically assigned by the Head of Department or the Legal Branch Chief Judicial Department of Defense, as appropriate.

TAX CRIMES, ART. 97 N° 8 Y 9 TAX CODE

"TRADE KNOWINGLY EXERCISED

ON GOODS OR VALUES materials of

all kinds, without legal requirements

have been met regarding the

declaration and payment of taxes

levied on production or trade ...

a fine of fifty percent to three hundred

percent of the taxes evaded and

imprisonment or banishment lower in

medium degree. recidivism shall be

punished with imprisonment or

banishment smaller in maximum

degree "

IRREGULAR TRADE

Art. 97 Nº 8 CT

CLANDESTINE TRADE

Art. 97 Nº 9 CT

"CLANDESTINO ACTUALLY

EXERCISE OR TRADE INDUSTRY, a

fine of 30% of a unit to five annual tax

and annual tax units with imprisonment

or banishment minors in its medium

degree and also with the confiscation of

products and manufacturing facilities

and respective containers. "

INSTITUCIONES COLABORADORAS

El SII ha desarrollado una fructífera coordinación en el ámbito PÚBLICO y PRIVADO:

■ Police of investigation ■ Custom Agency ■ Police Department ■ Ministry of Prosecution ■ Consumer Service Office ■ City Halls (specially the Capital of Chile, Santiago) ■ Ministry of Home Affairs

■ The Chilean Phonographic Producers Association ■ The Chilean Book Chamber ■ Software Distributors Association (ADS) ■ National Anti-Piracy Council (CONAPI) ■ Chilectra and Transelec (electricity distributors) ■ GEC (General Electric Company) ■ WHO (World Health Organization) ■ Chamber of Commerce ■ National Chamber of Commerce ■ The Chilean Tobacco Company

PUBLIC SECTOR

PRIVATE SECTOR

WORKTABLES

“TRADE”

“COOPER CABLES”

“CAR THEFT”

“TOBACCO”

“SALMON”

“RUSTLING”

“SLOT MACHINES”

“CHEMICAL PRECURSORS”

COMPLAINTS FILED

121

54

78

98

46

110

65

128

157150

40

0

20

40

60

80

100

120

140

160

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

TOTAL: 1.047

TYPES OF TAX CRIMES

10

391

611

350

100

200

300

400

500

600

97 N° 8 97 N° 9 97 N° 8 y 9 97 N° 25

CHILEAN TAX COD

30125 286184 93 66 85 69 1090

50

100

150

200

250

Tabac

os

Fonogram

a

Videogra

ma

Software

Libro

s

Vestu

ario

Fono/Vid

eogra

ma

Otros

Cable

s Cobre

TYPES OF MATERIALS