P60-B taxes burned due to illicit tobacco trade
Smokers had to look for cheaper alternatives. The situation is so bad that some retailers in Mindanao are selling a pack of illegal cigarettes at P35.
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Smokers had to look for cheaper alternatives. The situation is so bad that some retailers in Mindanao are selling a pack of illegal cigarettes at P35.
The government loses P30 billion to P60 billion because of illicit tobacco trade annually in foregone tax revenues, a report revealed on Saturday.
"Thirteen percent of total tobacco products sold in the country are either counterfeit or illicit whites," Euromonitor Report said.
Illicit Whites are cigarettes manufactured for the sole purpose of being smuggled into and sold illegally in another market.
"Figures are higher in Mindanao where six out of 10 cigarettes sold in the market come from illegal sources," it added.
For his part, Finance Assistant Secretary Dakila Elteen Napao said that the Customs bureau, in close coordination with the Philippine Coast Guard, has been strengthening its capacities for border control, prevention of smuggling, and other customs fraud.
"The significant and continuous rise in illicit tobacco trade during this post-pandemic demands stricter measures and strengthened collaboration. At checkpoints in Zamboanga, Davao and Cagayan de Oro, for instance, the BoC and PNP (Philippine National Police), are closely working together on a tight watch to intercept the transport of smuggled goods via vessel and land," Napao said during the Anti-Illicit Trade Conference dubbed "Plugging Revenue Leakage by Curbing Illicit Tobacco Trade."
Moreover, former congressman Jericho Nograles, who also chaired the Ways and Means Committee Technical Working Group, has confirmed that illicit tobacco trade has been a malady that worsened because of pandemic restrictions affecting government agencies from functioning normally, given its low capacity to enforce regulations in e-commerce.
"Restrictions, ironically, affected government agencies from functioning normally given our low capacity to enforce regulations in e-commerce," he said.
While the household budget shrunk during the pandemic, the demand for cheaper goods increased, Nograles observed.
"Smokers had to look for cheaper alternatives. The situation is so bad that some retailers in Mindanao are selling a pack of illegal cigarettes at P35," he said.
Under Bureau of Internal Revenue Regulation 7-2021, the minimum floor price per pack of cigarettes is pegged at P82.49.
Moreover, the report also said that tobacco is one of the most smuggled commodities in the world, creating unfair competition for legitimate businesses, as well as feeding organized criminal groups that channel profits obtained into other illegal activities such as drug trafficking.
Illicit tobacco also makes the product more accessible and affordable, especially among the youth.
Stiffer sanctions
Pushing to declare cigarette smuggling as an act of economic sabotage and make it a non-bailable offense, Senior Deputy Majority Leader Sandro Marcos proposed to Congress the immediate approval of House Bill 3917, which he principally authored.
The proposed law seeks to include tobacco, both in its raw form and as a finished product, in the list of agricultural commodities whose illegal importation will be considered a heinous crime under the Anti-Agricultural Smuggling Act of 2016.
Furthermore, under the proposed bill, cigarette smugglers face a minimum of 30 years imprisonment but not exceeding 40 years with no bail recommended.
At the same time, violators are obliged to settle a fine double the value of the seized smuggled items, plus the total amount of unpaid duties, and other taxes.
"Taxes are the lifeblood of the nation. If we are talking in terms of tens of billions of pesos, as we do here (P30 billion to as much as P60 billion is the estimate), of lost revenues due to illicit trade in tobacco then we are in a serious danger of 'blood' being drained from our national or collective life," Marcos said.
Meanwhile, local chief executives in the country have recently signed a manifesto to sustain an anti-tobacco campaign to ensure the safety of the public.
During the Alliance for Tobacco Control and Non-communicable diseases Prevention Summit forum participated by mayors throughout the country, they said "We, the delegates of the first Asia Pacific Alliance for Tobacco Control and NCDs Prevention Philippines Summit of Mayors commit to accelerating efforts against tobacco use, reducing the burden of non-communicable diseases, eliminating tuberculosis, improving synergy between health and development programs, and promoting integrated responses towards averting untimely deaths through the following measures."
However, tobacco farmers cried foul over the series of increases in taxes on their tobacco products, forcing them to avail of shark loans and affecting their income.
The tobacco farmers, mostly in the North, blamed the government for its failure to protect their interests despite the government earning billions of pesos from the tobacco industry yearly.
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