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DoF: Cigarette smuggling down despite higher taxes

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While the move to slap tobacco products with higher taxes could incite more smuggling in the market, actual figures are down compared to when the government began to hunt down such.

This was learned from Finance Secretary Carlos Dominguez III as he cited the significant reduction in smuggling activities in the country involving cigarettes.

“I haven’t (got) the latest figures because that’s done by the private sector but the latest figure I saw was between 7 to 10 percent, are illicit,” Dominguez said.

“Prior to our cracking down on this illicit cigarette business, I understand it was around 35 percent. Somebody told me, also from the industry, that in some European countries, the illicit cigarettes are more than 60 percent,” he added.

According to him, the same case in terms of the volume of erring tobacco trade was true in ASEAN countries, making the Philippines in a much better position than its peers.

Likewise, the Finance chief said that they are carefully monitoring the market as he recognized the higher incentive to smuggle when the tax on a certain product is very high.

“We’ve seen an increase not only in illicit cigarettes coming in, but small factories being set up. The manufacturers of cigarette-making machines have been able to miniaturize these so you can make it a business if you have 100 square meters of warehouse,” Dominguez explained.

“I calculated–the payback is less than four months, so it was successful. So it’s very tempting, so we’ll keep on looking for these guys and I must say the BIR (Bureau of Internal Revenue) and the BoC (Bureau of Customs) have been catching these guys,” he added.

The BIR earlier reported its excise tax collections from tobacco products in the first seven months of the year has reached P82.97 billion, higher than the recorded P63 billion in the same period year-ago.

 

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