AN exhaustive study by the Senate Tax Study and Research Office (STSRO) has yielded “interesting” findings that could provide the so-called smoking gun in the perceived tax leakages in cigarettes. Plugging the leakages seems easy: Just follow the STSRO’s recommendations. After scrutinizing several data on tobacco-leaf and acetate-tow imports, the STSRO underscored the need to harmonize the forms, procedures and filings from cigarette manufacturers in order to seal those leakages.
immediately raise red flags that the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) could use to make erring companies pay their taxes, for that Senate office’s study— which also tackled the withdrawal of cigarettes—showed questionable, even disturbing, variations in the pricing of tobacco-leaf and acetate-tow imports.
Actually, the STSRO underscored the need to further study the data it had looked into, particularly those from 2010 to 2013. It even cited the improbable pricing data that were submitted to the National Tobacco Administration (NTA), as well as the findings of our embassy in the United States on tobacco-related transactions. Clearly, the Senate office has done a great service to the government in its desire to raise its revenues just by looking at the data it had uncovered and analyzed.
In the report prepared by Vivian A. Cabiling, director of the indirect-taxes branch, and reviewed by lawyer and STSRO Director General Rodolfo Dascil, the Senate office said it considered the data it had analyzed “remarkable” and “interesting,” especially since they involved one cigarette manufacturer: Mighty Corp.
In looking at the NTA’s submissions, the STSRO said: “What is interesting to note is the nearly constant price of imported tobacco [leaves] by Mighty Corp. Unlike other importers, including those not manufacturing cigarettes, its price for various types of tobacco leaf [Virginia, burley, oriental] and from different sources stood at $0.68 from 2010 to 2012.” Besides noting this telling data, the Senate office also noted that the price reported by Mighty for 2010 to 2013 was “way below that reported by any of [the] importers in any given year.”
In examining the acetate-tow prices, the STSRO said that, while the Associated Anglo-American Tobacco Corp. (AAATC) and Philip Morris Fortune Tobacco Corp. Inc. (PMFTCI) reported increasing prices, Mighty reported import prices that “remained nearly the same every year.” On top of this, Mighty, the STSRO report said, submitted prices that were “not even a tenth of the prices paid for” by either AAATC or PMFTCI.
A comparison between the data submitted by Mighty and those by other cigarette manufacturers only indicates the plausibility of the charges that the latter have leveled against the former. This could be the reason for the advertisements that PMFTCI published in various newspapers, including this paper. Apparently, the continued pricing strategy of Mighty leaves several unanswered questions.
If the Senate Blue Ribbon Committee could launch an investigation into the issue, Filipinos, especially the survivors of Supertyphoon Yolanda (international code name Haiyan), would be able to profit from the additional revenues that could be raised from it. An official of a cigarette company said the “proper enforcement” of the laws would immediately raise much-needed revenues, the kind that has now allowed the Philippine Health Insurance Corp. (PhilHealth) to offer substantial help for the poor’s medical expenses. Why? Because much of the increased revenues generated through the “sin” tax law, which covers cigarettes and alcohol, have gone to PhilHealth, and it is due to this increase that even poor seniors can now avail themselves of medical care. It is now up to the concerned government agencies to really look at the data that the STSRO had uncovered and examined in performing its mandate to provide inputs to the Senate Committee on Ways and Means, led by Sen. Juan Edgardo “Sonny” Angara.
As a start, harmonizing the data provided by the different agencies concerned could provide a way to further increase revenues. According to the STSRO’s findings, the data provided by the BIR, the NTA, and Department of Trade and Industry “are not in agreement with each other.” Making the manufacturers submit uniform filings would plug the tax leakages and, consequently, raise revenues that could help improve the lot of our poor countrymen.
In fact, the STSRO has missed including another revenue-earning agency in its scrutiny of the data. It should also include data from the BOC in its recommendation. After all, Customs Commissioner John Phillip Sevilla was able to raise more than P800 million when it padlocked Mighty’s warehouse early this year for the withdrawals it made.
E-mail: hugagni@yahoo.com.
5 comments
This issue has been around for ages now. This could’ve been resolved if BOC and BIR analyzed the data presented to them instead discrediting the reports of concerned organizations. Now that STSRO stepped in, both government agencies should also be investigated.
There have been a lot of data showing this massive problem in sin tax collection but there are officials in the government seemingly determined to dismiss or hide the problem. Why was Mighty being protected by these officials?
It is obviously in everyone’s best interest that these tax leakages be plugged. The country is losing billions — billions we badly need. One would think that this is something BIR Commissioner Kim Henares would be interested in solving, yet for some reason she seems more intent on covering up for those involved.
“In examining the acetate-tow prices, the STSRO said that, while the Associated Anglo-American Tobacco Corp. (AAATC) and Philip Morris Fortune Tobacco Corp. Inc. (PMFTCI) reported increasing prices, Mighty reported import prices that “remained nearly the same every year.” On top of this, Mighty, the STSRO report said, submitted prices that were “not even a tenth of the prices paid for” by either AAATC or PMFTCI.”
And no one in the BIR or the BOC thought this was strange? What else kind of proof are they waiting for?
The only way this did not raise a red flag is if those government agencies were part of the scheme.