Plans to impose new taxes to fund government’s ambitious “Build, Build, Build” infrastructure program will be for naught if no decisive action is taken against smugglers.
A recent study commissioned by the Federation of Philippine Industries (FPI) under its Fight Illicit Trade project showed that, from 2011 to 2015, the government failed to collect P904.6 billion in revenues due to smuggling.
The largest value of smuggling was recorded in the petroleum industry, amounting to P680 billion.
Cigarettes made it to the top 10, contributing about P10 billion in foregone revenues.
The other most smuggled goods are steel at P106.1 billion; resin, P42.9 billion; palm oil, P30.9 billion; wood, P24.8 billion; sugar, P9.3 billion; and automotive battery, P750 million.
The latest order from the Department of Finance (DOF) tasking the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) to intensify their campaign against smuggling of tobacco products and even local production of counterfeit cigarettes is a welcome move.
Finance Secretary Carlos G. Dominguez III has specifically instructed the BIR and BOC to keep a vigilant watch on fake and smuggled cigarettes amid the annual increments in tobacco excise tax.
This year tobacco excise tax is at P30 per pack. Next year it will further adjust to P31.2 per pack.
Government has all the right to fret over the impact of cigarette smuggling if it wants to keep its 2017 excise-tax target of P173.19 billion, with tobacco tax alone valued at P120.66 billion.
Notwithstanding Executive Order 26, the tobacco industry can now heave a sigh of relief that, finally, the government is doing something to address the problem of smuggling and counterfeiting of their tax-paid products.
Since the time that tobacco taxes were hiked years ago, fake and smuggled cigarettes have proliferated.
Smugglers were dumping cheap smuggled and counterfeit cigarettes in Southern Mindanao, reaching Western Visayas such as Bacolod, Iloilo and even the province of Cebu. Luzon has its share of fake and smuggled cigarettes in Central Luzon. In Manila, fake cigarettes have started to appear at the “University Belt” along Recto Avenue.
The illicit cigarettes come from Thailand, China, Indonesia, Taiwan, Vietnam and Malaysia.
In Malaysia, which has increased its taxes over the years, the illicit trade has reached close to 60 percent and some of it is probably finding its way to our shores.
The previous government responded by launching an app that could empower smartphones to track fake cigarettes via its tax stamps. The BIR app was initially effective but was somewhat limited due to its erratic efficacy and the lack of broader access to the Internet.
The FPI, which counts local tobacco players as members, took the initiative by launching its Fight Illicit Trade campaign and has been collaborating with law-enforcement agencies to catch smugglers and counterfeiters.
But, after some time, syndicates will pick up a lesson or two by improving their smuggling and counterfeiting ways.
This is where the government should wise up and revisit its policing tools.
It might need to secure the help of its Asean neighbors to stamp out illicit trade, considering that the latest batch of smuggled cigarettes came from Thailand.
It will also need to get the assistance of local tobacco players to track and trace smuggled and counterfeit cigarettes sneaking into the market.
The import of this marching order from the DOF is that, aside from its adverse impact to state coffers, smokers have the right to be protected from smuggled cigarette products that have questionable origin, content and intent.
Because, with the rise in terrorism, the trade of illicit cigarettes is proving to be a lucrative tool to raise funds for their guns and bombs.
This is where the government should really step up its game.
E-mail: ernhil@yahoo.com.
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