Illegal cigarette trade seen to cost gov’t P8B a year

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Next to oil smuggling, the illicit trade of cigarettes has become a key concern of the Philippines, with the government seen to lose a potential revenue of P8 billion this year, LTG Group president Michael Tan said.

Speaking to reporters after the annual stockholders meeting of LTG, Tan said the underground domestic manufacturing of cigarettes and the smuggling of products from abroad have been fueling the illegal trade.

LTG is a key partner in the country’s leading cigarette-maker Philip Morris Fortune Tobacco Corp. Inc.

In other Asian countries, Tan said, the illegal tobacco trade has grown to “astronomical proportions.”

“It is eroding government revenues and also affecting legitimate businesses,” he explained.

He estimated that, since the start of the year, the illegal trade had cost the government P3 billion in foregone duties, excise taxes and value added tax (VAT). For the full year, the amount is expected to reach P8 billion.

The lost revenue is said to be enough to build 35,000 additional classrooms this year.

“I think next to oil, [illegal cigarette trading] will be the rising threat,” Tan said.

Based on estimates of key oil industry players, the government loses P30 to P40 billion from oil smuggling a year.

Local manufacturers who do not pay the proper taxes are said to account for about 90 percent of the illicit tobacco trade. The sale of smuggled products accounted for the rest.

A year ago, illegal tobacco traders comprised 4 percent of the market. Today, they account for almost 10 percent, Tan said.

The data was derived from a Nielsen audit on the volume of cigarettes absorbed by the local market.

Tan presented the results of a Nielsen retail survey where a total of 301 million packs of cigarettes had been absorbed by the local market from January to April this year. But taxes paid to the Bureau of Internal Revenue suggested that only 125 million packs were sold.

Last May, it was also reported that the Bureau of Customs seized shipments of counterfeit Marlboro, Winston and Fortune cigarettes alongside other fake food items from China.

“We have to work hand in hand with the government to curtail and stop this,” Tan said.

In the second half of 2013, LTG expects its tobacco business to fare better.

“It depends on how we control the illicit trade,” he said.

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  • Ako_Hiking

    So basically more problems for the Aquino Administration and his Customs. Cigarette is already unhealthy and now it is not only causing illegal activity to take place but it is costing the Philippines’ P8B? What a waste of money and potentially Filipino health.

  • joboni96

    psy war lang ng intsik switik yan
    na tinamaan ng sin taxes

    bir i monitor niyo ito

  • disqus_EWrSdjV1nv

    ilegitimize nila ang drugs. 1 trillion peso industry yan.
    basta may drugs… smuggled na agad yan. may sales walang resibo. pati pulis pwede nang bawasan kasi salesman sila ng drugs. dami rin na guns na involved, fast cars… and yes. its more than 1 trillion peso industry.
    dadami pa turista. drug tourism.
    ilegitimize na rin ang pok2 para may philhealth, pag-ibig etc.
    mababawasan pa traffic kasi high lahat… nasa langit at wala sa kalsada.
    lalakas ang alcohol industry.
    ganun din ang yosi.
    total isang bayan na puro tambay naman ang pinas kaya….
    Mabuhay!!!

  • rickysgreyes

    We need another Kim Henares at Customs, not a politician

  • farmerpo

    Champion blue seal, welcome back. Alam naman ng karamihan kung saan binababa ito kaya lang ang mga custong agents mismo ang namamahala paris din ng dati. Freeport zone kuno.

  • Prangka

    Tinaas ang buwis sa ginto, 80% ay ibenenta sa black market. Tinaas ang tax sa yosi,nauuso uli ang blue seals. In theory, riasing taxes mean more capability for the government to carry out its program but in actuality the government either loses revenue or break-even lang in the long run. The tax only puts more burden to honest tax payers and a reason for evaders to enjoy higher income.

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