US, Japan firms urge gov’t to curb illicit tobacco trade

The local chambers of Japanese and American firms have taken up the cudgels for their respective tobacco-manufacturing members to ask the government to stop the makers of “illicit” cigarettes currently flooding the market.

While tax authorities have insisted that local firms are already being closely watched, Finance Secretary Cesar V. Purisima was asked to give his blessing for the creation of an independent body to monitor the industry.

In a letter to Purisima this month, the Japanese Chamber of Commerce and Industry of the Philippines and the United States Chamber of Commerce raised their “ongoing concern regarding smuggling and tax evasion by some entities.”

Industry leader PMFTC Inc. is a joint venture between Fortune Tobacco Corp. and American giant Philip Morris. The firm corners around 80 percent of the market.

Japan’s stake in the local cigarette market, meanwhile, is represented by Japan Tobacco International, which distributes brands such as Winston, Camel and Mevius (formerly Mild Seven).

Other signatories to the letter were the Federation of Filipino Chinese Chambers of Commerce and Industry and the Federation of Philippine Industries.

The letter, which was received by Purisima’s office on July 11, cited results of a recent Oxford Economics study that showed the government lost nearly P15 billion in foregone revenues from excise taxes last year due to the illicit cigarette trade. The study was commissioned by Philip Morris.

Complaints by larger players comes amid the recent rise of local players, which started selling cheaper tobacco shortly after new legislation forced other players to raise prices.

According to the two chambers, the Oxford Economics study was proof that the government should look closer at tax payments of local manufacturers.

“This could be achieved via a third-party monitoring group, working closely with the Department of Finance and its officers,” the groups said in their letter to Purisima. “Ensuring proper implementation of our tax laws … is critical to the sustainability of a competitive industry.”

Revenue Commissioner Kim Jacinto-Henares brushed the letter off, saying local tax authorities were already on top of the issue. The Bureau of Internal Revenue already has extra personnel closely monitoring the operations of local tobacco makers.

“They can complain all they want. As long as I’m doing my job, I really don’t care,” she said. Paolo G. Montecillo