Finance Secretary Carlos G. Dominguez III on Wednesday said he had ordered the Bureau of Internal Revenue (BIR) to further tighten enforcement following the proliferation of fake cigarette tax stamps, which he described as “a matter of serious concern.”
Dominguez commended Internal Revenue Commissioner Caesar R. Dulay for investigating the alleged use of fake tax stamps by homegrown cigarette manufacturer Mighty Corp., among other cigarette manufacturers.
“Commissioner Dulay did the right thing in ordering an investigation after receiving field reports from our revenue officials on the illegal practices of certain tobacco companies,” Dominguez said.
Mighty had denied it was using fake tax stamps in its operations and called on the BIR to investigate not only the Bulacan-based company but also the other players in the industry.
Dulay last Tuesday told the Inquirer that the BIR already issued letters of authority to Mighty and other companies upon receiving reports of the proliferation of fake tax stamps in cigarettes being sold in the market. A letter of authority is an official document that empowers revenue officers to examine and scrutinize taxpayers’ books in order to determine their correct tax liabilities.
Dulay said the BIR has been receiving reports that there were “many” fake internal revenue stamps affixed on cigarette packs.
Since late 2014, the BIR has been implementing the Internal Revenue Stamps Integrated System on tobacco products. These stamps ensure that the correct excise taxes had been paid.
According to Dulay, the proliferation of counterfeit tax stamps “definitely impacts” on the collection of excise taxes, although he could not say how much. Excise taxes account for a tenth of the BIR’s annual tax take.
Inquirer sources said foregone revenues from fake tax stamps reach as much as P10 billion annually.
Dulay also disclosed that the BIR would come out by July with new designs of tax stamps bearing “more details” and better security features to prevent counterfeiting.
In a statement, Mighty executive vice president and spokesperson Oscar P. Barrientos argued that their operations were “transparent and closely monitored by revenue authorities from sourcing of raw materials to manufacturing and withdrawals of cigarettes,” hence they do not use fake stamps.
“In fact, our company’s operation is the only one monitored by close-circuit cameras required by the BIR, and it’s also on records that Mighty has spearheaded the campaign all over the country against the proliferation of fake cigarettes using fake stamps,” Barrientos added.
The former regional trial court judge said that they have yet to receive any notice of investigation from the BIR.
“We are hoping that if ever this is done, the BIR should include in its investigation not only local manufacturers but also multinational companies and their local partners,” Barrientos said.
According to the DOF, the BIR reported last month that it had shuttered a facility operated by an unauthorized cigarette manufacturer in Pampanga, confiscating 5.5 million pieces of fake unused cigarette stamps worth about P175 million in excise and value-added taxes.
The BOC also last month raided a facility in Bulacan, which the DOF said contained “unlicensed raw materials for cigarette production, among them, over 500 boxes of cigarette filters, 100 sacks of tobacco leaves, reels of inner liner, cigarette paper and packing film.”
Customs Commissioner Nicanor E. Faeldon had also reported of a recent raid in Pangasinan that yielded P1 billion worth of fake cigarettes and led to the arrest of 24 undocumented foreigners working in four warehouses.
“The raid also led to the seizure of counterfeit labels of cigarette brands manufactured by PMFTC Inc. and the arrest of a certain Jayson Enero Li,” according to the DOF.