New scheme to evade cigarette taxes

The head of the Duterte administration’s economic team has asked the Department of Trade and Industry (DTI) to join in the fight against illicit cigarette trade after the Bureau of Internal Revenue (BIR) uncovered a new modus operandi among traders.

In a statement Monday, the Department of Finance (DOF) quoted BIR officials as recently reporting to Finance Secretary Carlos G. Dominguez III that “some enterprising entities have come up with a promotional scheme in which tax stamps on sold cigarette packs could be exchanged for a can of sardines or a pack of noodles.”

Reusing those cigarette tax stamps will allow the user to avoid paying the correct excise taxes for new products, as it would appear that the dues were already paid, although for previous cigarette packs.

For Deputy Internal Revenue Commissioner Ariel Guballa, his suspicion was that illicit tobacco traders could be using this promotional scheme to gather used tax stamps to put on packs of fake cigarettes.

As such, Dominguez ordered the BIR to determine who were purchasing the used cigarette tax stamps and coordinate with the DTI in order to stop these transactions.

“You better talk to the DTI and tell them that can’t be allowed,” Dominguez told Internal Revenue Commissioner Caesar R. Dulay, especially if there was no DTI permit for such a promo.

In response, Dulay told Dominguez that he would meet with cigarette manufacturers such as PMFTC and Japan Tobacco Inc. as well as the handlers of the Internal Revenue Stamps Integrated System (Irsis) to resolve this issue.

At present, the tax stamps are being churned out by state-run printer APO Production Unit Inc. while Irsis Corp. provided their security features.

The illicit cigarette trade has persisted as unscrupulous businessmen find it lucrative given that taxes on cigarettes have been raised substantially.