Heftier penalties for illicit cigarette traders eyed

MANILA, Philippines – The Department of Finance (DOF) is looking into slapping heftier penalties on unscrupulous traders of illicit cigarettes, who took advantage of higher excise taxes and a dwindling supply of tax-paid sticks at the height of the COVID-19 lockdown.

“If you recall, when the law increasing the excise taxes on tobacco products was passed, we warned of a possible increase in illicit trade,” Finance Secretary Carlos G. Dominguez III said Tuesday, referring to Republic Act (RA) No. 11346 or the Tobacco Tax Law of 2019, under which cigarette excise tax increased to P45 per pack effective Jan. 1, 2020.

“We, therefore, strengthened the law enforcement teams of both the Bureau of Customs (BOC) and the Bureau of Internal Revenue (BIR), and these teams have been performing their jobs pretty well, as evidenced by their identification and shut down of the illicit operations. They will intensify their efforts,” Dominguez said.

Just last week, the BOC seized P2.6-million worth of fake Marvels and Mighty cigarettes in Isabela province.

Illicit traders had been churning out counterfeit sticks or smuggling foreign cigarette brands, which were being sold cheaper since they did not pay correct taxes nor import duties.

It did not help that domestic cigarette production stopped during the enhanced community quarantine (ECQ) imposed from mid-March to May amid restrictions on the movement of people and goods in a bid to contain the spread of COVID-19.

To strengthen enforcement, Dominguez said that “although the current laws and penalties are sufficient, we will put a study group together to determine if new laws and regulations are required.”

In a statement on Tuesday, the Department of Finance (DOF) said Dominguez’s earlier proposal to ban the sale of unregistered “sin” products on online marketplaces gained support from the Department of Health (DOF) and the Food and Drug Administration (FDA).

Early this month, Dominguez said the government would stop online sales of cigarettes, e-cigarettes and liquor, as these products may be accessible to minors, and at discounted prices, if left unchecked—a move which the Department of Trade and Industry (DTI) also supported.

The DOH and the FDA were quoted as saying that they will work with the DOF and the DTI in developing a “comprehensive regulatory framework to allow only legitimate and registered online sellers and place appropriate safeguards to protect vulnerable age groups.”

“The Philippines has come a long way in safeguarding the public from the dangers of tobacco and alcohol consumption through its taxation policies and stringent regulatory measures. With wider and easier access to ‘sin’ products through technology, regulatory purview should be expanded to ensure that online selling is similarly covered,” the DOH and the FDA said.

“It cannot be overstated that in this time of the COVID-19 pandemic, health should be of utmost priority. Products that increase the risk of contracting and developing a more severe form of COVID-19 and its co-morbidities should be avoided, if not totally eliminated. The DOH and FDA further stress that now is the time to quit and for the youth not to take up this habit,” they said.

Cigarette companies such as PMFTC Inc. had said they have age-gating in place, so their resellers double-checked buyers’ government-issued IDs when delivering orders to ensure their products don’t end up with minors.

The BIR had also been looking into online sellers’ compliance with payments of “sin” products’ excise taxes and 12-percent value-added tax (VAT).
Since some online sellers were not BIR-registered, they unlikely paid VAT to the country’s largest tax-collection agency, unlike brick-and-mortar stores that remit the mandatory consumption levy. [ac]