Tobacco sector bucks plan to hike tax stamp prices

As if the higher excise taxes slapped on cigarettes have not burdened manufacturers and consumers alike, the state-run printer will raise the price of tax stamps to 23 centavos apiece, according to a tobacco industry group.

In a statement Saturday, Philippine Tobacco Institute (PTI) said it opposed APO Production Unit Inc.’s plan to jack up the cigarette tax stamp cost from 15 centavos at present. The last price adjustment was made in 2018 from 13 centavos a stamp when the Internal Revenue Stamps Integrated System (Irsis) project started in 2014 to collect the correct excise taxes from cigarettes.

PTI groups domestic cigarette makers, exporters as well as tobacco leaf suppliers.

In a March 15 letter to APO president and chair Michael Dalumpines, PTI president Rodolfo Salanga said the higher cost was “unconscionable and excessive.”Salanga pointed out that “APO is not a revenue-generating government agency and its ‘monopoly’ of producing the tax stamps is for regulatory purposes and not to raise revenues.”Citing APO’s discussions with cigarette manufacturers and the Bureau of Internal Revenue (BIR), Salanga said the actual cost of printing tax stamps was only 11.38 centavos each.

Review of APO move

Given the difference in actual production cost and the price that APO wanted cigarette firms to shell out for stamps, PTI’s computations showed the agency would jack up its profit by as much as 102 percent, Salanga said.

“APO, however, could not justify its reason to increase the price, which is allegedly due to the higher cost of ink and paper to produce the security stamps,” Salanga added. Salanga said PTI had also written the BIR to express its concern and asked the country’s biggest tax-collection agency “to review APO’s move [as] certain government processes were not complied with, particularly the absence of a public bidding as provided for by law.”

Salanga noted that tax stamp prices could be adjusted only by the BIR under the revenue regulations it issued in 2014 and 2017.

The BIR plans to affix new and improved tax stamps on tobacco products this year to combat rising illicit trade.

In February, the Department of Finance (DOF) said the BIR’s upcoming rollout of the enhanced Irsis would further step up its campaign against cigarette smuggling.

BIR officials earlier said the new tax stamps would have more security features as previous stamps had been faked, resulting in foregone revenues for the government. Besides cigarettes, alcoholic drinks and e-cigarettes would also soon be affixed with internal revenue stamps.

Fake products

This year, cigarette excise tax rose to P50 a pack from P45 last year as mandated under Republic Act No. 11346, or the Tobacco Tax Law of 2019.

Excise rates slapped on e-cigarettes, vapes and alcoholic drinks also increased effective January 2021 under RA 11467 signed by President Duterte in 2020.

Illegal trade of fake and smuggled cigarettes flourished amid the COVID-19 pandemic, especially when supply dwindled during the stringent lockdown that restricted movement of nonessential goods.

In turn, many consumers turned to cheaper—sometimes counterfeited—alternatives due to a pandemic-induced recession.

Internal Revenue Commissioner Caesar Dulay earlier said the BIR’s strike team against illicit cigarette trade confiscated 55 cigarette-making machines, 4.89 million packs of assorted cigarettes and 22.39 million fake tax stamps amounting to P1.23 billion last year.

The BIR and DOF officials had warned that unscrupulous traders would take advantage of recent “sin” tax increases, which, in turn, were supposed to finance the universal health care program. INQ