Report: Smuggled cigarettes deprive gov’t of P26B in taxes yearly

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MANILA, Philippines—Rampant smuggling of cigarettes mostly from neighboring Asean countries and shipped through the Philippines’ unmonitored shorelines resulted in a P26-billion illicit market annually depriving the government of tax revenues, a lawmaker said on Thursday (April 7).

Rep. Jericho Nograles (Puwersa ng Bayaning Atleta) told an online seminar that the latest estimates of global business intelligence and market analysis provider Euromonitor International had shown that 13 percent of cigarettes being sold in the Philippines was illegal — smuggled without payment of import duties, or manufactured locally but sold without tax stamps signifying correct excise payments.

Nograles said that in the case of smuggled sticks, many were coming in no longer through ports being tightly watched by Customs authorities amid a crackdown on illicit cigarettes, but via the shorelines of provinces in Central Luzon and Mindanao. Citing Euromonitor data, Nograles said the biggest concentration of illegal cigarette sales in the country was in the provinces of Bataan, Misamis Occidental, Nueva Ecija, Palawan, Sultan Kudarat, Zambales, and Zamboanga Sibugay.

The lawmaker said his colleague, Albay Rep. Joey Salceda, who chairs the House ways and means committee, had estimated bigger foregone revenues amounting to P60 billion yearly due to illicit cigarette trade.

Nograles said Salceda’s projection pegged tax-evading cigarettes accounting for 25 percent of the market — an estimate which he said may not be far-fetched.

For the part of the government’s enforcement bodies belonging to the so-called “strike team” against illicit cigarettes, Customs (BOC) Assistant Commissioner Vincent Philip Maronilla and Bureau of Internal Revenue (BIR) director Beverly Milo admitted that Euromonitor’s figures may be a “more reasonable estimate” of the extent of illegal cigarette trade in the country.

As both the BOC and the BIR had been going after unscrupulous traders, Maronilla said the BOC from 2019 until this year apprehended a total of P8.08-billion worth of smuggled tobacco products which deprived the government of P2.98 billion in taxes. For the part of the BIR, Milo said its operations yielded fake cigarettes and stamps equivalent to unpaid taxes totaling P3.74 billion from 2018 to 2021. It did not help that the two years of COVID-19 lockdowns temporarily limited the BIR’s enforcement operations due to movement restrictions, Milo added.

Citing Euromonitor’s report, Nograles said that six out of every 10 cigarettes being sold in Mindanao was “illegal” amid an “abundance” of “easily obtainable” and cheaper illicit sticks. Smuggled cigarettes cost only P35 a pack or P2 per stick — nearly half the price of tax-paid packs worth P72, he noted.

The tougher times wrought by the prolonged COVID-19 pandemic plus the annual increases in excise on “sin” products, like cigarettes, to finance the government’s universal health care program had fueled a flourishing illicit tobacco trade in the country.

TSB