DOF backs BIR investigation on fake cigarette tax stamps

Cigarettes sold at a supermarket. (AFP FILE PHOTO)

MANILA — Finance Secretary Carlos G. Dominguez III on Wednesday said ordered the Bureau of Internal Revenue to further tighten enforcement against the proliferation of fake cigarette tax stamps, saying it has become “a matter of serious concern.”

Separately, homegrown cigarette manufacturer Mighty Corp. denied it has been using fake tax stamps in its operations, and called on the BIR to investigate not only the Bulacan-based company but also the other multinational firms that were allegedly not paying the right taxes.

In a statement, Dominguez commended BIR Commissioner Caesar R. Dulay for investigating the alleged use of fake tax stamps by Mighty, 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.

“This is a matter of serious concern and I’m instructing the BIR to tighten monitoring and enforcement,” Dominguez added.

Dulay told the Inquirer last Tuesday that the BIR already issued some letters of authority to Mighty and other companies upon receiving reports of 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 of “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 are paid.

Dulay the proliferation of counterfeit tax stamps “definitely impact” on the collection of excise taxes, although he could not say by how much. Excise taxes account for a 10th of the BIR’s annual tax take.

Industry sources said foregone revenues from fake tax stamps reach as much as P10 billion annually.

As such, Dulay 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 separate statement, Mighty executive vice president and spokesperson Oscar P. Barrientos said 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 record that Mighty has spearheaded the campaign all over the country against the proliferation of fake cigarettes using fake stamps,” Barrientos said.

Barrientos added that they have not received any notice of investigation from the BIR, but in case the company does, “we are prepared for it, as our records are always open for scrutiny by 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 who are known for importing large quantities of raw materials without paying the correct taxes to the prejudice of our local farmers,” Barrientos said.

Barrientos noted that since two years ago, “Mighty has coordinated with the BIR, Bureau of Customs, police and the National Bureau of Investigation in the seizures of fake Mighty cigarettes and other brands and the arrest and indictment of persons involved in the smuggling, manufacturing and marketing of contraband cigarettes.”

Barrientos claimed that “Mighty has been subjected to unfair publicity by its rivals after its products, known for their smooth and superior blending, eat a large share of their market in the low-priced category once dominated by multinational rivals who remit abroad a large part of their income to the prejudice of the Philippine economy.”

“Two years ago, a ranking member of Congress had requested then Customs Commissioner John Sevilla to look into the highly irregular release of 500 containers of raw materials for the manufacturing of cigarettes from the customs zone in Manila. The investigation, involving a multinational company, was never heard of again,” according to Barrientos.

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 as well as 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.  SFM