Fake, smuggled cigarettes proliferating

The country’s biggest tobacco firm raised alarm over the rising cases of cigarette counterfeiting and smuggling as well as the continued proliferation of fake tax stamps.

“There are many external factors that affect our business, and illicit trade is one major area of concern for us,” PMFTC Inc., a joint venture between Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco Corp., said in a statement.

“Illicit trade in cigarettes is a serious problem that undermines government revenue collections as well as fuels criminal and terrorist activities,” it noted.

Early this month, LT Group Inc. president Michael Tan said he was looking at the tobacco business with “mixed” sentiment this year due to the threats posed by fake cigarettes made locally and those smuggled into the country from abroad.

“We’re still hopeful enforcement will continue and the government can put an end to these illicit activities. It’s a concern because it’s also a national security issue. It could fund terrorism,” Tan said, whose LT Group controls PMFTC.

It said fake tax stamps remained the focus. “This is the same as fake money and should be treated as such under the law.”

Last year, the government shuttered homegrown Mighty Corp. for using counterfeit cigarette tax stamps to evade payment of excise taxes.

However, the increase in cigarette prices due to the Tax Reform for Acceleration and Inclusion (TRAIN) Act made counterfeiting and smuggling lucrative for illicit traders.

Under the TRAIN law, the unitary excise tax on cigarettes rose to P32.50 per pack starting Jan. 1 from P30 last year. This will further rise to P35 from July 1, 2018 to Dec. 31, 2019; P37.50 from Jan. 1, 2020 to Dec. 31, 2021; and P40 from Jan. 1, 2022 to Dec. 31, 2023.

A multisectoral coalition fighting illicit trade has expressed concern about the proliferation of fake and smuggled cigarettes, which could be financing criminal and terror groups.

In a statement, Fight Illicit Trade (Fight IT) movement chair Jesus L. Arranza lauded the Department of Finance, the Philippine National Police-Criminal Investigation and Detection Group, as well as the Bureaus of Internal Revenue and of Customs for recent actions against counterfeiting and smuggling of cigarettes.

Last month, a newly formed task force called the “Strike Team” led by the BIR uncovered fake cigarettes worth about P80 million in Malabon and Manila.

The BOC also intercepted P18.5-million worth of smuggled cigarettes from China last month.

“Had these illicit cigarettes found their way into the market, the government would have lost hundreds of million pesos in tax revenue,” said Arranza, who also chairs the Federation of Philippine Industries.

However, Arranza expressed alarm over “the growing incidence of the illicit cigarette trade owing to high tax-driven street prices.”

He raised concern that “these illegally generated funds may be financing criminal and terrorist activities.”