CAGAYAN de Oro City -- Mindanao or the so-called backdoor of the Philippines, is a major contributor to the close to PhP16 billion in uncollected taxes through illicit trade in cigarettes.
The Fight Illicit Trade (Fight IT) movement (Fight IT) said that based on survey, 20 retailers in Davao City have been found selling smuggled cigarettes, therefore violating the Internal Revenue Stamps Integrated System (IRSIS) which the Bureau of Internal Revenue (BIR) implemented beginning December 1, 2014.
The market survey which Fight IT simultaneously conducted in different barangays in major cities in Mindanao to check on compliance by manufacturers, wholesale and retail stores with IRSIS also found out that 9 retailers in General Santos City, 40 retail and wholesale outlets in Zamboanga City, and 39 wholesale and retail stores in Cagayan De Oro City were openly selling significant quantities of cigarettes without tax stamps.
“The situation in outlying areas could even be more alarming,” Fight IT said.
The illicit trade in cigarette is costing government close to PhP15.6 billion in uncollected taxes in 2013, a six-fold increase from PhP2.6 billion in 2012, while consumption of illicit cigarettes increased three-fold from PhP6.4 billion in 2012 to PhP19.1 billion 2013, according to the Oxford Economics and International Tax and Investment Center.
Jesus Arranza, chairman of the Federation of Philippine Industries (FPI), said that there may be technical smuggling involved in this drastic increase.
Reports said that there is a noticeable increase in smuggling of cigarettes following the implementation of the sin tax law, which was implemented in 2013 and will gradually increase the tax on so-called “sin products” like tobacco and alcohol until 2017. Part of the tax government collected will be used to fund health programs.
Smuggled or illicit cigarettes are easily identifiable because of the absence of the proof of tax payment stamps on the pack, through the IRSIS.
And effective March 1, 2015, no cigarette manufacturer can sell cigarette pack without the tax stamps. Imported cigarette packs are required by BIR to have the tax stamps effective April 1, 2015 before it can be sold.
The BIR implemented IRSIS to address the concerns on illicit cigarette trade in the country, and the use of tax stamps ensures that each pack is legitimate and has paid the excise tax.
“Tobacco products are specifically taxed per pack at increasing rates of excise, precisely because tobacco is harmful and addictive, and the tax is intended to make the product less affordable, thereby encouraging people to quit. The national and local authorities in Mindanao should be alarmed at this flagrant circumvention of the law that is not only denying revenues, but undermining important public health objectives,” Arranza said, Fight IT lead convenor.
Arranza urged everyone, especially cigarette consumers, wholesalers and retailers to help government and Fight IT combat the illegal trade of cigarettes. He also called on the public to be vigilant in spotting illegal products and report these to authorities.
“Let us work together to combat this menace. We cannot allow manufacturers and store owners to be scot-free in selling illegal products without paying tax. Do we let them go when we tax-paying citizens are duty-bound to help the government?” he asked.
The Fight IT movement warned consumers against patronizing the “no tax stamps” cigarette packs as this is not only illegal without the requisite tax payment, but its origin and production are not known as well.
Fight IT is a broad-based, multi-sectoral movement intended to protect consumers, safeguard government revenues and shield legitimate industries from the ill-effects of smuggling. It was launched earlier this month under the umbrella of the FPI.
Fight IT, which brings together major players from industries with some of the most commonly smuggled goods or products such as rice, sugar, corn, palm oil, tobacco, steel, cement, ceramic tiles among others, carries the campaign slogan “Stop smuggling, Protect the consumers.”
Arranza said that the group will furnish the list of outlets found to be selling without tax stamps to law enforcement authorities for appropriate action.
The BIR has warned against the serious consequences of non-use and use of counterfeit stamps. Penalty ranges from a fine of up to PhP50,000 and imprisonment of not less than four years but not more than eight years. (Bong D. Fabe)