THE Bureau of Internal Revenue (BIR) on Monday belied a report on the alleged rise of illegally traded cigarettes in the Philippine market, citing the high collection in excise taxes from tobacco as an indication of the said report’s inconclusiveness.
In a report prepared by the International Tax and Investment Center and Oxford Economics, entitled “Asia-14 Illicit Tobacco Indicator 2013,” it was alleged that of the 105.5 billion cigarettes locally sold in 2013, 18.1 percent is attributable to illicit consumption.
“The growth in collections on ‘sin’ taxes disproves the allegations that the government is losing revenues through illicit trade,” the BIR said in a news statement.
In 2013, or the first year of implementation of the higher tax rates on tobacco and alcohol products, the BIR collected a total amount of P100.9 billion in excise taxes from these sin products, with the actual incremental revenue arising from the imposition of the higher excise- tax rate amounting to P51.1 billion.
The BIR noted that this total collection is 81.2 percent higher than the P55.7-billion collection from sin products in 2012.
For the first three quarters in 2014, the BIR noted that total collections reached P78.3 billion, which is 27.7 percent higher than the collection made during the same nine-month period in 2013. The collection for the first three quarters also exceeded by P13.8 billion the sin-tax collection goal of P64.5 billion for the said period.
On the figures showing the cigarette withdrawals from the factories or warehouses, the BIR’s figures and the subject report also differed.
The BIR’s official data of cigarette withdrawals/consumption amounted to 107.2 billion sticks, which is already 1.7 billion sticks more than Oxford Economics’s reported data of 105.5 billion sticks, including the alleged illicit 19.1 billion sticks.
The 2012 data of the BIR also show the same pattern that the official data on cigarette withdrawals/consumption of 129.1 billion sticks is greater than Oxford Economics’s reported consumption of 108.7 billion sticks, including the alleged illicit 6.4 billion sticks.
The BIR’s statement, however, clarified that it is not discounting the fact that the illicit trade in cigarettes exists since this has become a worldwide concern.
“The bureau, together with the Bureau of Customs [BOC], has been very consistent in its fight against smugglers of goods as this affect our revenues. We implemented various measures to counter illicit cigarette activities such as implementation of stamp tax on cigarettes. We have also acted on reports by sectors to address allegations of misdeclaration/underdeclaration, and we are strictly monitoring removals of cigarettes to ensure that those that are sold in the market are properly taxed,” Internal Revenue Commissioner Kim Jacinto-Henares said.
Speed up probe
SEN. Antonio Trillanes IV is urging the BIR to speed up its tax probe of Mighty Corp., a Bulacan-based cigarette company facing a barrage of criticism for alleged tobacco-leaf smuggling and selling at retail prices below the prevailing excise-tax rate.
A staunch supporter of sin-tax reform, Trillanes said the BIR needs to investigate Mighty Corp. because it is obviously not paying the correct amount of taxes because of the lower retail price of their product: “Kailangan imbestigahan na ng BIR ang Mighty cigarettes kasi obvious na may kakulangan ito sa pagbabayad ng buwis sa baba ng kanilang retail price,” he said.
Meanwhile, Sen. Juan Edgardo Angara said that while it’s difficult to comment on the intense corporate rivalry between Philip Morris Fortune Tobacco Corp. (PMFTC) and Mighty, the BIR should do its work with dispatch.
“Definitely, the BIR should look into any allegation of tax evasion, especially if supported by strong evidence,” the neophyte senator from Aurora province said.
Last week PMFTC launched an all-out media offensive against Mighty Corp.’s alleged questionable business practices. The tobacco giant claimed that Mighty Corp.’s imported tobacco, allegedly intended for re-export, was diverted to local production. Declared purchase price of imported acetate tow used for cigarette filters was also way below the cost declared by its competitors. These prompted the Department of Finance (DOF) to order the BOC and the BIR to conduct separate probes on the Malolos, Bulacan-based cigarette firm last year.
Following its initial investigation, the BOC padlocked Mighty Corp.’s customs-bonded warehouse and made it pay close to P1 billion in back duties.
In contrast to BOC’s swift action on the Mighty case, the BIR has yet to report the status of its own probe more than a year after it was ordered by the DOF to investigate. This prompted administration lawmakers to urge Henares to speed up her investigation.
Recto Mercene
5 comments
In typical Henares fashion, she once again downplays how grave the problem is with the illicit cigarette trade. Is she still protecting Mighty Corp.?
Wow looks like Henares isn’t even trying to hide her bias anymore.
When you are presented with an evidence so strong, the logical thing to do is investigate.
Who knows what motivates Henares’ actions regarding the Mighty issue, but it sure isn’t logic! Otherwise she would have taken action against the company a long time ago, given the evidence of fraud and smuggling available.
She keeps ignoring all these allegations against Mighty without even doing a proper investigation. She seems desperate to paint the STL a success, and is trying to hide all evidence pointing otherwise.