Cigarette-making machinery the latest front in government’s war on smuggling

CIGARETTE-MAKING machines from China continue to enter the country, following the discovery of unregulated cigarette factories, the Department of Finance (DoF) said.

In a statement over the weekend, Finance Secretary Carlos G. Dominguez III ordered the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) to work closely with their counterparts in Beijing to stop the illegal entry of such machinery.

“What we have to stop is the import of the equipment, which is coming from China,” Mr. Dominguez said.

The DoF said that based on raids conducted by the BIR earlier this year, smugglers have shifted to illegally importing cigarette machines capable of making fake versions of popular brands here, after the government cracked down on the illegal entry of fake cigarettes and fake tax stamps.

“They have graduated from fake stamps to fake cigarettes,” BIR Commissioner Caesar R. Dulay said in the same statement.

Starting June, the BIR has confiscated cigarette-making machines, packing machines, filter-making machines, and fake tax stamps found in warehouses in Pampanga and Cagayan de Oro, as well as several other warehouses elsewhere in Luzon and in Mindanao.

The proliferation of counterfeit cigarettes is a revenue problem for the government, which collects an excise tax on cigarettes.

Philip Morris Fortune Tobacco Corp. Inc. (PMFTC) and JTI Philippines have pressed the BIR to clamp down on fake cigarettes. Last week, the National Bureau of Investigation, acting on a tip from PMFTC, raided an unlicensed cigarette factory in Pangasinan that is said to be the country’s main source of fake cigarettes.

Mr. Dulay has said fake cigarettes have become more prevalent, especially outside Metro Manila, after the government imposed higher excise taxes on tobacco products in January.

Another bill raising tobacco taxes further is advancing in Congress after the House of Representatives approved it on final reading last week, while the Senate has started committee-level discussions on its own counterpart measure.

Excise tax on tobacco products went up to P35 per pack in July under Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN), from P32.50 in January and P30 in 2017. This tax will rise further to P37.50 in 2020 and to P40 in 2022.

The House last week approved on final reading House Bill No. 8677, which proposes to increase the excise tax on tobacco products by P2.50 per pack every year, starting at P37.50 in July 2019, to P45 in July 2022, with a four-percent annual hike thereafter. This scheme takes the place of TRAIN’s provision once the new law is enacted.

The DoF had wanted a steeper hike to P60 per pack in 2019, with an annual increase of nine percent thereafter. It is packaging the legislation as a health measure to discourage cigarette consumption, with support from health advocates.

The government raised P106.89 billion from the tobacco excise tax in the nine months to September, accounting for six percent of its overall tax take. —