Home » Customs & Trade, Ports/Terminals » BIR, BOC tasked to escalate drive vs illegal tobacco operations

A raid last month on a warehouse in Valenzuela City found illegally imported printing machines and cutting machines used for printing unauthorized cigarette pack labels and carton labels with brands Fortune, Mark, Hope, More, and Jackpot. Photo from the Bureau of Customs.

Finance Secretary Carlos Dominguez III has directed the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) to intensify their joint campaign against the illicit cigarette trade following the recent approval by Congress of a new law imposing substantial excise tax increases on tobacco products.

Dominguez issued the order after BIR reported that operations of the bureau’s Strike Team continued to find counterfeit cigarette brands and bogus tax stamps in recent raids conducted in Tacloban City and the provinces of Nueva Ecija and Tarlac.

“The proliferation (of illicit cigarettes and fake tax stamps), that’s going to bloom some more next year,” Dominguez said. “Bantayan n’yo ’yan (Keep a close watch on that),” Dominguez told BIR and BOC officials during a recent Department of Finance (DOF) executive committee meeting.

Dominguez also told Customs commissioner Rey Leonardo Guerrero to step up BOC’s drive against cigarette smuggling, which is expected to increase once the new law imposing higher “sin” taxes on tobacco products is implemented next year.

The tobacco sin tax reform bill, which is now up for President Rodrigo Duterte’s signature, provides for a P45 excise tax increase per pack of tobacco products starting 2020, followed by a series of P5 adjustments until the rate reaches P60 in 2023, and a 5% annual increase thereafter.

The unitary excise tax rate on tobacco products was earlier increased under the Tax Reform for Acceleration and Inclusion (TRAIN) Law from P30 per pack of cigarettes to P32.50 beginning January 1, 2018 and to P35 beginning July 1, 2018.

Starting 2020, heated tobacco and vapor products will also be taxed by P10 to P50, depending on the liquid volume, under the tobacco tax reform bill.

Last month, BOC assistant commissioner Atty. Vincent Philip Maronilla said BOC’s numerous seizures of fake cigarettes and illegal cigarette-making equipment could be “directly related” to the increase in the excise tax on tobacco under TRAIN.

He noted that from January to June this year, fake cigarettes and cigarette-making equipment were the third largest volume of high-value items that BOC had seized, next to other counterfeit products.

He said this is why DOF has ordered the customs bureau to intensify its operations against these illegal products, as the department predicts an increase in illegal importation and illicit manufacture of fake cigarettes, as tobacco usually maintains a certain level of demand in the local market.

Dominguez said increasing the taxes on tobacco products is only one aspect of the sin tax reform, as higher taxes on alcohol products still have to be tackled and approved by the incoming 18th Congress.

DOF proposes a tax on alcoholic drinks of at least P40 per liter.

Higher excise taxes on sin products will provide the government with the means to curb vices and undesirable behavior, while at the same time generate the hefty revenues needed to fully fund the Universal Health Care program, which will require as much as P1.44 trillion combined from 2020 to 2024, according to DOF.

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