Who Should Monitor Illicit Trade in Philippines Tobacco Industry?

Source from:  GMA News 08/07/2014

An Asia-wide anti-tobacco group is claiming Philip Morris International (PMI) has funded a report to gain a seat in a tri-partite monitoring group within the Department of Finance to be organized for monitoring smuggling and undervaluation of imports into the Philippine tobacco market.

Thailand- based South East Asian Tobacco Control Alliance (SEATCA) raised the alarm as business federations, to which the tobacco giant is represented, jointly wrote Finance Secretary Cesar Purisima seeking representation in the tax audit of the tobacco trade and basing their rationale in the Asia-11 Illicit Tobacco Indicator 2012, a report on illicit tobacco trade by the International Tax and Investment Center and Oxford Economics released in September 2013.
 
The report cites how governments in the region are losing billions in tax revenue due to illicit trade, particularly related to tobacco tax increases and high prices while 9 percent or 66.5 billion of cigarettes consumed in the countries surveyed in the region are illicit – either illegally imported (5.6 percent) or illegally manufactured locally (3.4 percent) – prompting Asian governments to activate the Framework Convention on Tobacco Control protocol to check on illegal trade by convening an import monitoring and  audit group.
 
The letter was received by Purisima on July 11, and was signed by the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc., Federation of Philippine Industries, American Chamber of Commerce and Industry of the Philippines, and Japanese Chamber of Commerce and Industry in the Philippines and was made available to the media.

Negative economic impact
 
The purported revenue losses in tobacco trade through smuggling and underreporting of import data would have imminent negative impact on the domestic economy. "This issue is of such enormity because it not only places investor companies at a disadvantage when competitors do not pay the correct taxes, but it also deprives the government of much needed funds for its many programs to alleviate the condition of the poor…" the joint letter read.
 
"Additionally, ensuring the proper implementation of our tax laws across all manufacturers is critical to the sustainability of a competitive industry, and to ensure the security for the livelihood of the more than 2.9 million individuals dependent on the tobacco sector," it added.
 
However, the basis of these claims were questioned by SEATCA asserting the Asia 11 report was funded by Philip Morris International and was prepared based on the terms of reference provided by Philip Morris Asia Ltd. and asserted the results of the report were "skewed" in favor of the tobacco industry's positions on taxation.
 
The anti-tobacco group said that given the "non-transparent and potentially biased data used by the authors," the estimates of the extent of illicit trade are "likely also similarly biased and highly suspect.
 
"The Asia-11 Report cannot be relied on as a source of data on illicit trade until there is significant transparency over the underlying methodology and data inputs and the contractual arrangements under which it was produced."
 
SEATCA said the findings of the report on the Philippines produced the same questionable conclusions. The group added the report was "prone to either overestimation or underestimation, leading one to conclude that the estimate of illicit cigarette consumption in the Philippines is inaccurate and unreliable."
 
Philip Morris Fortune Tobacco Inc., the Philippine subsidiary of PMI, did not deny the funding source for the Asian 11 report but lambasted SEATCA for ignoring the real issues in the regional tobacco industry.
 
"Instead of providing practical recommendations to address illegal cigarettes in the Philippines, the Southeast Asia Tobacco Control Alliance (SEATCA) continues to misrepresent the obligations of signatories, including the Philippines, to the Framework Convention on Tobacco Control (FCTC). SEATCA knows well that the FCTC in no way precludes any Government from cooperating with tobacco Companies, as long as any interactions are conducted in a transparent manner, which they have been," PMFT said in a statement.
 
The statement added: "SEATCA also knows well that in dozens of countries around the world, there exists meaningful and transparent cooperation between Governments and tobacco manufacturers in order to address the illegal cigarette trade. The legitimate tobacco industry in the Philippines is responsible for the livelihoods of millions and in 2013 contributed 70 billion in taxes. SEATCA's stated goal to exclude legal manufacturers in resolving this growing problem is both irrational and self-defeating."

The monitoring group
 
The FCTC Alliance of the Philippines has also  expressed concerns over the supposedly tainted study commissioned by Philip Morris International, estimating the Philippines have lost some P15.6 billion in revenues from the sale of undervalued cigarette products increasing by nearly three-fold to P17.1 billion last year from P6.1 billion in 2012.
 
"The government should ensure that cigarette companies have no hand in the third-party audit group. If we would be the monitoring group, I think that would be better," FCTC president Maricar Limpin told reporters.
 
The Protocol to Eliminate Illicit Trade in Tobacco Products is the first Protocol to the World Health Organization-FCTC and was adopted on November 12, 2012 at the fifth session of the Conference of the Parties in Seoul, Republic of Korea. It is currently open for ratification, acceptance, approval or accession by signatory countries.
 
The protocol aims to eliminate all forms of illicit trade in tobacco products and provides tools for preventing and counteracting illicit trade through an array of national measures and international cooperation. Enditem