Philippines: Sotto Sounds Alarm on Massive Smuggling of Tobacco Products

Source from:  Manila Bulletin  10/27/2014

Acting Senate Minority Leader Vicente Sotto III has urged the government to look into the alleged smuggling of raw materials for tobacco products which apparently was spurred following the government's decision to impose higher excise taxes on cigarettes.

Sotto pointed this out in a recent hearing of the Joint Congressional Oversight Committee on Comprehensive Tax Reform Program (COCCTRP) where a study by the Senate Tax Study and Research Office (STSRO) showed strong indications of massive smuggling of these raw materials and several questionable business practices.

Using the STSRO study, Sotto pointed out data obtained showed conflicting figures of a local manufacturer Mighty Corporation in the importation and domestic consumption of the company.

Under the existing laws, imported raw materials declared for warehousing and transshipment are duty free as these are intended for international market. Only those declared for domestic consumption will be subjected to tax by the Bureau of Customs (BOC).

But apart from having questionable figures in the importation of tobacco leaves, Sotto said Mighty Corp. was also found not declaring importation of acetate tow, the material used to make cigarette filters which cannot be locally sourced, for domestic consumption until 2013.

Sotto emphasized the fact that consumption entries where companies are required to pay duties and taxes, were cleared in the case of the Associated Anglo-American Tobacco Corp. (AAATC), La Suerte Cigar and Cigarette Corporation, and Philip Morris Fortune Tobacco Corp.  Inc. (PMFTI).

But Sotto noted it was a "different case on Mighty Corp.," and urged the National Tobacco Administration (NTA) officials to look into the veracity of the report.

"Majority of its acetate tow importations since 2005 were cleared for warehousing entry and therefore should be used for cigarette exports," Sotto said at the hearing.

"Another interesting development there is that, they declared as under-transshipment beginning 2011 with a substantial increase in 2013. It is only in 2013 they declared acetate tow under consumption, baka yun yung mga panahon na nasita niyo na," he said addressing NTA officials.

"And it's of significant amount, barely able to justify its having the second largest market share in the cigarette industry locally," the senator added.

Citing the Senate report, Sotto also noted Mighty's volume of importation has been higher year on year since 2005. Enditem