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Philippines: Senate Study Unravels Illicit Cigarette Production Tripled Just before Sin Tax Rreform Source from: InterAksyon.com 10/29/2014  Two high ranking government officials sustained the findings of the Senate Tax Study and Research Office (STSRO) indicating systematic abuse, to include possibly resorting to technical smuggling by a local manufacturer, in the effort to dodge payment of excise taxes on cigarettes.
The findings came to light during a recent hearing by the Congressional Oversight Committee on the Comprehensive Tax Reform Program (COCCTRP) in the Senate that indicated illicit domestic production almost tripling to 17.1 billion sticks from six billion in 2012, or just prior to the imposition of the reformed excise or "sin" tax law. Based on the records of the National Tobacco Administration, out of the total 64.7 million kilograms of raw material produced by local tobacco farmers in 2012, 27.5 million were consumed by cigarette manufacturers in the country and this increased in 2013 by almost 50 percent to 32.6 million kgs. What's notable, however, was that, reputedly, Mighty gained an estimated 20 percent share of the country's smoking consumers from just 3% in the previous year on the strength on purveying low-cost cigarettes. Industry leader Philip Morris-Fortune Tobacco Corp. (PMFTC) is believed to hold as high as 75% from a strong 92% share before January 2013. Bureau of Customs (BoC) Commissioner John Sevilla practically bolstered the observations of the NTA chief by informing the bicameral body that, as early as last year, the Department of Finance (DoF) had been "quite aware of the very large of volumes of warehousing entries of Mighty Corp." A DOF Task Force report noted that, "during the course of evidence gathering and documentation at the Port of Manila, it was noted that the subject Mighty made a series of requests for large payments of duties and taxes of Mighty Corporation's warehousing importations... it is highly irregular, bordering on the anomalous, for Mighty to make duty payments for unusually large volume of bonded raw materials that are supposed to be devoted to manufacturing and exportation of its finished products." Apparently, there existed discrepancies in BOC records of the company's imported tobacco leaves for warehousing and the BIR records on the volume of its reexports. "After suspension of their license, a team from customs went in to audit the physical stock of tobacco that was there at that time ... We collected P1 billion from Mighty, and they paid right away. Those were taxes due on what was imported actually, but was not exported," Sevilla said, alluding to what amounted to an apparent attempt at technical smuggling. Senate Minority Leader Vicente Sotto III asked: "How can this corporation produce goods to sell in the domestic market if its raw materials are all declared for export? What percentage have they managed to corner in the 32.6 million kg production of tobacco leaf in 2013?" Sotto asked. Related Updates |
