BIR wants more agencies to participate in campaign to crack down on illicit tobacco

MORE AGENCIES need to be involved in the crackdown against illicit tobacco products trade, Internal Revenue Commissioner Romeo D. Lumagui, Jr. said.

“It’s not just the BIR’s (Bureau of Internal Revenue) responsibility,” he told BusinessWorld on the sidelines of a House hearing on Tuesday.

“We’re doing everything we can to monitor the illicit trade, but so much still gets through, and it’s beyond our control,” he added.

The Department of Finance has estimated that around P52 billion in revenue each year is foregone due to the illicit tobacco trade.

Asked about his views on adjusting taxes on novel tobacco products, Mr. Lumagui declined to answer, deferring to the Department of Finance.

Legislators have filed House Bills 5207, 5212, and 5364, which propose to lower taxes on vape and heated tobacco products.

The tobacco industry contends that high taxes are encouraging the illicit trade, though Action for Economic Reforms blames weak enforcement and governance gaps.

Tobacco taxation expert and former World Bank Senior Economist Roberto Iglesias said novel tobacco products may be ripe for higher tax rates as consumption rises, giving the government an opportunity to boost revenue.

“The problem is a governance problem, a law enforcement problem, not a tax policy problem, in and out,” Mr. Iglesias said when asked if lowering rates could curb the illicit trade.

He warned against rate reductions, citing Brazil’s experience.

“In Brazil, we tried reducing rates to fight illicit trade, (but they were still) much, much cheaper. So even with a tax reduction, (illicit traders were still) able to do business,” he said.

Mr. Iglesias cited the need for cross-border cooperation with neighboring countries to address illicit trade.

He said bilateral diplomatic conversations with China and Indonesia are necessary to help the law enforcement effort. — Aubrey Rose A. Inosante