JAPAN TOBACCO International (JTI) Philippines, the new owners of Mighty Corp., said the authorities need to focus on plugging the revenue losses from cigarette smuggling, rather than raising taxes on such products.
JTI Philippines Managing Director Manos Koukourakis said “billions” in tax revenue is lost every year due to “rampant” cigarette smuggling.
He added that raising taxes further would be “disastrous for the legitimate tobacco industry.”
“Smugglers don’t pay taxes, put jobs at risk, play badly with smokers’ health and creates a bad image for our country to the investors community,” he said in a text message yesterday.
“Instead of raising taxes and going after the very legit companies like JTI Philippines… why don’t we better go after the smugglers,” he added.
Sought for comment, Finance Secretary Carlos G. Dominguez III said in a mobile phone message: “We always welcome information on tax evaders. The information provided will be acted upon immediately by the… anti-smuggling, anti-taxpayer teams. We expect results immediately,” referring to units of the Bureau of Customs and Bureau of Internal Revenue.
Mr. Dominguez has said that the incidence of cigarette smuggling likely grew given the subsequent yearly increase in tobacco taxes under Republic Act No. 10351, or the Sin Tax Reform Law that was enacted in 2012.
This year, cigarettes face several rounds of tax increases under Republic Act 10963, or the Tax Reform for Acceleration and Inclusion law. Cigarettes are taxed P32.5 currently, rising gradually to P40 per pack in 2022.
The Department of Finance (DoF) has said that it will support Senator Emmanuel D. Pacquiao’s bill seeking to raise the tobacco excise tax to P60 per pack under a new round of tax measures to be submitted to Congress by mid-February.
“Another tax increase which inevitably will lead to further consumer price increases seriously risks turning this country like Malaysia’s where cigarette smuggling is almost 60% of total consumption,” said Mr. Koukourakis.
He added that the government makes about P800 million in taxes excluding excise and value-added taxes for every P1 billion a cigarette company makes.
“It will be good for the government, good for decent employment, far better for those adults who chose to smoke and not against the legitimate industry. So in the end, the biggest beneficiary of clamping down smuggling is the government per se,” he said.
JTI Philippines settled part of the P30 billion in liabilities owed by Mighty Corp. after it bought Mighty in September.
The DoF expects to collect about P150 billion in excise taxes from cigarettes this year. — Elijah Joseph C. Tubayan