LGU business permits in spotlight after raid on tobacco factory

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THE DEPARTMENT of Finance (DoF) said it wants an investigation into local government units (LGUs) granting permits to illegal businesses, following the discovery of unregistered tobacco factories and the proliferation of unregistered cigarette production lines.

The National Bureau of Investigation (NBI) and the Bureau of Internal Revenue (BIR) raided on Nov. 28 an illegal tobacco factory in Bugallon, Pangasinan that was given a permit to operate as a piggery.

“The officials/employees who were instrumental in the issuance of the permit and all other accountable persons who failed to exercise the degree of diligence required of them should be investigated and subsequently subjected to appropriate charge/s,” Finance Secretary Carlos G. Dominguez III said in a letter to Department of Interior and Local Government (DILG) Secretary Eduardo M. Año.

Mr. Dominguez said the barangay, as the smallest political unit, serves as the government’s “first line of defense against the proliferation of illegal businesses” and its officials “are mandated to enforce all laws applicable within their jurisdiction and promote the general welfare of the barangay.”

“More specifically, barangays are given the power to issue barangay permits to businesses or activities which are located or conducted within their jurisdiction. The barangays are allowed to exact reasonable fees in the issuance of business permits for the limited purpose to cover only the cost of regulation,” Mr. Dominguez said.


“Thus, it is reasonable to expect that the barangay would investigate the requirements submitted and/or inspect the area/location before issuing the permit and its yearly renewals, and even during the validity thereof,” he added.

The latest raid saw P2 billion worth of cigarettes packed and imprinted with unregistered tax stamps and brand labels.

Around 30 workers, including five Chinese nationals, were found working at a factory in Barangay Portic.

The DoF has asked the BIR and the Bureau of Customs to keep watch on the importation of cigarette-making machinery from China.

The DoF has said that fake cigarettes have become more prevalent after the government imposed higher excise taxes on tobacco products in January.

Another bill raising tobacco taxes further is advancing in Congress after the House of Representatives approved it on final reading last week, while the Senate has started committee-level discussions.

Excise taxes on tobacco are currently at P35 per pack as of July under the Tax Reform for Acceleration and Inclusion (TRAIN) law, from P32.5 in January and P30 in 2017. The law is also set to raise tobacco taxes to P37.50 by 2020, and P40 by 2022.

The House meanwhile approved on final reading House Bill No. 8677, which proposes to increase the excise tax on tobacco products gradually by P2.50 per pack every year beginning at P37.50 in July 2019 to P45 in July 2022, and a 4% annual hike thereafter.

The DoF raised P106.89 billion from tobacco excise taxes in the first nine months of the year, which is equivalent to about 6% of the government’s overall tax take. — Elijah Joseph C. Tubayan