Gov’t scrambles vs new tax cheat scheme

THE BUREAU of Internal Revenue (BIR) is teaming up with the Trade department in the ongoing crackdown on illegal cigarettes after uncovering a new scheme involving recycled tax stamps.

In a statement, Finance Secretary Carlos G. Dominguez III said he has instructed BIR to seek the help of the Department of Trade and Industry (DTI) in going tobacco traders using this new modus operandi to evade taxes.

This developed after the BIR reported that some entities have been buying tax stamps from used cigarette packs from the public in exchange for a can of sardines or pack of noodles which they describe as a “promo.”

BIR Deputy Commissioner for Operations Arnel S.D. Guballa explained that the erring cigarette traders will then attach the old tax stamps on packs of illegal cigarettes.

“You better talk to the DTI and tell them that can’t be allowed,” Mr. Dominguez told BIR Commissioner Caesar R. Dulay during a recent executive committee meeting.

The Finance chief is also set to meet with officials from Philip Morris, Japan Tobacco Inc. and other cigarette companies, together with those handling the Internal Revenue Stamps Integrated System (IRSIS) to crack down on this new scheme.

The excise stamps are used as proof that taxes on cigarettes have been paid. The stamps have special chemicals and quick response (QR) codes by which their legality can be verified using a reader.

In 2017, authorities discovered a local cigarette manufacturer using fake tax stamps which allowed the maker to sell its products cheaper, which then led to a P30-billion tax settlement.

Excise tax on cigarette packs has risen to P35 per pack due to Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act that took effect in January last year.

The tax will rise to P37.50 per pack by 2020 and to P40 by 2022, and the rate will increase by four percent annually starting Jan. 1, 2024.

Cigarettes are also subject to a 12% value-added tax.

The recycling of tax stamps has emerged as the new strategy to skirt these higher taxes.

Prior to this, BIR officials had discovered factories that illegally produced cigarettes and printed their own tax stamps.

The Department of Finance is lobbying to further raise taxes on cigarettes, saying that doing so could push over three million Filipinos to quit smoking and collect P30.1 billion in additional revenues besides. The department is backing the bill of Senator Emmanuel D. Pacquiao that proposes a nine percent increase in the tax rate for the succeeding years, which will also raise P30.1 billion in additional revenues.

Latest estimates show that cigarette consumption could fall by as much as 16.8% if they raise the excise tax to P60 per pack.

Mr. Dominguez had also asked the help of the Department of the Interior and Local Government in apprehending local executives found coddling manufacturers of illicit cigarettes. — Melissa Luz T. Lopez