BIR CHIEF. Bureau of Internal Revenue Commissioner Romeo Lumagui said the government will step up efforts to combat illicit cigarette trade, at a forum in Manila on Tuesday (Oct. 17, 2023). He said that lost revenues in 2022 alone amounted to PHP26.19 billion. (PNA file photo)
MANILA – Bureau of Internal Revenue (BIR) Commissioner Romeo Lumagui said on Tuesday the bureau will ramp up measures to combat illicit tobacco trade to prevent further damage to the national economy and revenue collections.
"In a recent study, the University of Asia and the Pacific (UAP) and the Federation of Philippine Industries, Inc., disclosed that between 2018 and 2022, the illicit trade in cigarettes is estimated to have reduced our Gross Domestic Product (GDP) by an average of 0.39 percent, decreased the average household income by 0.63 percent, and cut employment by 4.9 percent," Lumagui said during the "Defend Sin Taxes, Fight Illicit Trade" media forum held at the Bayleaf in Intramuros.
In terms of revenue collections, Lumagui said the UAP study showed that the government stands to lose approximately PHP30.57 billion in revenues this year, almost 20 percent higher than the PHP26.19 billion revenue foregone last year.
"The UAP study warns, however, that foregone revenues are estimated to further increase to PHP33.7 billion next year, PHP36.8 billion by 2025, PHP39.8 billion by 2026, and jump to PHP42.54 billion in 2027," said Lumagui.
Lumagui said the PHP26.19 billion in lost revenues in 2022 alone could have funded the construction of 57,000 socialized housing units, 8,642 classrooms, and 75 hospitals.
The BIR Commissioner said there are four fundamental types of illicit tobacco trade which include illicit manufacturing, counterfeit production, smuggling, and bootlegging, where individuals purchase cigarettes in large quantities from countries where taxes are low to sell them in countries where taxes are high.
To combat illicit tobacco trade, Lumagui said the BIR conducts nationwide raids against individuals or business entities involved in illegal trade.
The BIR also promulgates revenue issuances mandating rules and policies for the tightening of regulations, and the monitoring of the manufacture, importation, and sale of tobacco products and affixing of internal revenue stamps on vapor products.
Lumagui, however, cited the need to improve its border defenses, to support the tax administration in its efforts to control the illegal trade of cigarettes.
He said effective intelligence work and inter-agency coordination among various law enforcement agencies are urgently needed to support collaborative efforts and toughen operations against cigarette smuggling.
"Attention must also be focused on industrial parks and economic and freeport zones, which are also abused and serve as cover for illicit tobacco manufacturing facilities," Lumagui said.
He also stressed the need to develop a comprehensive regulatory framework for the sale of cigarettes through the various e-commerce platforms, so that only legitimate and registered manufacturers, importers and traders are allowed to be involved in the sale of legitimate brands of cigarettes.
Lumagui said the BIR is also developing a series of endeavors to further enhance the impact of our tax laws that relate to the tobacco industry.
These include intensifying the monitoring of supply chains and distribution channels of tobacco products and enhancing the Track and Trace System, and the Security Features of the Internal Revenue Stamp Integrated System (IRSIS), that cover the Internal Revenue Stamps currently in use.
He said the BIR will also strengthen its connections with other government agencies, coordinate with other Asian countries, review and update the existing rules and regulations related to the illicit trade of tobacco products, and explore the possibility of imposing stiffer penalties on those involved in illicit trade.
Lumagui said the BIR will soon issue a revenue memorandum circular updating the schedule of penalties and fines for violations of the excise tax provisions of the National Internal Revenue Code of 1997. (PNA)
