A special team formed recently by the Bureau of Internal Revenue (BIR) to crack down on the illicit tobacco trade will work closely with other government agencies to further step up the Department of Finance (DOF)'s campaign against perpetrators of this scheme.
In a report to Finance Secretary Carlos Dominguez III, the BIR said its Strike Team and other concerned offices of the bureau will actively coordinate with other government agencies "to curtail further the proliferation of the illicit cigarette trade.”
BIR Deputy Commissioner Arnel Guballa said at a DOF executive committee (Execom) meeting that as part of these efforts, the BIR Regional Investigation Division assisted a team led by the Bureau of Customs (BOC) last Feb. 9 in seizing and apprehending several unregistered cigarette-making machines and fake stamps inside an illegal cigarette manufacturing facility in Tacloban City.
Guballa also said that at a recent hearing conducted by the Senate ways and means committee, senators had proposed that the BIR be provided with funds to assist the Strike Team in gathering intelligence against illicit tobacco traders.
“They (senators) noticed that we have conducted several raids and apprehensions, and I told the committee that we do not have funds for intelligence (gathering). And they are willing that, if this universal health care (bill) will be passed, they will give to the BIR some funds for the equipment and the warehouse (for storing seized machines and goods),” Guballa said during the Execom meeting.
In response, Dominguez said that because the BOC is the main investigating body against these illegal activities, the agency should also be given a share of the funding proposed by the senators, because their goal is to strengthen the government’s operations against smuggling and tax evasion.
Dominguez has underscored the need for heightened government vigilance against the illicit manufacture and sale of tobacco products, given that the increase in “sin” taxes has incentivized illegal traders to increasingly resort to smuggling and tax evasion.
He said the destruction last January of several machines used in the manufacture of illicitly traded cigarettes forms part of the Duterte administration’s relentless campaign against manufacturers of these products as effectively demonstrated in 2017 when the DOF, through the BIR and of BOC, cracked down on the "biggest fish," namely Mighty Corp.
Taking down Mighty Corp. for using counterfeit excise tax stamps led to the biggest tax settlement ever in the country’s history amounting to about P30 billion, forcing the company to get out of the cigarette business.
Moreover, after Japan Tobacco Inc. (JTI) took over Mighty, tobacco excise tax collections increased by at least P2 billion a month.
The contraband destroyed last Jan. 18 in Porac, Pampanga included units and parts of three filter maker machines, two packaging machines, and a cigarette-making machine, along with 484 master cases of various finished cigarette brands, and raw materials used in making cigarettes such as filter rods, tipping papers, packaging foil, acetate tow, and other supplies.
With a single cigarette-making machine capable of producing 20,000 sticks per minute, which is equivalent to about 9.6 million sticks during an eight-hour shift or 480,000 packs per day, the government has effectively blocked attempts of being defrauded of as much as P16.8 million per day of much-needed revenues for human capital development and the “Build, Build, Build” program by destroying these confiscated machines and products, Dominguez said.