Group disputes PH losses from illicit trade in tobacco

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An international anti-tobacco organization has slammed a report published by the International Tax and Investment Center (ITIC) and Oxford Economics as unreliable for claiming that the Philippine government was losing P16 billion in foregone tax revenues from illicit trade.

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Thailand-based Southeast Asian Tobacco Control Alliance (Seatca) said the Asia-11 Report, which covered supposed illicit trade in eight Asian countries including the Philippines, was actually funded by Philip Morris International and prepared “according to agreed terms of reference provided by Philip Morris Asia Ltd.”

“The ITIC itself, despite its declaration of independence, is funded by the major transnational tobacco companies,” Seatca added.

The ITIC-Oxford report claimed that 9 percent or 66.5 billion cigarettes consumed in the countries surveyed “are illicit, either illegally imported or illegally locally manufactured.”

The report stated that 6.4 billion of the estimated 108.7 billion cigarettes consumed in the Philippines in 2012 were considered illicit, of which 6.1 billion sticks were tagged as “domestic illicit.”

“Given that the most popular brands in the Philippines belong to Philip Morris Fortune Tobacco Corp., it is highly possible that these also comprise the majority of domestic illicit, an embarrassing potential conclusion for the Asia-11 Report’s funders,”    it added.

Seata questioned use of the Empty Pack Survey methodology for the Philippine report.

“Identification of illicit packs by this process is highly disputable because of the non-transparent methodology employed . . . It is prone to either overestimation or underestimation, leading one to conclude that the estimate of illicit cigarette consumption in the Philippines is inaccurate and unreliable,” it said.

“The Asia-11 Report cannot be relied on as a source of data on illicit trade until there is significant transparency over the underlying methodology and data inputs and the contractual arrangements under which it was produced,” the group added.

“This Asia-11 Report is another attempt of the tobacco industry to protect its profits and to counter the public health benefits of tobacco taxation by persuading governments that tax increases will result in increased illicit trade and subsequent revenue losses,” Seatca said.

The report, according to the group, was prepared using “problematic methodology.”

It cited multiple data sources, the group said, but ITIC and Oxford “fail to provide a detailed description of each data source, the limitations of data derived from each source and how such would affect the accuracy of the estimates in the report.”

Seatca said the report contains “unexplained gaps and inconsistencies and shows selective use of the information presented.”

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6 Comments

  1. Blake Rodriguez on

    The Oxford Economics report really seems legitimate and trustworthy. These groups trying to discredit the report are actually sounding more questionable and unreliable. It looks like an agenda to protect those manufacturers involved in the illicit cigarette trade.

  2. Aries Cabaya on

    Tsk tsk tsk another defense of Southeast Asian Tobacco Control Alliance (Seatca) in order not to file case against Mighty Corp. Wonder what’s the real deal of this special treatment for Mighty? It could be this organization already received kickbacks from Mighty.

    • Benedict Cordero on

      Makes one really question what is behind this biased defense and protection of Mighty Corp., right? According to reports, there are data showing the company has gotten away with billions of tax nonpayment. That’s a tough blow for both the Philippine economy and the tobacco industry.

  3. Meredith Pacheco on

    And here we see a group trying to make an already confusing issue even more confusing. They’re trying to discredit the study done by ITIC and Oxford Economics with reasoning that itself is without merit. Bottom line is, we’ve all seen the numbers the DOF has released. We know tax evasion and smuggling has been rampant, and that Mighty’s operations have been called into question. Stop trying to muddle the issue by trying to trick the masses with these claims of bogus reports and whatnot. It’s a fact that there are groups engaging in illicit activities, it would be borderline idiotic to try to deny that. The government should focus on pursuing the local manufacturer that’s in the center of all this.

  4. oliver vicente on

    And is SEATCA reliable? All I know is, some cigarettes are able to sell at dirt cheap prices despite the heavy taxes being imposed. Clearly these companies are selling at a loss and probably would have been already bankrupted if not for their illicit trade practices.

  5. But it’s not like the ITIC-Oxford Economics just pulled their data out of nowhere. They relied on facts and figures to come up with this report, and these reports actually support previous claims by AC Nielsen, and even findings by the DOF itself, that’s why Purisima himself ordered an investigation before. Sadly, this order was ignored.