Stamp tax slapped on cigarettes to curb smuggling

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THE government is imposing a new stamp tax system on cigarettes effective October 1 as part of efforts to curb smuggling and improve revenue collection from this commodity sector.

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In a statement on Monday, the Department of Finance said the issuance of the Revenue Memorandum Circular 72-2014 is central to the government’s anti-smuggling strategy because the stamps will serve as effective tracking and audit measures ensuring due excise taxes have been paid for each product.

According to the circular, all locally manufactured packs of cigarettes should have the new tax stamp by October 1. The regulation also prescribes the use of the Internal Revenue Stamp System (IRSIS) for the ordering, distribution, and monitoring of cigarettes.

The finance agency said cigarette stamping regulation will be boosted by a provision allowing the Bureau of Internal Revenue (BIR) to conduct a study and cause the installation of closed-circuit television (CCTV) monitoring systems on all production and withdrawal points in the premises of cigarette excise taxpayers for more effective monitoring purposes.

In approving the regulation, Finance Secretary Cesar Purisima said simple governance measures like the stamp tax would help improve revenue collection performance.

“In 2013, revenues from the Sin Tax Law were 51 percent higher than projected. We are consistently looking at ways to enhance the government’s ability to raise revenues at a critical time requiring much investment for our infrastructure, services, and people,” Purisima stated.

For her part, BIR Commissioner Kim Henares said the measure will strengthen the government’s capacity to curb cigarette smuggling.

“We believe in implementing regulations with enough teeth to bite down on smugglers who are intent on depriving the nation of critical resources for greed and private gain,” Henares said.

Meanwhile, Philip Morris Fortune Tobacco Corp. (PMFTC), manufacturer of premium brand Marlboro, said it fully supports the BIR in its implementation and rigorous enforcement of the new tax stamp system.

Amid reports of growing domestic illicit trade in cigarettes, PMFTC is hopeful that the tax stamps, where tax-paid evidence will be applied to every pack manufactured for the Philippine market, will go a long way in addressing the issue of large-scale leakages.

The tobacco company was referring to a study released by Oxford Economics, in partnership with the International Tax and Investment Center (ITIC), which said illicit cigarette consumption in the Philippines almost tripled last year, making thee country one of the top illicit cigarette markets in the Association of Southeast Asian Nations.

At the same time, PMFTC also expressed confidence that the BIR will ensure rigorous checks at all manufacturing sites to ensure full compliance.

“The requirement of the BIR to install closed-circuit television monitoring systems on all production and withdrawal points of all manufacturers is also a welcome imposition to ensure full transparency, equitable application of the rules and to maximize revenue collection,” it stated.

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6 Comments

  1. Carter Gumabay on

    This will be effective only if those implementing it really carry out the measures without unjust and biased treatments towards the manufacturing companies. The officials should be watched too, they need to let go of their biases and make sure everyone abides by the law. Mighty was allowed to engage in whatever illicit practices they feel like it seemingly because of their connections… there’s no room for that now. Enough is enough.

  2. Mighty Corp was said to have gotten away with billions in tax nonpayment. While this new tax stamp measure is good and will hopefully put a stop to future illicit practices, hopefully the government doesn’t just rest their laurels on this and fail to investigate Mighty and file charges if necessary. We’ve lost billions, hopefully the government is not planning on simply moving on from it and just focusing on this new measure.

  3. Constant monitoring should also be done, it’s not enough that the government implement it. Also, it would be nice if they can go after companies that has been reportedly cheating the government in taxes.

  4. Dina Dela Cuesta on

    Studies have shown that illicit trade in the tobacco industry has ballooned within the past year. Some officials may try to refute these studies, but we all know that this is a growing problem that needs to be addressed. This new tax stamp measure couldn’t have come at a better time. Hopefully this will really help in monitoring the tobacco products for proper taxation and put a stop to the tax leakages that has cost the country billions in tax nonpayment.

  5. The government is equipped with the tools and has the jurisdiction to solve the issues if only they will strictly enforce the laws and continue regulating the activities. If only. Well the new tax stamp systems is a good start, let’s just hope they would really and properly implement it.

  6. Hopefully the stamp tax system does work in curbing smuggling and illicit trade in the tobacco industry. THe government should still also find ways to investigate and prosecute those involved in the growing problem. The country lost billions because of it, that’s no small change. It would have gone a long way in benefiting the health sector, and we cannot afford to simply look the other way. They should be punished now, otherwise at some point these same crooks will find ways to cheat the tax stamps and we will again be faced with billions in forgone revenue.