Gov’t urged to closely monitor cigarette firms

MANILA, Philippines - Philip Morris Fortune Tobacco Corp. (PMFTC) has urged the government to closely monitor cigarette companies involved in illegal activities and tax evasion as it assailed the Thailand-based Southeast Asian Tobacco Control Alliance (SEATCA) for failure to provide concrete proposals on how to resolve illicit cigarette trade.

PMFTC, the joint venture between global tobacco giant Philip Morris International and billionaire Lucio Tan’s Fortune Tobacco, likewise chided the SEATCA for attempting to keep cigarette firms from taking an active role in fighting the scourge of tobacco smuggling.

 “Instead of providing practical recommendations to address illegal cigarettes in the Philippines, the SEATCA continues to misrepresent the obligations of signatories, including the Philippines, to the Framework Convention on Tobacco Control (FCTC). SEATCA knows well that the FCTC in no way precludes any government from cooperating with tobacco companies, as long as any interactions are conducted in a transparent manner, which they have been,” PMFTC said.

 “SEATCA also knows well that in dozens of countries around the world, there exists meaningful and transparent cooperation between governments and tobacco manufacturers in order to address the illegal cigarette trade,” PMFTC said.

PMFTC noted that the legitimate tobacco industry in the Philippines is responsible for the livelihoods of millions and has in fact contributed P70 billion in taxes in 2013.

 “SEATCA’s stated goal to exclude legal manufacturers in resolving this growing problem is both irrational and self-defeating.

The SEATCA called for an outright rejection of the Asia-11 Illicit Tobacco Indicator report, conducted by the International Tax and Investment Center and the United Kingdom-based Oxford Economics which claimed that the Philippines was losing P15 billion in potential revenues from illegal tobacco trade.

SEATCA said it was not an independent study as it was funded by PMI. Aside from that, the study used flawed technology resulting in “skewed findings supportive of the tobacco industry’s positions on taxation.”

PMFTC said while it commends the more than 100 percent surge in tax revenues generated following the passage of the excise tax law last year, it believes that there is still room for growth in terms of additional revenues for the government.

 “We contend that there are opportunities for billions of peso in additional revenue if evasion practices are stamped out and tax administration tightened. We are hopeful that strict enforcement of the new tax stamps will achieve that end,” PMFTC said.

An excise stamp is a type of revenue stamp affixed to any tobacco or alcohol product as evidence of payment of the corresponding tax.

PMFTC has a waged a war against Bulacan-based Mighty Corp., which has eaten into the former’s market share.  It accused Mighty of engaging in fraudulent activities such as tax evasion that allowed the Filipino-owned tobacco firm to sell its products at very cheap prices.

The BIR, nevertheless, assured the public that it was keeping a tight watch on the tobacco industry and that its investigation into Mighty remains ongoing.

The BIR has started its audit on Mighty’s financial books  to check its compliance with the tax law following the discovery of huge discrepancies between tax-paid volumes and retail trade surveys from AC Nielsen.

Mighty’s customs bonded warehouse was likewise closed down by Bureau of Customs following the company’s failure to show how it was able to produce large quantities of cigarettes despite minimal purchases of local tobacco leaves.

Mighty was asked to pay P852.9 million in duties for imported cigarette raw materials.