BIR keeping watch on cigarette sellers for tax stamp compliance

MANILA, Philippines - The Bureau of Internal Revenue (BIR) is keeping a close watch on retailers of cigarettes to ensure 100 percent compliance by all manufacturers with its tax stamp program.

Under the BIR’s tax stamp system, all cigarette packs, whether locally manufactured or imported, must bear tax stamps effective April 1 to ensure the required excise tax has been paid by the manufacturers.

BIR Commissioner Kim Henares said despite the agency's intensive campaign to raise awareness of the regulation, about 5 percent of cigarettes in the domestic market still lack the required tax stamp.

“Manufacturers have been complying. We have a World Bank study that says 95 percent of cigarettes in the market have stamps. We are working to improve this further,” Henares said.

Cigarette packs without the necessary tax stamps are presumed to be illicit and expose the possessors of such packages to criminal prosecution for attempting to evade taxes.

“By special provision of the law, they are illegal, but to say they did not pay taxes is inaccurate,” Henares said.

The World Bank report was made to assess the effectiveness of the BIR’s cigarette tax stamp system.

“In all our laws, we can’t have 100 percent compliance. Realistically, there’s no such thing as perfection, but there’s always room for improvement and we should always be on guard,” Henares said.

Meanwhile, Henares debunked the latest report by UK-based Oxford Economics on illicit cigarette trade in the Philippines, saying the study was funded by tobacco giant Philip Morris International.

“If they [Oxford Economics] can stand by their data, there’s no problem,” the BIR chief said.

Based on the study by Oxford Economics, illicit cigarette consumption in the Philippines remained substantial with a total of 19 billion cigarettes coming from illegal channels in 2014, depriving the government of P22.5 billion in revenues.

Oxford Economics said while total tobacco consumption fell by three percent for a second consecutive year, the share of illicit in total consumption rose to 19.4 percent last year, the highest level since 2012.

Oliver Salmon, Oxford Economics senior economist for Asia, however, pointed out the group has been transparent in its operations and dealings despite being contracted by Philip Morris to study the illegal cigarette market in 14 Asia Pacific region countries.

“We've always maintained full academic control, at the end of the day, the figures in front have our name on it. It’s our reputation, our credibility that’s at stake,” Salmon said.

“We'll never put anything out there that as a company, we aren't fully satisfied with the credibility,” he added.

Salmon, nevertheless, is hopeful domestic illicit consumption would decline with the implementation of the BIR’s tax stamp program.

Henares said the new regulation is key to the government’s anti-smuggling strategy as the stamps serve as effective tracking and audit tools to ensure all due taxes are collected on cigarettes. 

Under this system, it is possible to quickly distinguish genuine from counterfeit cigarettes and to verify the authenticity of the tax stamps applied on the packs by manufacturers.