Government monitoring possible smuggling of cigarettes

MANILA, Philippines - The government is keeping a tight watch on possible smuggling of cigarettes following the implementation of the Sin Tax Law. 

Customs Commissioner Ruffy Biazon said Mindanao, particularly Zamboanga City and Tawi-Tawi, will be monitored as smugglers use them as jump-off points.

“These are not massive smuggling activities,” he said.

Biazon said smugglers usually transport goods using boats to evade arrest.

“Our bigger problem is the smuggling of cigarettes from the Philippines,” he said. “Because even with the Sin Tax Law our cigarettes are still lower than the prices abroad.”

In Mindanao, the Navy is guarding the country’s vast coastline near the border with Malaysia against smugglers.

Capt. Rafael Mariano, Naval Forces Western Mindanao deputy chief for naval operation, said the anti-smuggling campaign has been going on even before the Sin Tax bill became law.

“Our anti-smuggling campaign has been relentlessly ongoing and nothing has changed even as we have put on some asset replacement for more vigorous campaign,” he said.

The Navy has seized volumes of contraband that have been turned over to the Bureau of Customs, Mariano said.

Beginning Jan. 1, the tax on cigarettes is P12 per pack for those with a net retail price (excluding the excise tax and the 12-percent value added tax) of P11.50 and below. The tax is P25 for those with a higher retail price.

The rates will go up to P17 and P27 in 2014, P21 and P28 in 2015, and P25 and P29 in 2016. A single rate of P30 per pack will be imposed starting 2017, rising by four percent every year.

In Quezon City, big grocery stores such as Save More that the Henry Sy-owned SM Group operates and the Tantoco family’s Rustan’s Supermarket have not jacked up retail prices of imported and local cigarettes and alcohol products.

“We haven’t received the new stocks yet,” said an employee of Rustan’s along Katipunan Avenue in Quezon City.

Convenience stores like Shell Select and Ministop that the Gokongwei group owns still sell their cigarettes and alcohol products at last year’s rates.

However, some street vendors in Quezon City have raised cigarette prices to P1 to P2 per stick from P0.50 to P1.

Internal Revenue Commissioner Kim Henares said some products still carry the same prices because those with higher rates have yet to be delivered. It’s possible that cigarette manufacturers also partly absorb the higher taxes and not pass this on entirely to their customers, she added.

BIR Revenue Regulation 17-2012, dated Dec. 21, 2012, prescribing higher tax rates on tobacco and alcohol products took effect on Tuesday.

The regulation for distilled spirits provides that the excise tax rate, based on the net retail price per proof, is 15 percent from Jan. 1, 2013 until Jan. 1, 2014. The rate will increase to 20 percent effective January 2015 onwards.

The excise tax on fermented liquor, including beer, is P15 per liter for products whose net retail price per liter of volume capacity is P50.60 or less effective Jan. 1, 2013.  This will go up to P17 per liter in 2014; P19 per liter in 2015; P21 per liter in 2016 and P23.50 per liter in 2017.

The Sin Tax Reform Law corrects inequities in tax structure and removes the price classification freeze on tobacco products to 1996 prices as the basis for their tax classification.

The law paves the way for a shift from the multi-tiered system to a unitary tax regime by 2017 for tobacco and fermented liquor.

In terms of revenues, the new law will allow a collection of P33.96 billion in incremental revenues from tobacco and alcohol for the next year and P184.31 billion over the next four years. – With Iris Gonzales, Roel Pareño