Illicit cigarettes seized in Cebu: P4.36B tax liability

CEBU, Philippines — The 10,729 master cases of illicit cigarettes intercepted in Cebu reflects an estimated tax liability of P4.36 billion, according to the latest inventory of the Bureau of Internal Revenue (BIR).

This inventory followed an operation conducted by the BIR alongside the National Bureau of Investigation-Cebu District Office (NBI-CEBDO) and the Bureau of Customs-Port of Cebu (BOC), which flagged a total of 25 20-foot container vans on July 2.

BIR Revenue Region No. 13-Central Visayas (BIR RR13) Regional Director Douglas Rufino, however, said the estimated tax liabilities arising from the seized cigarettes, amounting to P4,366,204,585.38, still have to undergo a final inventory, verification, and assessment by the agency.

A preliminary examination showed that the cigarette brands MODERN and GUIA did not bear the required internal revenue stamps, indicating possible violations of the relevant provisions of the National Internal Revenue Code of 1997, as amended.

It was also found that the products weren't compliant with the revenue regulations governing the affixture of internal revenue stamps on excisable tobacco products.

The BIR RR13 Strike Team remains in close coordination with the BOC and other participating law enforcement agencies in the ongoing investigation to identify the individuals and entities responsible for the importation, transport, storage, and distribution of the suspected illicit cigarettes.

The BIR reiterated its commitment to protecting government revenues and strengthening the enforcement of tax laws through sustained inter-agency collaboration against illicit trade.

The operation also aligns with the directive of BIR Commissioner of Internal Revenue Charlito Martin R. Mendoza to intensify efforts against the manufacture, importation, transport, storage, distribution, and sale of illicit cigarettes and vape products.

Maria Rizza Oguis, Officer-in-Charge and Chief of the Tax Fraud Investigation Section of the Revenue Investigation Division of BIR Revenue Region 13-Central Visayas, clarified that the estimated P4.36 billion in tax liabilities imposed on the illicit cigarettes seized in Cebu is largely due to administrative penalties mandated under the National Internal Revenue Code (NIRC).

Oguis said the taxes imposed on the confiscated cigarettes primarily consist of excise taxes.

“The tax imposed is the excise tax on cigarettes. The excise tax per cigarette pack is P69.46,” Oguis explained.

As of July 3, the BIR had inventoried a total of 10,729 master cases of illicit cigarettes recovered from the 25 container vans intercepted in Cebu. The confiscated shipment is equivalent to 5,364,500 packs of cigarettes.

Oguis said the computation of the total tax liabilities includes the basic excise tax, inspection fees, value-added tax (VAT) on the excise tax, civil penalties, and administrative penalties.

According to the BIR, the excise tax is first computed by multiplying the total number of cigarette packs by the applicable excise tax rate, with inspection fees added. This amount is then subjected to a 12-percent VAT.

Civil penalties, consisting of interest and a 50-percent surcharge on the basic tax, are likewise imposed.

However, Oguis emphasized that the biggest factor behind the P4.36-billion assessment is the administrative penalty required by law, which is equivalent to ten times the basic excise tax due.

“Basically, the total tax liabilities became this high because of the administrative penalties,” she said.

The administrative penalty is imposed pursuant to Section 263 of the National Internal Revenue Code of 1997, as amended.

Under the law, any person found in possession of locally manufactured excisable articles for which the required excise tax has not been paid may be fined at least ten times the amount of the excise tax due, but not less than P500, and imprisoned for a period ranging from two to four years.

The same provision also penalizes manufacturers, owners, or persons responsible for unlawfully removing excisable goods from production sites or bonded warehouses without payment of the required excise tax.

For a first offense, violators may be fined at least ten times the amount of the excise tax due, but not less than P1,000, and imprisoned for one to two years.

The seized shipment, valued at approximately P980 million, remains under government custody as authorities continue their investigation into the source and intended distribution of the illicit cigarettes, while the BIR pursues the corresponding tax assessment and enforcement proceedings. — (FREEMAN)