Biz leaders call for monitoring of cigarette firms’ tax compliance

MANILA, Philippines - Business leaders have joined calls for the creation of an independent third party that will monitor sales and tax compliance of cigarette companies in a move aimed at curbing smuggling and tax evasion.

In a letter to Finance Secretary Cesar Purisima, the Philippine Chamber of Commerce and Industries, American Chamber of Commerce,  the Federation of Filipino-Chinese Chambers of Commerce and Industry and the Japanese Chamber of Commerce and Industry of the Philippines asked the government to step up its monitoring of all production facilities of registered tobacco firms.

The business groups cited reports of alleged smuggling and tax evasion by some players in the tobacco industry.  They said tax avoidance undermines robust and stable economic growth.

“This issue is of such enormity because it not only places investor companies at a disadvantage when competitors do not pay the correct taxes (an estimated P15 billion of taxes due is lost in sale of illicit cigarettes alone), but it also deprives the government of much-needed funds for its many programs to alleviate the condition of the poor and may also undermine the strength of the nation’s current account surplus and the peso as a consequence of any under-reporting of import data,” they said.

“Additionally, ensuring the proper implementation of our tax laws across all manufacturers is critical to the sustainability of a competitive industry and to ensure security for the livelihoods of the more than 2.9 million individuals dependent on the tobacco sector,” the business groups further said.

They said the establishment of a third party monitoring group, working closely with the Department of Finance and its officers, would help ensure cigarette companies are paying the right taxes and complying with the excise tax reform law.

Members of the House ways and means committee are also backing a proposal being pushed by Philip Morris Tobacco Corp. (PMFTC) for third party inspections of all manufacturing facilities of tobacco companies to determine their compliance with the sin tax law.

A recent study commissioned by Philip Morris International showed that the Philippines lost an estimated P15.6 billion in revenues due to nonpayment of correct taxes by some local cigarette manufacturers, while consumption of domestic illegal tobacco grew almost three-fold to P17.1 billion last year.

Data from the Bureau of Internal Revenue showed that excise-tax collection on tobacco and alcoholic beverages rose 11.8 percent in the first four months of the year to P23.02 billion. Taxes from cigarettes alone amounted to P11.34 billion, 14.22 percent higher year on year.