All systems go for BIR’s stamp tax project

MANILA, Philippines - Its all systems go for the Bureau of Internal Revenue’s stamp tax project following the approval by the Department of Finance of the proposed revenue regulation mandating the affixture of stamps on all imported and locally made cigarettes.

Under the Internal Revenue Stamp System (IRSIS), every packet of locally-manufactured cigarettes must bear a stamp tax by Oct. 1 to indicate that the required excise tax has been paid by the manufacturers.

Imported cigarettes, on the other hand, will have the new stamp tax starting Feb. 2015.

The IRSIS allows authorities to further secure the distribution system as well as aid in the investigation of illicit trade.

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

BIR commissioner Kim 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 that all due taxes are collected on cigarettes.  

“This measure will strengthen our capacity to combat smuggling of tobacco products. We believe in implementing regulations with enough teeth to bite down on smugglers who are intent on depriving the nation of critical resources for greed and private gain,” Henares said.

To effectively monitor  the movement of tobacco products, the BIR will order the installation of a close circuit television monitoring system on all production and withdrawal points in the premises of all cigarette firms.

Aside from curbing illicit  cigarette sales, the trace and trace system is expected to help  raise additional revenues for the government, said Finance Secretary Cesar Purisima.

“In 2013, revenues from the Sin Tax Law were 51 percent higher than projected. Simple governance measures like this enable the government to push harder in driving our revenue collection performance ever upwards. We are consistently looking at ways to enhance the government’s ability to raise revenues at a critical time requiring much investments to our infrastructure, services, and people,” Purisima said.

All importers and local cigarette manufacturers are required to enroll or register with the IRSIS prior before they purchase the stamps.

Illicit trade has become a concern for some major tobacco manufacturers and some organizations.

A study done by the UK-based think tank Oxford Economics, together with the International Tax and Investment Center, showed that the Philippines has become one of the biggest markets for illegal cigarette sales, accounting for 34.5 percent of all untaxed cigarettes consumed within ASEAN, the second highest after Vietnam which took up a 39-percent share.

ITIC president Daniel A. Witt said the Philippines now has the fastest growing black market as one out of five cigarettes sold in the country is illegal.

Illicit consumption across Asia was estimated to have increased by 20.1 percent to 79.9 billion cigarettes, mainly driven by the 198-percent surge in illegal cigarette sales in the Philippines.

On the other hand, Pakistan and Singapore saw significant declines in the share of illicit consumption.

According to the study, the Philippines also posted the biggest jump in tax loss from illicit consumption at 49 percent, representing 9.4 percent of the total $3.9-billion losses incurred by the ASEAN region. The largest tax losses were in Australia ($1.35 billion), Malaysia ($624 million) and Hong Kong ($395 million).