BIR to cigarette firms: Pay excise tax differential before yearend

MANILA, Philippines - The Bureau of Internal Revenue has directed all cigarette manufacturers which have already purchased tax stamps to pay the differential between the existing and new tax rates on both locally-produced low-priced and high-priced brands on or before the end of the year.

The BIR issued Revenue Memorandum Circular 89-2014, in light of the impending increase of excise tax rates on cigarettes effective Jan. 1, 2015.

Cigarette firms were given until Dec. 29, the last working day of December 2014 to pay the total excise taxes due them.

“Accordingly, local tobacco manufacturers shall compute and pay the differential increase between the new tax rates and current tax rates, according to the tax classification of their cigarette products based on the number of internal revenue stamps, whether or not actually affixed to the packs of cigarettes, being held in their possession as of Dec. 31, 2014,” BIR commissioner Kim Henares said.

The BIR, thereafter, shall conduct a physical inventory of all internal revenue stamps held in possession by all tobacco firms as of the end of December, to validate the tax payment.

Henares said the results of the said inventory shall be properly reconciled with the database of the BIR’s Internal Revenue Stamp Integrated System (IRSIS).

In case of discrepancy between the actual payment of the local manufacturer and the results of the physical inventory, the deficiency excise tax shall be accordingly assessed and collected upon demand, the BIR chief pointed out.

Subsequently, the database of the IRSIS shall be updated according to the new tax rates with respect to the internal revenue stamps previously issued to and paid under the current tax rates, according to the price classification of cigarettes by the concerned local manufacturers of cigarette products.

The IRSIS prescribes the affixture of tax stamps for each pack of cigarettes to track and audit the withdrawals of these cigarette packs from warehouses. The system will also reflect when the cigarette was made as well as when taxes were paid.

Under the new regulation, the BIR may  cause the installation of a closed-circuit television monitoring system on all production and withdrawal points in the premises of the cigarette firms  for more effective monitoring purposes.

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

The revenue stamps are priced at  P0.13 each. No sale will be made unless the excise tax due on the total stamps has been paid first.

Industry giant Philip Morris Fortune Tobacco Corp. is  hopeful that the stamp tax project would address the issue of large scale revenue leakage in the industry.

The government was estimated to have lost P15.6 billion in potential revenues last year as the consumption of illicit cigarettes nearly tripled to 17.1 billion.