MANILA, Philippines — Not even a P50-million minimum fine and possible jail time of eight to 12 years have deterred cigarette smugglers from plying their trade and depriving government of much-needed tax revenues.
This has prompted senators to press for harsher penalties including making the illicit trade non-bailable and punishable with life imprisonment.
The lawmakers made the call as the Department of Finance (DOF) reported that illegal traders of tobacco have made a killing during the COVID-19 lockdown since mid-March when legitimate cigarette firms were barred from transporting and, selling their products.
The senators said the rampant cigarette smuggling is weakening the campaign to reduce smoking as smuggled or illegally manufactured tobacco products are not only much cheaper, but also more dangerous due to added chemicals.
“There must be a strong crackdown on smuggling and illicit trade of tobacco products,” Senate President Pro Tempore Ralph Recto said.
Sen. Sonny Angara, who chairs the Senate committee on finance, said the government must be able to raise revenues without imposing new taxes to fund programs to fight COVID-19 and pump prime the economy.
“Smuggling hurts local industries and costs jobs. If it (smuggled value) exceeds P50 million, it can even be considered economic sabotage under a previous law,” Angara said.
Senate Minority Leader Franklin Drilon backed the DOF’s call for harsher penalties but stressed that they “should be coupled with a strong and consistent enforcement” against illicit trade of tobacco products.
Despite back-to-back successful raids of warehouses, factories, container trucks and even residential houses storing smuggled and counterfeit cigarettes by crack teams of the Bureau of Customs (BOC), Bureau of Internal Revenue (BIR) and other law enforcement agencies, authorities are still baffled on why smuggling syndicates have not slowed down.
The senators said there is an urgent need to amend existing law to impose new provisions like making tobacco smuggling and counterfeiting a non-bailable offense, imposing higher fines and longer prison terms.
The DOF earlier convened a group of experts to look into the loopholes of existing laws and address it with possible amendments or changes to make the penalties much stiffer and heftier.
Finance Secretary Carlos Dominguez said his agency is looking into slapping heftier penalties on unscrupulous traders of illicit cigarettes, who took advantage of higher excise taxes and a dwindling supply of tax-paid sticks at the height of the COVID-19 lockdown.
“If you recall, when the law increasing the excise taxes on tobacco products was passed, we warned of a possible increase in illicit trade,” Dominguez said last week, referring to Republic Act 11346 or the Tobacco Tax Law of 2019, under which cigarette excise tax increased to P45 per pack effective Jan. 1, 2020.
“We, therefore, strengthened the law enforcement teams of both the BOC and the BIR, and these teams have been performing their jobs pretty well, as evidenced by their identification and shut down of the illicit operations. They will intensify their efforts,” Dominguez said.
Last week, the BOC reported it has apprehended over P235 million worth of smuggled and counterfeit cigarettes from the Ports of Manila and Davao this month alone.
The BOC also reported that its agents raided and closed down an illegal cigarette-making factory in Naguilian, Isabela where they seized P1.3 billion worth of equipment, fake tax stamps, and other paraphernalia.
Under Section 263 of the National Internal Revenue Code, persons or companies caught in possession of cigarette products that did not pay excise taxes face an imprisonment of 10 years to 12 years.
A person caught with smuggled or counterfeit cigarettes will be fined 10 times the value of the payable excise taxes or not less than P1 million and a minimum jail time of five years. A company, such as a manufacturer or importer, faces a minimum cash penalty of P50 million and jail time of at least eight years.
Meanwhile, the move of the DOF and the Department of Trade and Industry (DTI) to prohibit the online sale of tobacco and vape products is supported by HealthJustice Philippines, a research and legal organization advocating tobacco control and promoting healthy lifestyles and habits.
“We strongly support the plan of the DOF and DTI to ban the online sale of tobacco and vape products. Their removal from online platforms will protect our youth and the public from the dangers of these harmful and undesirable products especially during this time of the coronavirus pandemic,” lawyer Benedict Nisperos, legal and policy consultant of HealthJustice, said in a press statement.
“Currently, it is doubtful if these products sold in various online platforms are registered with the Food and Drug Administration (FDA). It is very alarming that people are buying and using these harmful products which may be adulterated,” he said.
President Duterte through Executive Order No. 106 issued on Feb. 26 ordered the ban on the manufacture, distribution, marketing or sale of adulterated and unregistered e-cigarettes. EO 106 also banned the importation of unregistered and adulterated e-cigarettes and heated tobacco products.
“The owners of these online platforms should be reminded that Congress banned the importation, sale and distribution of vapor products with flavorings other than tobacco and plain menthol through RA 11467. This prohibition was effective last Jan. 1, 2020,” Nisperos said.
RA 11467 or the Sin Tax Law increases the excise tax on alcohol products, electronic cigarettes and heated tobacco products (HTPs). It introduced regulation of e-cigarettes and HTPs by the FDA.
The move of Congress to prohibit flavored e-cigarettes is based on evidence-based studies showing the toxicity of flavorings to humans, according to HealthJustice, citing a United States Surgeon General report on e-cigarette use and tobacco use prevention.
The report concluded that flavorings are a key driver of initiating the youth to use all types of tobacco products.