P80-M worth of smuggled, fake cigarettes found in Malabon, Manila

An anti-cigarette smuggling task force uncovered smuggled and fake cigarettes worth about P80 million in Malabon and Manila last week amid higher prices of the so-called sin product due to the government’s first tax reform package, the two leading tobacco manufacturers said.

The Bureau of Internal Revenue’s “Strike Team,” led by revenue officer Remedios Advincula Jr., in coordination with the Philippine Drug Enforcement Agency, last April 17 discovered “large” quantities of counterfeit Marlboro cigarettes at a crystal meth (shabu) factory in Barangay Santolan in Malabon, PMFTC Inc. said in a statement.

Authorities found 150 master cases of fake Marlboro cigarettes at a leased property reportedly owned by Marynor Patricio and Nova Acuna, PMFTC said, even as the tax force had yet to confiscate the goods.

Since the cigarettes are fake, they have either no tax stamps or fake tax stamps, hence depriving the government of excise tax payments.

Last April 19, a follow-up operation in Barangay Potrero in Malabon yielded 69 master cases of fake Marvels Menthol, 28 master cases of fake Winston Red, 20 master cases of fake Fortune Green, and eight master cases of fake Marlboro Red, according to PMFTC.

“Two persons of interest – Jaiyab Hong Chua a.k.a Joseph and Danny Sy – are facing charges for their use of unregistered tax stamps on these products and for being unlicensed cigarette manufacturers,” PMFTC said.

PMFTC said it had already asked the BIR, through a letter to Internal Revenue Commissioner Caesar R. Dulay, to seize the fake products found in Malabon.

Raul Academia, director at PMFTC’s Corporate Affairs-Illicit Trade Strategies and Prevention Division, also requested the BIR “to file appropriate cases against those responsible for keeping the counterfeit products.”

On April 20, the BIR strike team seized in Santa Cruz in Laguna 32 master cases of counterfeit cigarettes – 15 of Marlboro Red, nine of Mighty Red, five of Winston Light, two of Fortune Red, and one of Mighty Green, PMFTC said.

Form the Manila raid, “a certain Steven Go is facing charges for possession of fake cigarette stamps and possession of fake cigarettes,” it added.

For its part, Japan Tobacco International Philippines said in a separate statement that “the biggest haul of smuggled and counterfeit cigarettes were seized last Thursday from five makeshift warehouses in Malabon area allegedly owned by Filipino-Chinese traders.”

“At least 43 master cases of Winston brand, 91 master cases of Mighty cigarettes, 82 master cases of Marvels brand, 11 master cases of Chunghua cigarettes, 71 master cases of Two Moon brand, 37 master cases of Fortune brand, and 8 master cases of Marlboro brand were seized from two Malabon warehouses by the BIR’s special anti-illicit trade team,” JTI Philippines said in a statement.

Another raid in Tondo, Manila last Friday, meanwhile, “yielded at least 31 master cases of assorted cigarettes, including JTI brands bearing fake tax stamps,” it added.

“The continuing raids and enforcement action of the BIR strike force on secret warehouses and factories is clear proof of government’s sincere efforts to weed out syndicates denying collections of billions of revenues that could be used to improve social services and smoking education,” JTI Philippines president and general manager Manos Koukourakis said.

“The pro-active stance of government is laudable and deserves support of all industries adversely affected by smuggling. Smugglers rake more money when taxes are high and cigarette prices are also increased – which is a signal for them to start stockpiling their secret warehouses,” Koukourakis added.

“The series of raids unleashed by the BIR strike force and the Bureau of Customs’ anti-illicit unit should be a warning to all retailers to refrain from buying and selling illegal cigarettes,” Koukourakis added. “Cigarette smuggling is an ever growing and worsening reality and kudos to the government for acknowledging its seriousness and going after it. Non-duty paid cigarettes deny revenue collections, adversely impact local farmers and labor, harm adult smokers due to their extremely poor quality and negatively affect the legitimate tobacco industry which pay their taxes.”

Last week, Dulay said cigarette smuggling was on the rise partly due to the Tax Reform for Acceleration and Inclusion (Train) Act.

“Frankly, we have a proliferation of smuggling,” Dulay told reporters. “So we created a task force to address that because our attention was called by big tobacco companies, Philip Morris and Japan Tobacco, that based on their investigation there are many smuggled cigarettes.”

Although he could not give the exact volume of allegedly illicit cigarettes entering the country from abroad, the BIR chief said it was “substantial because the tobacco companies were complaining.”

Dulay said the smuggled cigarettes likely mostly came from neighboring Asian countries.

“We also have feedback that there are some manufacturers in the provinces producing fake cigarettes; in fact, the NBI [National Bureau of Investigation] and the police have conducted some raids,” Dulay added, citing those recently uncovered in Bulacan and Nueva Ecija.

Under the Train Law, the unitary excise tax slapped on cigarettes rose to P32.50 per pack effective Jan. 1 from P30 a pack last year.

The Train Law also mandated a further increase in the cigarette excise tax rates to P35 per pack from July 1, 2018 to Dec. 31, 2019; P37.50 a pack from Jan. 1, 2020 to Dec. 31, 2021; and P40 from Jan. 1, 2022 to Dec. 31, 2023.

Signed by President Rodrigo Duterte in December 2017, the Train Law (Republic Act No. 10963) since Jan. 1 this year has jacked up or slapped new excise taxes on cigarettes, oil, sugary drinks and vehicles, among other goods, to compensate for the restructured personal income tax regime that raised the tax-exempt cap to an annual salary of P250,000.

“Those cigarette packs without stamps are P32 less in the market. A pack of legitimate cigarettes will cost P60-65. So those [smuggled or fakes] without stamps, they can sell them for P30 or half the price. So which will smokers buy? The cheaper cigarettes. That’s the effect,” Dulay explained.

Dulay nonetheless warned that those to be found bringing in illicit cigarettes will be slapped smuggling and tax evasion cases. /atm