Higher tobacco tax could encourage illicit trade, smuggling — FPI

Raising the excise tax on tobacco products could encourage illicit trade such as smuggling and tax evasion among businesses in the country, an official of the Federation of Philippine Industries (FPI) said Monday.

During a Senate hearing on proposed measures to increase the excise tax on tobacco products, FPI chairman Jesus Arranza said that previous increases in tobacco excise tax have “incentivized illegal traders” to commit fraud.

“Sa tinataas taas ng tax, nagkaroon ng incentive ang mga smuggler at mga factories na namumuhay sa pandaraya sa buwis sa ating bansa (Because of the higher tax, there is an incentive for smugglers and factories to resort to fraud),” Arranza said.

“Ang (The) increase ng (in) tobacco tax has incentivized illegal traders to resort to smuggling and tax evasion,” he added.

Arranza said imposing higher taxes on tobacco products “will create a market for unscrupulous people” and would not really discourage Filipinos from smoking because smugglers would be able to provide cheaper cigarettes.

“Akala natin mababawasan (ang maninigarilyo), hindi ho, napupunta doon sa smuggler kasi mas mura (We thought that smoking will decline, but smoker will only go to the smugglers because they can sell cigarettes cheaper),” he said.

Arranza disclosed that the government loses over P200 billion in revenues per year due to illegal traders.

The Philippine Tobacco Institute (PTI) presented data during the hearing, showing that increasing tobacco excise tax to P60 per pack could result to an increase of 27 percent in illegal trade by 2022 while raising it to P90 per pack could lead to a 40-percent increase in illicit trade during the same period.

Regarding revenue collection, P121 billion would go to illegal traders in 2022 if the excise tax is hiked up to P60 per pack and P198 billion if the excise tax on tobacco is raised to P90 per pack, the PTI said.

Arranza appealed to legislators to first focus on how to curb illegal trade and smuggling in the country before imposing a higher excise tax on tobacco products.

“Kailangan sana na bago natin gawin ang isang magpapataas (ng excise tax), mag-i-incentivize sa mga smuggler, siguruhin na may sapat nakaalaman na mahuli ang ganito (Before we increase the excise tax on tobacco, we need to ensure that authorities have enough knowledge to curb smuggling.) ,” he said.   /ee