Gov’t agencies bat for ‘whole-of-nation’ approach to tackle illicit cigarette trade

Former PBA Rep. Jericho “Koko” Nograles

As smugglers become more sophisticated in their methods, a whole-of-government approach is necessary to tackle the persistent problem of illicit trade, especially of agricultural products, which is a top priority of President Ferdinand Marcos Jr.

“When the Bureau of Internal Revenue (BIR), and Bureau of Customs (BOC) catch these criminals, they adapt. The government response should also adapt, not just law enforcement but also the legislature. It’s now time to do regional and international cooperation. All governments, particularly our ASEAN neighbors, should work together,” said former Pwersa ng Bayang Atleta (PBA) Rep. Jericho “Koko” Nograles during the International Tobacco Agricultural Summit at Shangri-la The Fort in Bonifacio Global City.

To make significant in-roads against the vast global network of illicit tobacco traders, Nograles said governments worldwide should closely collaborate. “In the ASEAN region, criminals are taking advantage of porous borders and lax regulations by illegally trafficking cigarettes across borders of neighboring countries. In addition to regional law enforcement cooperation, governments should also consider fortifying their domestic legislation by ensuring that smugglers will be prosecuted and severe penalties shall be meted out on those convicted.

“In this case, governments can assess whether the provisions of the Protocol to Eliminate Illicit Trade in Tobacco Products can apply and improve their domestic laws,” he said.

The Protocol is an international treaty under the World Health Organization’s Framework Convention on Tobacco Control (WHO FCTC) that provides a global model designed to combat the worldwide illicit tobacco trade.

When asked about their respective agencies’ challenges, BOC Commissioner Bienvenido Rubio echoed Nograles’ statement and said the Philippines’ porous borders are advantageous to smugglers. According to Rubio, illicit goods do not course through regular ports, but are instead brought in through the “backdoors.”

“We try to strengthen anti-smuggling operations, but these smugglers are also innovating. The biggest challenge now is how to protect our borders since we are an archipelago. So we need to cooperate with other agencies,” said Rubio.

The BOC reported during the summit that in the first half of 2023, in continued partnerships with national, regional, and international law enforcement agencies, it confiscated P30.5 billion worth of smuggled goods across various operations. The estimated value was the highest in the last five years.

BIR Commissioner Romeo Lumagui, for his part, emphasized the importance of raising public awareness, lamenting that many establishments raided in recent months didn’t know they were carrying illicit products.

“That’s why [the BIR] is aggressive in our activities. We want to let them know that when they sell these untaxed products, we will be confiscating them, and we will go after [sellers of illicit products],” he said.

Rubio said that as most illicit cigarettes are sourced outside the Philippines, international partners should enforce data and intelligence-sharing, allowing the BOC to put sources and suppliers of illicit goods into the system, facilitate tracking from high-risk countries, and trigger an alarm for certain cargoes to be scrutinized.

Nograles said both the BIR and BOC are already leveraging evolving technologies to address technical smuggling, where smugglers import goods into the country through fraudulent methods like misdeclaration, misclassification, or undervaluation.

“For Customs, there’s a directive for pre-shipment, which means exporting and importing documents will be compared to reduce technical smuggling. For the BIR, they’re already streamlining everything to avoid inefficiencies. Given that, domestic smuggling must be looked into,” he said.

Data from the National Tobacco Administration (NTA) show that revenue losses from tobacco smuggling reach about P30 billion annually.

Lumagui said the tobacco industry has contributed an average of P147 billion annually in excise tax payments, representing at least 50 percent of total annual excise tax revenues.

Tobacco smuggling also heavily impacts farmers as low illicit cigarette prices lessen the demand for locally grown tobacco, resulting in lower income and decreased productivity.

Nograles said, “The illegal trade of tobacco products is not only detrimental to the government’s revenue collections. The illicit tobacco trade harms the main source of livelihood for the more than two million Filipino farmers and workers in this sector.”

“Illicit trade gives rise to unfair competition between illegal merchants and legitimate business enterprises, a situation that in the end is harmful to the local workforce,” said Lumagui.

“It is given that the agricultural sector has the potential to generate more revenues for the country in an even playing field, and we are one with the Government’s aspiration and effort to continuously provide Filipino farmers the opportunity to be more productive and globally competitive.  A deeper and more complex understanding of the situation of our tobacco farmers could help inform policies and other related efforts to help and support them,” said Rubio.

Nograles said the government and the private sector should continue to work together to once and for all eradicate, if not significantly reduce, the consumption of illicit tobacco products in the country.

READ: Gov’t losing billions in tax revenues from illicit tobacco trade, says BIR chief