By Chino S. Leyco

Finance Secretary Carlos G. Dominguez III has directed the government’s two main tax agencies to intensify their campaign against illicit cigarette trade following the recent approval by the Congress of a new law imposing substantial excise tax increases on tobacco products.

DOF logo

Dominguez issued the order after the Bureau of Internal Revenue (BIR) recently uncover the presence of counterfeit cigarette brands and bogus tax stamps in raids conducted in Tacloban City and the provinces of Nueva Ecija and Tarlac.

“The proliferation [of illicit cigarettes and fake tax stamps], that’s going to bloom some more next year,” Dominguez said. “Bantayan nyo yan (Keep a tight watch over that),” he told BIR and Bureau of Customs officials during a recent meeting.

Dominguez also told Customs Commissioner Rey Leonardo Guerrero to step up the agency’s drive against cigarette smuggling, which is expected to increase once the new law imposing higher “sin” taxes on tobacco products is implemented starting next year.

The tobacco “sin” tax reform bill, which is now up for President Duterte’s signature, provides for a unitary P45 excise tax increase per pack on tobacco products starting in 2020, followed by a series of P5-adjustments until the rate reaches P60 in 2023, and a 5 percent annual increase thereafter.

The unitary excise tax rate on tobacco products was earlier increased under the Tax Reform for Acceleration and Inclusion (TRAIN) Law from P30 per pack of cigarettes to P32.50 beginning January 1, 2018 and to P35.00 beginning July 1, 2018.

Starting 2020, heated tobacco and vapor products will also be taxed by P10 to P50, depending on the liquid volume under the tobacco tax reform bill.

During the recent Pre-State of the Nation Address (Pre-SONA) forum of the Economic Development and Infrastructure Cabinet Clusters, Dominguez pointed out that the DOF made history in 2017 by collecting from a cigarette manufacturer more than P30 billion for non-payment of excise taxes.

“Incidentally, we are the only administration that actually cleaned up the cigarette industry and raised tobacco excise taxes twice.

The DOF has proposed a tax of at least P40 per liter on alcoholic drinks.
Higher excise taxes on “sin” products will provide the government with the means to curb vices and undesirable behavior, while at the same time generate the hefty revenues needed to fully fund the Universal Health Care (UHC) program, which will require as high as P1.44 trillion combined from 2020 to 2024.