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Smuggling to worsen if cigarette taxes rise further

May 21. 2019
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By PHILIPPINE DAILY INQUIRER
ASIA NEWS NETWORK
MANILA

2,713 Viewed

AMID THE push by the Philippines' departments of Health (DOH) and of Finance (DOF) to further jack up the excise taxes slapped on “sin” products such as cigarettes and alcoholic drinks, the Philippine unit of global manufacturing giant Japan Tobacco International (JTI) has warned that higher levies would only exacerbate already worsening cigarette smuggling.

“When we talk about the tobacco industry we need to bring in mind: the thousands of farmers, millions of retailers, thousands of employees, thousands of those indirectly work for tobacco, many suppliers and their employees, and all those who benefit from the income generated by the tobacco consumption – all of them will be negatively affected by a tax hike,” JTI Philippines general manager Manos Koukourakis said in a text message to reporters on Monday.

On the other hand, Koukourakis said, “smugglers will benefit because the higher the tax, the higher the benefit due to tax avoidance”.

Earlier, both DOF and the Bureau of Internal Revenue (BIR) admitted that alongside increased excise taxes under the Tax Reform for Acceleration and Inclusion (TRAIN) Act came a proliferation of illicit cigarette trade in the country.

Under the TRAIN Law, the unitary cigarette excise tax has risen to 35 pesos (Bt21.19) per pack since July last year.

But DOF wanted to further increase cigarette excise taxes to at least 60 pesos a pack starting this year, hence lobbying for the approval of Senate Bill (SB) No 1599 sponsored by Sen Manny Pacquiao before the 17th Congress comes to close in three weeks’ time.

However, Koukourakis noted that “countries which raised taxes steeply still suffer the effects of smuggling, government coffers included”.

“Everything looks good short term, but in mid to longer term the consequences are rather dire and we’ve seen it in Malaysia, Thailand, Singapore, Indonesia and so many other places,” he added.

“Currently in the Philippines we have a quite balanced situation where smokers keep ditching the habit, going from 26 million smokers in 2013 down to 16 million in 2018.”

 

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