Finance Secretary Carlos Dominguez III has directed the Bureau of Internal Revenue (BIR) to work closely with the Department of Trade and Industry (DTI) in curbing a new scheme perpetrated by illicit tobacco traders involving their suspected use of recycled tax stamps on fake cigarettes.
During a recent Department of Finance (DOF) executive committee (Execom) meeting, BIR officials said they found out that some enterprising entities have come up with a promotional scheme in which tax stamps on sold cigarette packs could be exchanged for a can of sardines or a pack of noodles.
Dominguez told the BIR to coordinate with the DTI in stopping this so-called practice, especially if it is determined that no permit was issued for the promo.
He also ordered the BIR to find out who are buying the used tax stamps.
“You better talk to the DTI and tell them that can’t be allowed,” Dominguez told BIR Commissioner Caesar Dulay during the meeting.
According to BIR Deputy Commissioner Arnel Guballa, illicit tobacco traders could be using this promotional scheme to gather used tax stamps to put on packs of fake cigarettes.
Dulay said he will be meeting with representatives from Philip Morris, Japan Tobacco and other cigarette companies, as well as the those handling the Internal Revenue Stamps Integrated System (IRSIS) to find out how to address this new modus operandi in the illicit tobacco trade.
In January this year, the DOF and BIR led the destruction of several machines used in the manufacture of illicitly traded cigarettes.
The destroyed contraband included units and parts of three filter maker machines, two packaging machines, and a cigarette-making machine, along with 484 master cases of various finished cigarette brands, and raw materials used in making cigarettes such as filter rods, tipping papers, packaging foil, acetate tow, and other supplies.
To strengthen the campaign against smuggling and tax evasion, the BIR has formed a strike team tasked to crack down on illicit cigarette manufacturing and trade.
Last year, the BIR incinerated over 230,000 mastercases or over 115 million cigarette packs bearing brands manufactured by the defunct Mighty Corp in 2018. It earlier destroyed over 9,000 mastercases bearing the Mighty brands in the latter part of 2017.
The aggregate excise tax of the incinerated cigarettes total some P9 billion, which was part of the tax deficiency of Mighty Corp.
The DOF made history in 2017 by collecting from Mighty Corp. a total of P30 billion in unpaid taxes, the biggest sum on record raised by the government from a tax settlement.
After the BIR filed three separate criminal complaints before the Department of Justice (DOJ) against Mighty for its widespread use of counterfeit tax stamps, the firm offered in July last year to shut down its operations and settle its tax liabilities.
To implement this, Mighty’s manufacturing and distribution assets were sold to Japan Tobacco Inc. (JTI) for around $1 billion. As a conditionality, Mighty paid around P30.4 billion (roughly equivalent to $600 million) in taxes, comprising previous tax liabilities and transaction taxes, to settle its obligations to the Government.
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