Salceda wants crackdown on smugglers of cigarette, ecozone leakages; House tax chair estimates at least P30 billion lost to cigarette smuggling annually

Share this information:

House Committee on Ways and Means Chairman Joey Sarte Salceda (Albay, 2nd district) urged the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC), and Philippine Economic Zone Authority (PEZA) to crack down on illicit trade on cigarettes, as the House tax chair and Albay solon estimates lost tax revenues due to illicit trade in tobacco products to be at least P30 billion annually.

“I want a crack down on the illicit cigarette trade. We are losing P30 billion annually due to this, from the laxity of enforcement,” Salceda said.

“I am invoking my oversight powers to have BOC conduct a program similar to the Run Against Tax Evaders or RATE of BIR,” Salceda added.

Salceda also invoked congressional oversight powers to have BIR reverse Revenue Regulation 9-2015, which exempted cigarette manufacturers from tax stamps for exports, and instead requires them to have unique identification codes (UIC). Salceda says that given that it relies on self-declaration and regulation, it is highly prone to abuse especially in a highly-regulated product.

“It’s a regulated product. And a violation of tax and trade rules on cigarettes is a malum in se. It is bad on its own. So, we have to be stricter with the regulatory pressure. We are very strict with crude. Cigarettes are also excised. The push of the thumb should be just as strong,” Salceda explained.

“I ask for a commitment from BIR to reverse RR 9-2015,” Salceda demanded.

In response, BIR Commissioner Caesar Dulay promised Salceda that “on his word of honor,” he will have the policy reversed.

30 billion lost to smuggling

Salceda estimates that at least P30 billion is lost in tax revenues due to illicit trade in cigarettes. During the hearing, it was also found that ecozones are used as avenues for illicit trade due to looser enforcement rules.

“It is not enough that PEZA cooperates with BIR. You have an ecozone police. You have the mandate to enforce the law in ecozones,” Salceda said in response to the statement by PEZA Director-General Charito Plaza that PEZA “cooperates with BIR and allows them to conduct inspections.”

Salceda requested Plaza a report on the accomplishments and activities of the PEZA Police, particularly enforcement activities against illicit trade in cigarettes.

Salceda says he will study potentially having a ring-fenced regime or “licensed area” for highly regulated products so that they are not commingled with less regulated industries in the same ecozones.

“We will definitely come up with legislated solutions after this hearing. Stricter enforcement is absolutely critical, so the policy fix will involve closing the loopholes that lighten enforcement,” Salceda added.

Salceda adds that they are considering defining large-scale tax evasion as economic sabotage.

“Now that we know the importance of reliable revenue streams during this pandemic, large-scale tax evasion is definitely economic sabotage. The law has to reflect it,” Salceda added.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.