3, 2013

NR # 3276

Congress to probe fraudulent reporting of cigarette withdrawals & importations
The House Committee on Ways and Means is set to conduct an inquiry into the alleged fraudulent reporting of volume of tobacco and cigarette withdrawals or importations committed by unscrupulous entities which have resulted in undervaluation or misdeclaration of these products and grossly incorrect excise taxes paid to the government. Rep. aolo !avier "#one $istrict% &ntique' sought the inquiry through House Resolution ()*% saying questions arose as to how certain cigarette brands can be sold at such low prices despite the tax increases% and whether the government is maximi+ing the tax revenues when there are reports of massive down,trading from high,priced to low, priced brands. -There is a need to review the consequences and implications of the recent excise tax increases in view of current conditions and the proper implementation of Republic &ct /01*/% otherwise .nown as &n Restructuring The 2xcise Tax on &lcohol and Tobacco roducts of )0/)% to ensure that the ob3ectives and purposes of the law are reali+ed4 that tax administration is improved% tax lea.ages stopped% and that there is proper reporting and monitoring of raw materials used in the manufacture of cigarettes4 and that the government is not deprived of its rightful tax revenues from alleged under or misdeclaration of cigarette volumes and under or misdeclaration of imported raw materials used in cigarette production%5 said !avier. !avier% an &ssistant Ma3ority #eader and member of the Committee on Ways and Means% cited that available research and studies show that as of $ecember )0/)% the incidence was close to *0 percent among adults% whereas in !une )0/1% the incidence was shown to have remained stable at */ percent despite the substantial increase in excise taxes and significant drop in tax paid or legitimate volumes. -This phenomenon% wherein incidence is increasing despite the substantial increase in excise taxes and significant drop in tax paid or legitimate volume% can be attributed to the sale and distribution of contraband or illicit cigarettes%5 he said. Hence% there is a need to closely monitor the movement of tobacco products especially those being withdrawn from premises of registered cigarette manufacturers to ensure the correct volumes are being declared and the correct taxes thereon are being paid according to him. !avier filed the resolution after Rep. 6arlo &lexei 7ograles "/st $istrict% $avao

City' during a hearing conducted by the Committee on Ways and Means chaired by Rep. Romero -Miro5 8uimbo ")nd $istrict% Mari.ina City' last 9ctober ))% )0/1 called the attention of the :ureau of ;nternal Revenue ":;R' and the :ureau of Customs ":9C' about a news report that one company imported seven million .ilos of tobacco but paid only <(.=>? million compared to another company that imported one million .ilos of tobacco but paid more for <(.@ million. Customs Commission Ruffy :ia+on said he assumes the company in question is Mighty Corporation because previously the :9C had information coming from other cigarette manufacturers on issues similarly raised in the news report. -The :9C initiated a post entry audit of importations of that particular company "Mighty Corporation'% so there is now an ongoing investigation. ;mportations can be audited by the :ureau of Customs for a period of three years. ;f there are any discrepancies in the companyAs payments% they may be required to pay the difference or face other sanctions. Bo what we are going to do is inform that cigarette company involved about this information. Bo we are aware of such "issue'%5 said :ia+on. 7ograles said the company mentioned in the news report is indeed Mighty Corporation. -&nd ; was supposed to as. if the company is so mighty as being able to avoid taxes and custom duties. The reason that we are concerned again is that as mentioned by the Chair% especially after the passage of the Bin Tax law% is that what we would have wanted to see is not only a decline in cigarette consumption but also an increase in collecting taxes primarily from the :9C. &nd those were the fears that were loc.ed out during the "sin tax' deliberations that there will be smuggling%5 he said. 7ograles also cited a report that the company started with three percent share of the but when it started selling cigarettes at /? per pac.% it was able to form its 10 percent share. -Bo imagine the 3ump from 1 percent to 10 percent but losing 10 percent also% based on the computations of the Cederation of hilippine ;ndustries%5 he said. 8uimbo assured 7ograles that whoever these big companies are% Congress went headstrong despite of the strong lobby because the health cost will be three times more of the money the government is collecting. -There is no such thing as mighty. The mightier they are% the heavier they fall "to the :;R'. Bin tax is very close to our hearts. We are spending more than what we can collect. ;t is important to meet this ob3ective in terms of collection%5 said 8uimbo. Relatedly% a news report published last 9ctober )>% )0/1 said the government lost (.@ billion in cigarette,tax revenues in the first six months of the implementation of the new law imposing higher taxes on tobacco products. The losses according to the news report -resulted from alleged various questionable trade practices of the :ulacan,based cigarette manufacturer Mighty Corp.% according to data gathered by the $epartment of Cinance "$9C' from official and independent sources.5 "10' rbb

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