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New scheme: Cigarette tax stamps traded for sardines, noodles

MANILA, Philippines – Illicit tobacco traders have found a new scheme to skirt taxes: exchanging tax stamps found on cigarette boxes for sardines or a pack of noodles.

The Bureau of Internal Revenue (BIR) said the new "promotional scheme" by some enterprising entities then involves recycling these tax stamps to put on boxes of fake cigarettes.

Finance Secretary Carlos Dominguez III already directed the BIR to work closely with the Department of Trade and Industry to curb the practice and find out who are buying the used tax stamps.

Tax stamps serve as an indicator that taxes have been collected by the government.

BIR Commissioner Caesar Dulay said he will be meeting with representatives from Philip Morris, Japan Tobacco, and other cigarette companies, as well as those handling the Internal Revenue Stamps Integrated System to find out how to address this new modus operandi in the illicit tobacco trade. 

The government has been aggressive in chasing tax cheats in the cigarette industry.

In 2017, the government collected some P30 billion in unpaid taxes from Mighty Corporation – the biggest sum on record raised by the government from a tax settlement.

Mighty Corporation used counterfeit tax stamps to sell its products at a much cheaper cost than rival brands.

Meanwhile, legislators have been pushing for even higher tax on cigarettes. From the current P32.50, lawmakers want it hiked to P37.50 this year.

Cigarette prices would also climb some more, as lawmakers proposed to slap P2.50 of tax every year until July 2022. A 4% tax increase would then be imposed annually starting July 2023. – Rappler.com 

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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