Finance Secretary Carlos Dominguez III ordered the Bureau of Internal Revenue and Bureau of Customs to work with their Chinese counterparts to stop the illicit entry of cigarette-making machines that are being used to manufacture counterfeit tobacco products in the country.
Dominguez issued the order after confirming with BIR commissioner Caesar Dulay that the illegal tobacco trade shifted from smuggling cigarettes to producing counterfeit brands using undocumented cigarette-making machines from China.
“What we have to stop is the import of the equipment, which is coming from China,” Dominguez said during an executive committee meeting at the DoF.
Dominguez instructed Dulay and Customs commissioner Rey Leonardo Guerrero to coordinate with Chinese officials to inform them about this new illicit scheme and to request them not to allow the export of cigarette making machines from China to the Philippines without the proper documentation.
Based on previous raids conducted by the BIR, counterfeiters were able to manufacture fake versions of popular brands using smaller, more portable versions of the machines and devices for making cigarettes.
Dulay said these unscrupulous individuals “have graduated from fake stamps to fake cigarettes.”
He said erring traders apparently switched to manufacturing their own counterfeit cigarettes in lieu of smuggling legitimate products following the heightened joint BIR-BOC drive against suppliers of tobacco products with fake tax stamps, which was in compliance with Dominguez’s earlier orders.
In the raids conducted by the BIR on several warehouses in Luzon and Mindanao, unlicensed cigarette-making machines, packing machines and filter-making machines were seized along with fake cigarettes and fake tax stamps.
Dominguez ordered the BIR to disable and dismantle the confiscated machines so that they would be rendered non-operational.
The BIR and BoC created a joint task force to crack down hard on sellers of smuggled and counterfeit cigarettes.
The BIR also created a strike team to act as lead and point coordinator of all BIR enforcement activities on smuggled articles and locally manufactured counterfeit excisable products.
The intensified and well-coordinated campaign of the BIR and BOC against the illicit tobacco trade led to the closure of local manufacturer Mighty Corp. last year.
The firm eventually sold its assets to be able to settle its tax obligations after the government slapped a string of criminal complaints against it for the use of counterfeit tax stamps on its products.
Mighty’s tax settlement generated P30.4 billion in total revenues comprising the payment of the firm’s deficiency taxes and transaction taxes arising from the sale of its assets.
The tax payments marked the largest amount ever collected by the government from a single corporate entity.
Following the shutdown of Mighty’s operations and its takeover by Japan Tobacco International, excise tax collections from tobacco products increased by an average of P2.5 billion a month.
