Finance Secretary Carlos Dominguez III ordered the Bureau of Internal Revenue to work closely with the Trade Department to stop the illegal practice by illicit tobacco traders of using recycled tax stamps on fake cigarettes.
BIR officials said during a recent DoF executive committee meeting they found out that some enterprising entities came up with a promotional scheme where 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 to stop the alleged practice and find out who were 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.
BIR deputy commissioner Arnel Guballa said illicit tobacco traders could be using the promotional scheme to gather used tax stamps to put on packs of fake cigarettes.
Dulay said he would be meeting with representatives from Philip Morris, Japan Tobacco, other cigarette companies and those handling the Internal Revenue Stamps Integrated System to find out how to address the latest modus operandi in the illicit tobacco trade.
The DOF and BIR led the destruction of several machines used in the manufacture of illicitly traded cigarettes in January.
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.
It also formed a strike team tasked to crack down on illicit cigarette manufacturing and trade.
The BIR incinerated more than 230,000 master cases or 115 million cigarette packs bearing brands manufactured by the defunct Mighty Corp in 2018. It also destroyed more than 9,000 master cases bearing the Mighty brands in the latter part of 2017.
The aggregate excise tax of the incinerated cigarettes could reach 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 raised by the government from a tax settlement.
After the BIR filed three separate criminal complaints before the Department of Justice 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.
Mighty’s manufacturing and distribution assets were sold to Japan Tobacco Inc. for around $1 billion. Mighty then 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.
