Finance Secretary Carlos Dominguez III has directed the Bureau of Customs (BOC) and Bureau of Internal Revenue (BIR) to work with their counterparts in China to stop the illicit entry in the Philippines of cigarette-making machines used to manufacture counterfeit tobacco products.
Dominguez issued the order after confirming with BIR Commissioner Caesar Dulay that the illegal tobacco trade has shifted from smuggling cigarettes to producing counterfeit brands in the country using undocumented cigarette-making machines acquired from China.
“What we have to stop is the import of the equipment, which is coming from China,” Dominguez said during a recent Department of Finance (DOF) executive committee (execom) meeting. BOC and BIR are under DOF.
According to a statement by DOF, Dominguez instructed Dulay and BOC Commissioner Rey Leonardo Guerrero during the execom meeting to inform and coordinate with Chinese officials about this new illicit scheme and to request them not to allow cigarette-making machines to be exported to the Philippines without proper documentation.
Based on previous raids conducted by BIR, it was found that counterfeiters are able to manufacture fake versions of popular brands using smaller, more portable versions of machines and devices that make cigarettes.
“They have graduated from fake stamps to fake cigarettes,” Dulay said during the meeting.
DOF said erring traders have apparently switched to manufacturing their own counterfeit cigarettes in lieu of smuggling in legitimate products following the heightened joint BIR-BOC drive against suppliers of tobacco products with fake tax stamps, a move carried out in compliance with Dominguez’s earlier orders.
In raids conducted by 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 has ordered BIR to disable and dismantle the confiscated machines to render them non-operational.
In response to Dominguez’s earlier directive, BIR and BOC have created a joint task force to crack down hard on sellers of smuggled and counterfeit cigarettes.
The BIR has 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 coordinated campaign by BIR and BOC against the illicit tobacco trade led to the closure of local manufacturer Mighty Corp. last year, DOF noted.
The firm eventually sold its assets and settlef its tax obligations after the government slapped it with a string of criminal complaints for using 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 have increased by an average of P2.5 billion a month.
