Will cigarette smuggling worsen with sin tax hike?

Ina Reformina, ABS-CBN News

Posted at May 27 2019 09:32 PM

MANILA - Senate President Vicente Sotto III and Senate Blue Ribbon Committee chair Richard Gordon have expressed concern that smuggling of cigarettes and other tobacco products may worsen should the proposal to raise excise taxes gain the Senate's approval. 

The committee report on Senate Bill No. 2233 was presented in plenary on Monday. The bill proposes a starting rate of P45 in 2020 or an increase of P10 in the first year of implementation, followed by a series of annual P5 increases until the rate reaches P60 in 2023. Thereafter, the rate automatically increases by 5 percent annually.

“These smuggled cigarettes that cost P20 per pack are original brands; they are not fake brands or fake cigarettes… we’re told it’s prevalent in Palawan and parts of Mindanao. Are they (Finance Department officials, personnel) aware of this? Is there something they are doing? I hope they start trying and start doing,” Sotto said during his interpellation of Ways and Means Committee chair and sponsor Sen. Sonny Angara.

“Being in the Blue Ribbon, I know that it is so easy to smuggle things in the customs… Isn’t it true that there are now Chinese who come here and they bring in equipment and they manufacture cigarettes in Gapan, Nueva Ecija and in Bulacan and Pangasinan?” Gordon asked.

Angara, for his part, agreed that raising taxes also “tends to increase” illicit trade.

“You’re right, as a general proposition that the more you increase taxes, the illicit trade tends to increase, that’s the case worldwide,” Angara said, responding to Gordon. Angara, however, explained the finance department has committed to step up efforts to crack down on cigarette smugglers. 

Gordon also questioned why the tobacco sin tax will be raised by government instead of totally banning cigarettes.

“Why don't we just cancel it altogether? Isn’t it hypocrisy? If this is policy, if cigarette smoking kills, why don’t we ban it altogether?” he said.

Angara, for his part, said there is a need to increase sin taxes because “the reality is there: a lot of people knocking on our doors with all kinds of sicknesses.” 

Gordon questioned why the proposal is being “rushed,” when it can wait until the next Congress.

“The department (finance department) sees the opportunity, given the advanced stage of deliberations on the revenue measures and knowing that we have to refile these bills in the 18th Congress,” replied Angara.