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Smuggling of cigarettes due to sin tax unlikely – Palace

MANILA, Philippines - Malacañang has belied the claim of Senate President Juan Ponce Enrile that smuggled cigarettes would flood the market if the prices of tobacco products were raised too much once the sin tax reform bill is enacted into law.

Presidential Communications Development and Strategic Planning Office Secretary Ricky Carandang said “cost of smuggling” had always been one of the arguments used against the sin tax. “And they’ve been used even in other countries, that if you increase the prices then it will increase smuggling. But we haven’t seen that happen in other countries and we don’t think that would... If it doesn’t happen in other countries, I don’t see it necessarily happening here,” Carandang said Thursday after attending the National Economic and Development Authority meeting and Christmas tree lighting ceremony at Malacañang.

Officials have been saying that smuggling of cigarettes will not happen since the prices of these products in other countries are much higher.

Malacañang also said the rates were reasonable enough to discourage vices, especially among the young people, and provide bigger subsidy for tobacco farmers.

Malacañang is also expecting the new sin tax rates to break the monopoly in the country’s tobacco industry.

Enrile said smuggling was already taking place in the country, not only in Mindanao where a lot of the reported illegal activity was taking place, but also in Metro Manila.

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Enrile showed reporters a pack of Chinese cigarettes called YunYan, which he said were widely sold in Divisoria, Manila.

He said the pack of Chinese-made cigarettes was given to him by a friend who told him about the sale of those products in Divisoria.

Enrile said that rampant smuggling should be expected if the prices of locally manufactured cigarettes go up too much compared to cheaper ones from abroad. 

Sen. Franklin Drilon, however, said the possibility of cigarette smuggling in the country due to the passage of the sin tax reform bill is very remote since the local prices remain cheap compared to neighboring countries in Southeast Asia.

“(Cigarette) smuggling will not progress (in a country) where the prices are still low,” Drilon said.

Despite the increase in prices of cigarettes starting next year, Drilon said local cigarette brands remain cheaper than those in Malaysia, Singapore and Thailand.

Drilon cited the price of a popular cigarette brand which he said costs P320 in Singapore.

“Once we implement the law, the price... here will just go up to P50,” said Drilon, the principal author of the sin tax reform bill.

He said cigarette smuggling is also unlikely in the Philippines where big tobacco companies control 95 percent of the market.

“To make it profitable, you have to have sophisticated market, extensive networks of distributors. The big cigarette companies here control 95 percent of the market,” he said.

Drilon added smuggling is primarily a law enforcement problem. “Smuggling is principally a law enforcement issue... enforce the law strictly,” he said. – With Helen Flores



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