LT Group wants sources of illicit cigarette trade known

MANILA, Philippines - The illicit trade of cigarettes, estimated to cost the government P10 billion in foregone revenues annually, will remain a headache to the Philippines unless sources of the illegal activity are pinned down, LT Group Inc. president Michael Tan said.

In an interview, the son of taipan Lucio Tan has urged government to go after the true sources of the illegal tobacco trade and not just the retailers.

“We’re happy that Justice Secretary (Leila) De Lima and (BIR) commisioner (Kim) Henares came out with a statement deputizing the NBI (National Bureau of Investigation) to seize illicit cigarettes, those which do not have stamps. It is faster and easier to address the issue within the facility than outside, meaning enforce a source in the factory instead of outside,” Tan said.

Tan said there are currently only “a handful” of cigarette factories in the country as opposed to a million retail sources.

“It is pity for the stores which get their products confiscated because sometimes, they don’t know that what they are selling are a fake. They will be penalized when in fact, the real culprit of that is the source. So you have to catch it at the source and that’s very easy. The most efficient way is at source,” he said.

Tan estimated the illegal trade is costing the government P10 billion in revenues a year and that will likely continue until the root of the activity is pulled out.

LT Group’s tobacco arm Philip Morris Fortune Tobacco Corp. (PMFTC) Inc. has been reeling from the effects of illicit cigarette trade in the country.

Net earnings of the LT Group plunged more than half to P4.2 billion last year from P8.7 billion in 2013 due to the continuing difficult operating environment of its tobacco business.

As of the first quarter this year, net income of the group’s tobacco business fell 29 percent to P411 million from P578 million in the same period last year.

“The problems of the tobacco business have not been resolved, but recent developments point toward a more positive outlook that will hopefully lead toward a level playing field, and enable Philip Morris Fortune Tobacco Corp. to improve earnings,” Tan told reporters following the company’s annual stockholders meeting in June.

The company has been accusing rival Mighty Corp. of selling below cost, allowing the Bulacan-based cigarette firm to capture a significant share of the local market in a short span of time.