Illicit tobacco trade rising as government scrapes for funding

The illicit trade and manufacture of cigarettes is rising, a development that threatens both public health and government revenues. Now that the coronavirus-induced lockdowns are slowly being lifted, law enforcers need to prioritize on weeding out the crooks behind this.

The widespread and increasingly rampant scope of their operations should ring alarm bells for authorities. Who are the criminal syndicates behind these illegal operations? Are these separate and disparate gangs, or are they run by a single crime organization? Are there local powerful people protecting and benefitting from these illegal activities?

Earlier this year, with legitimate cigarettes becoming more expensive after the excise tax was increased to P45 per pack under the Tobacco Tax Law of 2019, an increase in cigarette brands that were either smuggled in or illegally manufactured was immediately noticed.

Serious threat to health care funding

The lost taxes because of this rampant selling of smuggled cigarettes is no joke, which is such a waste because the government currently needs to raise as much money as it can to finance initiatives to help those affected by the recent quarantines.

Illicit trade robs the government of potential revenues. Along with alcohol, tobacco products are the Philippines’ biggest contributor of excise taxes and the main source of funding for the government’s Universal Health Care Program. If left unchecked, the proliferation of these illegal products in the market can seriously threaten the government’s ability to fund its health care programs.

Tobacco, of course, remains to be a controversial product and one that is known to pose health risks to consumers. Nevertheless, it remains a legal product, as the legitimate tobacco industry continues to be heavily regulated by the government.

Illicit products, on the other hand, evade regulatory oversight. There is no way to know the kind of tobacco leaves or other ingredients that go into these products, thus potentially aggravating the health risks of those who consume them. Plus, no taxes are derived from sale of these products.

Well-entrenched operations

During the lockdowns, the distribution channels of both legitimate and smuggled or illicitly manufactured cigarette brands were abruptly halted after only the transport of essential goods such as food and medical supplies were allowed.

But with businesses resuming normal operations these days, crooks are also back to their old mischievous moves.

Our law enforcement agencies led by the Bureau of Customs (BOC) have been busy with successive raids on different illicit operations scattered throughout the country, resulting in the seizures of hundreds of millions pesos worth of fake cigarette products, machinery, and other materials necessary in the production of cigarettes, including fake tax stamps.

On May 1, BOC agents and local police in Valenzuela City raided a warehouse located at Cabral Industrial Park in Barangay Lawang Bato and confiscated 280 master cases (140,000 packs) of assorted counterfeit cigarettes.

On May 12, law enforcement agents raided a warehouse located at Global ASEANA Business Park 1, in San Fernando, Pampanga. Seized in the operation were approximately 700 cases of non-duty paid cigarettes.

On May 26, three Chinese nationals and four Filipino workers were arrested at an unregistered warehouse in Sta. Maria, Bulacan. Found were an undetermined amount of fake cigarette brands.

These are just a sampling of successful operations launched by government authorities last month. In April, six separate enforcement operations were conducted in various provinces all over the country, resulting in the seizure of 1,275 master cases of assorted cigarettes.

The problem is not limited to illegal manufacturing operations. Smuggling of imported cigarettes has also been rampant. Just recently, authorities seized boxes of smuggled and fake cigarettes in Pagadian City.

Customs authorities in the Port of Manila just recently seized P17.8 million of worth of fake cigarettes coming from China.

Focus on threats to economy

To put the economy back on track after the pandemic, government must focus on threats to the economy. Not just on reforms to increase taxes but also on strengthening laws against economic saboteurs engaged in smuggling and other forms of illicit operations.

It should seriously look, for instance, at this problem of rising illicit tobacco trade unless it wants to suffer the same experience of other countries where illicit trade in cigarettes have become such a huge problem that its spawns other criminal activities.

This would need, however, a “whole of government” approach, which involves stronger laws and intense enforcement program by responsible entities.

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