JTI unit offers help to combat smuggling

JT International Philippines Inc. (JTI Philippines), a unit of multinational Japanese Tobacco International, indicated willingness to share with the government information that will help address cigarette smuggling in the country.

In a statement, JTI Philippines General Manager Manos Koukourakis said the government lost billions in revenues annually because of rampant illicit cigarette trade nationwide.

Koukourakis said that “instead of raising taxes and going after the legit companies, why don’t we go after the smugglers?”

He vowed to work with authorities “and support their efforts with good intel.”

“This admin(instration) is sworn to go after smuggling and as part of the Legitimate Tobacco Industry, we will contribute to their efforts as much as we can,” he said.

“Either in Davao or wherever, the government will have a strong ally in its efforts against tobacco smuggling which is becoming rampant,” he stressed.

He said that for every P1 billion in gross revenues “the government makes P800 million in taxes, excise tax and value-added tax (VAT) excluding corporate income taxes.”

“So in the end, the biggest beneficiary (in) clamping down smuggling is the government,” he said.

The Department of Finance (DOF) plans to support a measure calling for an increase in cigarette taxes, in a bid to raise additional revenue for the government and address smoking-related diseases.

The JTI Philippines chief said raising taxes on tobacco “will be disastrous for the legitimate tobacco industry”, which he said, lost around 40 billion cigarettes in just five years” or from 110 billion in 2013 to 70 billion last year.

“Another tax increase will lead to further consumer price increases which seriously risk turning the country into a Malaysia where cigarette smuggling is almost 60 percent of total consumption,” he added.

Meanwhile, Finance Secretary Carlos Dominguez III acknowledged Koukourakis’ offer of help.

“This information will be acted on by the BIR (Bureau of Internal Revenue) and the BOC(Bureau of Customs),” he said.

Dominguez said government revenues from sin taxes will get further boost in 2018 as JTI pays the remaining tax deficiencies of Mighty Corp., which it recently bought.

“The minimum of excise tax that Japan Tobacco Inc. will be paying as of January 2018 onwards is estimated at over P3.1 billion per month, about P2 billion more per month than paid by Mighty Corp,” he said.

“For this year, JTI is expected to pay almost P40 billion out of the estimated P118 billion total excise taxes on tobacco products,” he added.

The government, as part of its strengthened revenue collection, has focused on erring companies and one of these is local cigarette manufacturer Mighty Corp, which registered some P30 billion tax deficiencies.

Last July, Mighty Corp. paid the Bureau of Internal Revenue (BIR) about P3.5 billion as initial payment and the balance will be paid by JTI.