From: Malaya Business Insight
Criminals and terrorists may be drawn to the illicit tobacco trade to take advantage of price differentials across jurisdictions, bootlegging and small consignments from a low-tax or duty-free outlet and re-selling the products elsewhere at a higher price.”
This warning is contained in Transnational Crime Foreign Policy Issues for Congress reported recently by the US Congressional Research Office.
The Philippines is not as yet in the league of criminal and terrorist gangs whose activities are funded by money from drug trafficking, illicit cigarettes and kidnapping for ransom such as the Hezbollah, Hamas, the Kurdistan Workers Party and the Real Irish Republic Army listed in the US Congress report.
The Philippines can be a nest of terrorist activities, not because of its large Muslim population but for the huge financial opportunity in illicit trade that may likely be created should Congress, pushed incessantly by the Executive, pass a law imposing excessive excise tax on cigarettes.
The US Congressional Report points out that “cigarette smuggling schemes as a means of financing terrorists have been discovered in a wide range of countries and regions including the United States, the Middle East and North Africa and Iraq.”
The report noted “if sufficiently resourced, some groups may conduct larger-scale operations that divert and smuggle commercial-sized volumes, those in excess of one million cigarettes per consignment for subsequent distribution and sale.”
John Rollins, specialist in Terrorism and National Security, and Liana Sun Wyler, analyst in International Crime and Narcotics, said in their Oct. 19, 2012 joint report entitled Terrorism and Transnational Crime: Foreign Policy Issues for Congress, “the production, smuggling, and sale of tobacco products, including genuine and counterfeit cigarettes, is a lucrative form of financing for organized crime as well as terrorist groups, such as Hezbollah, Hamas, the Kurdistan Workers Party and the Real Irish Republican Army.”
In the footnote to the report, Rollins and Wyler pointed out that the US district Court, District of North Carolina, Charlotte Division, indicted Mohamad Youseff Hammoud et al for alleged involvement in terrorism funded with money from illicit cigarettes.
The Senate is now debating many versions of a House-originated bill that has a common conclusion. All of the versions seek an increase of around 700 per cent (the original rate of increase was slightly more than 1,000) on cheap cigarettes patronized by the poor.
These brands are said to account for an estimated 60 per cent of total annual cigarette consumption.
Voicing a different concern on excessive excise tax, a coalition in Canada fighting cigarette smuggling wrote Sen. Ferdinand Marcos Jr. telling him the excessive tax on sin products now pending in the Senate can only lead to rampant smuggling and exacerbate youth smoking “and fund organized crime.”
The bill seeks to raise taxes on cigarettes by about 700 per cent presumably for two oxymoronic reasons. One is to discourage smoking because the price becomes prohibitive.
The other is to raise more revenues for the health care of smokers who cannot kick the habit. Opposition to the plan suggests that when the price of low-end local cigarettes, which are said to account for about 65 per cent of total consumption, goes up, the tax base will be reduced.
However, the smoking habit will be exacerbated because cheap smuggled cigarettes will flood the market. The result, according to lawmakers against the tax, is promoting smoking without the government getting a share of the tax on cigarette consumption.
The benefit, it has been pointed out, will go to the smugglers. The government will not necessarily collect the revenues it expects.
