From: Business Mirror
BRITISH-American Tobacco (BAT) Philippines, maker of the Lucky Strike brand of cigarettes, on Thursday said it will support the government in monitoring the illegal trade of cigarettes that poses a threat to legitimate businesses.
Robert Eugenio, BAT Philippines corporate and regulatory affairs head, said the government and the local tobacco industry should unite in protecting the sector against unscrupulous groups that disregard the law by not paying taxes.
The LT Group, local partner of market leader Philip Morris Fortune Tobacco Corp. (PMFTC), earlier claimed that the illegal trade and nonpayment of excise taxes by some small cigarette players is a significant concern, next to oil smuggling, after the enactment of the new excise-tax law in January.
Eugenio said, “We strongly support the close monitoring by the government to ensure that everyone obeys the law and pays the right taxes. After an excise increase, there is bound to be some movements in the market, like consumers switching brand preferences and companies losing or gaining market share.”
LT Group President Michael G. Tan also earlier identified underground domestic cigarette manufacturers and smugglers as behind the growing illegal trade of tobacco products in the country.
He said the illegal cigarette trade has grown by “astronomical proportions,” which could lead to P8 billion in foregone revenues this year for the Bureau of Internal Revenue (BIR), the government’s main tax agency.
Eugenio said BAT has yet to feel the effects of illegal cigarette trade considering the company’s less than 1-percent domestic market share.
“As a new player, BAT right now has a very small market share and thus, we are not yet feeling any significant direct impact from these movements,” he said.
PMFTC, the merged company of Philip Morris Inc. and Fortune Tobacco Corp., currently controls about 90 percent of the more than P72-billion cigarette market.
Of the reported illegal trade, Tan estimated that illegally manufactured cigarettes in the domestic market, or those that do not pay excise taxes, account for about 90 percent of illegal tobacco trade, while sale of smuggled products accounts for the balance.
Eugenio said BAT has been closely working with governments and law-enforcement agencies globally to tackle illegal tobacco products and has dealt not only with “well-organized criminal gangs,” but also with money laundering, drugs and human-trafficking activities that fund terrorist organizations.
“BAT continues to fight the illegal tobacco trade. These people don’t abide by the law or follow government regulations. They don’t pay taxes, they don’t care what’s in their products and they happily sell to minors,” Eugenio added.
Tan estimated that illegal trade had cost the government P3 billion in foregone duties, excise taxes and value-added tax (VAT) since the start of the year. “We have to work hand in hand with the government to curtail and stop this,” Tan said.
Eugenio said driving the tobacco industry out of business altogether will not end all smoking overnight, and the reality is that adults who wish to smoke will continue to do so and they will turn to the black market if a legal industry is not in place. “Sophisticated networks of criminals are ready and waiting to step in and take over if the legitimate tobacco industry didn’t exist,” Eugenio said.
