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ITIC Meets with Philippines Officials

http://www.iticnet.org/news-item/itic-meets-with-philippines-officials

On 28-29 September, ITIC President Daniel Witt and Senior Advisor Wayne Barford held a series of meetings to present the ASEAN Excise Tax Reform Manual to key stakeholders.

On 29 September, House Committee on Ways and Means Chairman Romero Quimbo chaired a roundtable at the School of Economics at the University of the Philippines. Members of the House Committee on Ways and Means and the Senate Tax Study and Research Staff attended the roundtable (pictured below).

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Witt and Barford also met with Senate Committee on Ways and Means Chairman Sonny Angara and attended a Senate Plenary session, where they presented a copy of the ASEAN Excise Tax Reform Manual to Senate President Frank Drilon, among other Senators.

Following the House and Senate meetings, Witt and Barford also attended a dinner organized by the Philippine Chamber of Commerce and Industry.

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Govt loses about P22.5B in excise and VAT revenues

http://www.manilatimes.net/govt-loses-about-p22-5b-in-excise-and-vat-revenues/221265/

UNTAXED CIGARETTE CONSUMPTION UP 4.1% IN 2014

by MAYVELIN U. CARABALLO

Hong Kong: More untaxed cigarettes were smoked in the Philippines last year, subsequently increasing foregone government revenues, a study released here Tuesday said.

Data from a Philippine market report, prepared by the International Tax and Investment Center (ITIC) and Oxford Economics, put the volume of 2014 illicit cigarette consumption at 19.9 billion sticks, up 4.1 percent from the previous year. The report is an extract from the forthcoming Asia-16 Illicit Tobacco Indicator 2014, which is set for release in the fourth quarter of this year.

Illicit consumption refers to the use of non-domestic cigarettes —smuggled goods or counterfeit products from another country —and locally made sticks that are both sold without the payment of required taxes.

Philippine-made cigarettes accounted for almost all of illicit consumption, which at 19 billion sticks was 10.8 percent higher. Illicit non-domestic cigarette use, at 900 million sticks, was down 55.3 percent from 2013.

Illicit consumption cost the government an estimated P22.5 billion in lost excise and value-added tax revenues, the report noted.

Experts, however, are hoping for a marked decline in illicit cigarette consumption this year with the implementation of the Bureau of Internal Revenue’s (BIR) tax stamp program.

“In line with the amendment of the National Internal Revenue Code of 1997, it is anticipated that the affixture of tax stamps introduced on December 1, 2014 will ‘further improve tax administration’ and ‘deter mis-declaration of removals’,” the report said.

In Tuesday’s briefing, Oxford Economics Senior Economist for Asia Oliver Salmon noted that the government’s move should be part of a wider campaign to address the illicit cigarette trade problem.

He pointed out that significant tax-led price increases had left the market exposed to the threat of cheap cigarettes from other countries as well as counterfeits of well-known brands.

“As evidenced by this report, significant price increases over the last few years have led to the erosion of the legal market for cigarettes, with the illicit trade filling the gap” Salmon said.

He noted that legal domestic cigarette sales (or tax paid volumes) fell further last year to 82.3 billion sticks. Overall, following the implementation of the new sin tax law in 2013, legal domestic sales were said to have fallen by nearly 20 billion sticks.

University of the Philippines economist Benjamin Diokno, an adviser to the ITIC who reviewed the report, sa id the rise in domestic illicit cigarette consumption had built a compelling case for the BIR’s new Internal Revenue Stamps Integrated System as a means of protecting government revenues

Asia 16 Illicit Tobacco Indicator 2014 – Philippines September 2015

Download (PDF, 4.66MB)

After setback in SC ruling, DOH wants to revisit interagency panel on tobacco regulation

http://www.interaksyon.com/article/111059/after-setback-in-sc-ruling-doh-wants-to-revisit-interagency-panel-on-tobacco-regulation

MANILA – Health Secretary Janette Garin signalled at the weekend she will push to revisit the composition of the Inter-agency Committee on Tobacco (IACT), after a Supreme Court ruling thwarted her agency’s effort to regulate tobacco promotion.

The focus of the review she wants: the inclusion of the tobacco industry in the IACT, which she deems a “loophole” in Republic Act 9211 or the Tobacco Regulation Act .

“That’s basically to look at the whole composition. Because that is in the law, and it’s a loophole (of the law),” Garin remarked, by way of commenting on a ruling last week, where the SC granted an appeal against DOH by Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco Corp.

The high court affirmed a 2011 Court of Appeals decision favoring Fortune and Philip Morris in their move to contest a DOH resolution on tobacco sales promotion. The IACT, not the DOH, has the authority to implement the law, the SC ruled last week.

Garin explained that the DOH resolution on tobacco sales promotion was issued because IACT “has been inactive for so long.”

She conceded that if one were to strictly follow the law, “it’s the interagency committee [IACT] that has the prerogative [to regulate].” But, she explained, “the DOH did this because for a long time the IACT was not being activated.”

In light of the SC ruling last week, the DOH now plans to coordinate with the Department of Trade and Industry in order to activate the IACT.

Through the DTI, the DOH will also try to forge a compromise with the tobacco industry, hoping to win their cooperation to regulate tobacco consumption, she said.

The DOH has not yet decided on whether or not to file a motion for reconsideration with the SC, and is still consulting its legal department.

India tobacco confab a ploy to sway policies, PH warned

http://globalnation.inquirer.net/122521/india-tobacco-confab-a-ploy-to-sway-policies-ph-warned?PageSpeed=noscript

MANILA, Philippines–Antismoking groups on Wednesday warned the government against participating in the three-day tax forum being held in India, saying it is a tobacco industry trap meant to sway government policies on public health and tobacco control in the Asia-Pacific region.

According to HealthJustice, New Vois Association of the Philippines (NVAP) and the Southeast Asia Tobacco Control Alliance (Seatca), the 12th annual Asia-Pacific Tax Forum, held from May 5 to 7 and organized by the International Tax and Investment Center (ITIC), received funding from giant tobacco companieshttp://images.intellitxt.com/ast/adTypes/icon1.png.

The groups identified these companies as Philip Morris International, Imperial Tobacco Ltd., British American Tobacco and JTI Group.

They also noted that the website of ITIC, described as a known tobacco industry front group, claimed that government delegations, including from the Philippines, have confirmed their participation in the forum.

“The forum serves as a venue for the tobacco industry front group to influence governments in the Asia Pacific region… a clear violation of the World Health Organization Framework Convention on Tobacco Control,” said Irene Reyes, managing director of HealthJustice.

Reyes added that the forum was also an infringement of a joint memorandum circular of the Civil Service Commission and the Department of Health issued in 2010, which requires government officials to protect public health policies from commercial and other vested interests of the tobacco industry.

“Philippine delegates must keep in mind their obligation to protect life-saving tobacco control measures against the interference of tobacco companies. Public health interests should always be prioritized over the commercial interests of the tobacco industry,” added NVAP president Emer Rojas.

The groups also pointed out that the World Bank and India’s finance minister had formally withdrawn their participation from the tax forum.

If traditionally conservative institutions like the World Bank “have seen through” the ITIC and its objectives, the government should not allow itself to be a party to the event, stressed Reyes.

Pangasinan town mayor, vice mayor, 17 others face raps for misuse of excise tax fund

http://www.interaksyon.com/business/109908/pangasinan-town-mayor-vice-mayor-17-others-face-raps-for-misuse-of-excise-tax-fund

ALCALA, Pangasinan – Nineteen officials of the town of Alcala, Pangasinan were accused of allegedly misusing in 2011 the town’s share from the accumulated excise tax from 1997 to 2007 in a case filed last week before the Ombudsman for Luzon.

The complaint accused the 19 officials, led by then Mayor Manuel Collado and then Vice Mayor Paolo Mencias, now the town mayor, eight councilors, and heads of various departments of the municipal government of alleged technical malversation and violation of the Anti-graft and Corrupt Practices Act.

Save the Pangasinan Movement Inc., represented by its president Manuel Tolentino and its secretary general Fleurdeliz Cabalteja filed the case.

At least P2.7 million from the Tobacco Excise Tax were misused for the six infrastructure projects bid out and built by the municipal government, the complainants said.

In their complaint affidavit, Tolentino and Cabalteja charged the municipal officials for technical malversation under Article 220 of the Revised Penal Code and violation of RA 3019 or the Anti-Graft and Corrupt Practices Act and violation of RA 6713 otherwise known as the Code of Conduct and Ethical Standards for Public Officials and Employees.

The two said RA 8240 provides among others that 15 percent of the incremental revenue from excise tax on tobacco products shall be allocated and divided among the province’s producing burley and native tobacco in accordance with the volume of tobacco leaf production.

This act specifies that the fund shall be exclusively used for programs like cooperative projects that will enhance better quality of agricultural products, livelihood projects, and agro-industrial projects that will enable the tobacco farmers to be involved in the management and subsequent ownership of projects such as post-harvest and secondary processing like cigarette manufacturing and by-product allocation.

The complaint said that in 2009, then President Gloria Macapagal Arroyo released the 15-percent share of beneficiary local government units consisting of provinces, cities and municipalities producing burley and native tobacco covering the period 1997 to 2007 amounting to P6.3 billion.

Of the amount, P600 million was shared by the Fifth District of Pangasinan with then Rep. Mark Cojuangco as congressman, while Alcala, which was the district’s biggest producer of burley and native tobacco, has a share of P332 million.

Basis of the distribution of the 15-percent LGU share was 80 percent to the municipalities and cities in the congressional district; 10 percent to the provincial government of the beneficiary province; and 10 percent to the municipalities and cities.

The complaint stated that sometime in 2011, six infrastructure projects–all farm to market roads–were bid out by the municipality of Alcala using the share of the town from the excise tax and the winning bidder for all of these was Mecer Construction owned by the family of then Vice Mayor Paolo Mencias, now the town mayor.

“The law on tobacco excise tax, RA 8240 and JMC (Joint Memorial Circular) 2009-1 is very explicit in its mandate that the funds ensuing from the collecfion of the tobacco excise tax shall be applied in the pursuit of projects specified, ” the complaint stated.

The two complainants said the provisions of RA 8240, Section 8 or in JMC 2009 do not allow the use of Tobacco Excise Tax fund for infrastructure projects, unlike in RA 7171 which seeks to promote the development of farmers in the Virginia tobacco-producing provinces where the law expressly states that the fund thereof may be applied for the construction of farm to market roads.

The two told newsmen the municipal government also built palay and corn dryer in Barangay Bersamin, Alcala using another P2 million from the excise tax of the municipality which today remains a virtual white elephant.

They said part of the excise fund of the municipality were used to buy molasses and corn grits for a dairy farm in Laoac, Pangasinan, supposed to be a district project of then Congressman Maek Cojuangco.

The two said that the share of the fifth district in the amount of P600 million was released at one time thorough then Congressman Cojuangco and was supposed to have been distributed to other towns and city with Alcala getting its share of P232 million

Bill sought hiking legal smoking age

http://newsinfo.inquirer.net/685058/bill-sought-hiking-legal-smoking-age

MANILA, Philippines–The antismoking group New Vois Association of the Philippines (NVAP) on Sunday urged lawmakers to pass a measure raising the legal age to buy cigarettes from 18 to 21 to cut the prevalence of smoking among Filipino youth.

It is well known, however, that those younger than 18 can obtain cigarettes despite the current law.

But NVAP president Emer Rojas said that passing a law raising the minimum legal sale age (MLSA) would save lives in the long run since the tobacco industryhttp://images.intellitxt.com/ast/adTypes/icon1.png has been luring young people to start the smoking habit to take the place of those who had died or gotten sick from tobacco use.

“Raising the age of those given access to cigarettes will certainly be a good measure to further reduce smoking prevalence, especially among the youth,” Rojas said in a statement on Sunday.

Rojas cited a recent study by the US-based Institute of Medicinehttp://images.intellitxt.com/ast/adTypes/icon1.png that showed that banning the sale of tobacco products to those under 21 would eventually slash the smoking rate by roughly 12 percent and smoking-related deaths by 10 percent.

He pointed out that among the countries that had raised the MLSA for cigarettes were Sri Lanka, Honduras, Kuwait, Cook Islands and several US states, including New York, Illinois, Massachusetts and Hawaii.

He noted that in the Philippines, the MLSA was limited to the use of the word “minors,” which means those under 18 are prohibited access to cigarettes and other tobacco products.

Based on a Social Weather Stations survey in the first quarter last year, Filipinos aged 18 to 24 account for 18 percent of the smoking population. Over 17 million Filipinos currently smoke tobacco.–Jocelyn R. Uy

Group to propose raising legal age to buy cigarettes from 18 to 21

http://www.businessmirror.com.ph/group-to-propose-raising-legal-age-to-buy-cigarettes-from-18-to-21/

SAYING that it would help limit the youth’s access to the deadly cigarette addiction, the New Vois Association of the Philippines (NVAP) is mulling over proposing a bill that will raise the minimum age in buying cigarettes from 18 to 21 years old.

“Increasing the age of those given access to purchase cigarettes will certainly be a good measure to further reduce the smoking prevalence especially among the youth,” NVAP President Emer Rojas said, adding that there is a need for lawmakers to consider passing a law raising the minimum legal sale age (MLSA).

Rojas noted a March 2015 report by the Institute of Medicine (IOM) of the United States which shows that raising the age limit to buy cigarettes to 21 will have a substantial positive impact on public health and save lives. The IOM study predicts that raising the minimum age for the sale of tobacco products to 21 will eventually reduce the smoking rate by about 12 percent and smoking-related deaths by 10 percent.

The study forecasts such a measure would translate to 249,000 fewer premature deaths, 45,000 fewer deaths from lung cancer, and 4.2 million fewer years of life lost in the US alone.

Among the countries that have raised the MLSA for cigarettes to 21 are Kuwait, Sri Lanka, Honduras, Cook Islands, as well as the states of New York, Illinois, Missouri, Massachusetts, and Hawaii in the US. In the Philippines, the MLSA is limited to the use of the word “minors” which means those below 18 years old are prohibited from buying and smoking cigarettes or using any tobacco product.
In the Social Weather Station (SWS) survey in the first quarter of 2014, 18 percent of smokers come from the 18-to-24-year-old age group. Rojas said protecting the youth is a crucial aspect in the fight versus the smoking epidemic as they are known to be the main target of tobacco manufacturers.

“These kids will be the so-called ‘replacement smokers’ for those who died or are sick from tobacco use. Thus such a measure would protect our youth from becoming the next victims,” Rojas said. The anti-smoking advocacy group also said raising the MLSA will also be a good complement for previous tobacco control policies such as the “sin” tax law and Graphic Health Warning (GHW) Act.

The sin tax law aims to make cigarette products less accessible to the youth by increasing its prices in the market. The GHW is looking to use picture warnings in a bid to alert the youth of the ill-effects of smoking.

ITIC-OE study on PH illicit cigarette trade, unreliable – AER

http://aer.ph/itic-oe-study-on-ph-illicit-cigarette-trade-unreliable-aer/

Action for Economic Reforms (AER) refutes the claim of the International Tax and Investment Center (ITIC) and Oxford Economics (OE) that nearly P16 billion was lost in illicit cigarette trade in the Philippines, mainly causing the drop in legal domestic sales of cigarettes in 2013.

The said ITIC-OE study entitled “Asia-11 Illicit Tobacco Indicator 2013 Update for the Philippines” estimated that illicit consumption of cigarettes in the country increased from 5.9% of total consumption in 2012 to 18.1% in 2013. Moreover, it claims that the total consumption of smokers was only down by 3% after a year of implementing the Sin Tax Reform Act of 2012.

Yet AER argues that the study is a case of conflict of interest. ITIC is a research firm that claims to be independent even while Philip Morris International’s Vice President for Fiscal Affairs and International Trade (Mr. Huub Savelkouls) actually sits in the Board of Directors, along with other global tobacco industry representatives.

AER recalls that at the height of the sin tax debate in Congress in October 2012, ITIC organized the Ninth Asia-Pacific Tax Forum in Manila and used the occasion to criticize the government’s proposed reforms, including the cigarette tax increase. In the experiences of other countries such as Australia and the UK, using alleged threat of smuggling has been among the strategies of tobacco companies to oppose tobacco tax reforms.

Significantly, said AER Coordinator Filomeno Sta. Ana, the ITIC-OE study suffers from serious methodological problems starting from its data gathering process to analysis.

It employed “empty pack surveys” which, by its very nature, may suffer from selection bias of sources of litters or incorrect deciphering between counterfeits and legal non-domestic products.

Secondly, the study used a formula which assumed values of too many important variables such as other cigarette companies’ declared and actual volume in the market, which, because of BIR’s disclosure information

Although the artificially depressed prices of some cigarette brands are worrisome, AER asserts that they are not sufficient to automatically conclude that the manufacturers of such brands are already engaged in illicit trade.

“Not only Mighty but also PMFTC’s Jackpot as well as other variants have more or less the same artificially low prices,” said Sta. Ana. At present, PMFTC’s low-end brands sell at around P1.25/stick when Mighty cigarettes typically sells at P1.50/stick. AER sees this price war as an unsustainable strategy to gain market share especially with the application of a unitary tax scheme by 2017.

Lastly, AER also emphasizes that aside from doubling excise tax collections, the Sin Tax Law greatly reduced cigarette consumption. Far from the 3-percent estimate of ITIC, smokers from Angono, Rizal and Cotabato City reduced smoking by 14.3% and 22.9%, respectively, according to AER-DOH surveys in 2013.

More recently, the 2014 Social Weather Stations survey on cigarette consumption revealed a drop in smoking prevalence, particularly among the young and the poor.

Despite the questionable nature of the Asia-11 report, AER supports the Bureau of Internal Revenue (BIR)’s effort to pursue an investigation on illicit trade. AER also lauds the latest measure of having stamps on cigarette packs to distinguish the paid packs from the illicit ones.

Action for Economic Reforms (AER) is an independent policy think-tank and a core member of the civil society coalition that pushed for the passage of the Sin Tax Law in 2012.