November, 2012:

http://manilastandardtoday.com/2012/11/19/cigarette-smuggling-from-the-philippines/

Cigarette smuggling from the Philippines

By Alvin Capino | Posted on Nov. 19, 2012 at 12:01am | 961 views

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For several years now, there has been a lucrative but low-profile cigarette smuggling operation based in the Philippines.

We don’t know if the operation is still ongoing but until a couple of years ago, the cigarette smuggling had been flourishing from the Poro Point port in La Union and in the SBMA port in Subic.

The cigarettes smuggled from these Philippine ports are destined for the People’s Republic of China where the country’s burgeoning middle class in a booming economy have developed a taste for imported cigarettes other than their popular locally manufactured “Chunghwa” and “Double Happiness” brands.

China is a lucrative cigarette market with an estimated 350 million smokers who smoke an estimated 1.7 trillion cigarettes a year.

The cigarette brands smuggled to China from the Philippines are the popular premium brands preferred by China’s smokers, principally State Express 555, Kool and Camel.

It is not known where these cigarettes shipped from the Philippines come from, whether they are brought in the country as transhipment or manufactured in clandestine factories in the country. What is certain is that these smuggling operations are known and condoned by Philippine government officials.

The smuggled cigarettes are brought to China via medium-sized fast patrol crafts powered by powerful engines. These fast crafts, we are told, can outrun any and all of China’s coastal patrol boats. The fast crafts make a couple of trips every week to China, filled to the brim with thousands of cartons of cigarettes.

It is interesting to mention these Philippine-based cigarette smuggling operations because soon we would see similar operations with the Philippines no longer an origin but a destination once the “sin tax” bill, imposing as much as a 1,000-percent increase in taxes, is implemented.

It is doubtful whether the “sin tax” would be able to curb smoking. What is sure is that there will be a huge boost for cigarette smuggling. Cigarette smuggling will certainly flourish because it will become lucrative.

If China with its tight security and efficient coastal border patrol is unable to curb the smuggling of cigarettes, then how can the Philippines control the expected deluge of cigarette smuggling with our porous borders and a virtually unguarded coastline?

Cigarette smuggling as a direct result of the imposition of unreasonable and burdensome taxes has been the experience of many countries and territories that have adopted this strategy.

Hong Kong is one example. The November 3 editorial of the Hong Kong Daily News entitled “The method of banning illicit cigarettes by levying heavy tobacco tax should be comprehensively reviewed” detailed Hong Kong’s experience when it imposed increased taxes on cigarettes.

The editorial explained: “Crimes related to illicit cigarettes have continued to increase despite the severe penalty. Crimes are even increasing at a skyrocketing pace, with the fastest growth recorded during the time from 2009 to 2010. Tobacco tax was levied 50% higher in that year, so the number of individuals buying illicit cigarettes rose sharply accordingly by 90%.”

It added: “Considering the fact that the current tax rate of each stick of cigarette is HK$1.7, one can see that great profit that lures a large group of people to take the risk of selling illicit cigarettes. Buying illicit cigarettes can save a large sum of money, which is an irresistible amount for those in the lower classes, especially chain smokers without any self-control.”

The editorial might as well be describing what the situation would be in the Philippines if and when the sin tax, as proposed in the Senate, is approved.

What happened in Hong Kong also happened in Canada where the imposition of heavy cigarette taxes have resulted only in increased cigarette smuggling. There has been no increase in income for the government and no decrease in smoking.

According to news reports, the Canada-based National Coalition against Contraband Tobacco has expressed concern that the highly lucrative smuggling of cigarettes “undermines the safety of our communities by fuelling organized crime.”

NCACT’s Gary Grant said Canada has lost about $2.1 billion in taxes annually because of smuggled cigarettes.

He said: “Such a loss of revenue is certainly a reason for government to be concerned. But as a public interest group, we are equally concerned at how contraband tobacco funds organized crime and contributes to youth smoking.”

The Royal Canadian Mounted Police, the counterpart of our Philippine National Police, has estimated that there are some 175 criminal gangs involved in cigarette smuggling. These gangs use the illicit money they raise to finance their other illegal activities, including guns, drugs and human smuggling.

Cigarette smuggling is probably as lucrative as jueteng. Perhaps even more. We see the country’s criminal syndicates anticipating the approval of the sin tax while singing “Happy days are here again”.