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Committee supports third-party tax audits

| July 3, 2014

Members of the Philippines’ House Ways and Means Committee have endorsed a proposal to assign a nongovernment organization to monitor tax compliance at cigarette companies, according to a story by Gil Cabacungan for the Philippine Daily Inquirer.

Representatives Emil Ong and Roy Señeres said they would file a resolution deputizing the Framework Convention on Tobacco Control Alliance of the Philippines to conduct third-party audits of tax payments by cigarette companies.

The development comes amid fears that the sin tax reforms of 2012 have been undermined by chronic tax-evasion schemes, specifically the use of “duplicate tax stamps.”

The alliance expressed concerns over a recent study commissioned by Philip Morris International that showed the Philippines had lost an estimated PHP15.6 billion in revenue because the sale of tax-dodging cigarettes had increased nearly three-fold to PHP17.1 billion last year, from PHP6.1 billion in 2012.

An earlier story, however, quoted the Bureau of Internal Revenue Commissioner Kim Henares as saying the proposal to use third-party agents would violate the tax code.

Illicit trade one-fifth of Bulgarian market

| July 3, 2014

Every fifth cigarette in Bulgaria is illicit, according to a Novinite story quoting a survey commissioned by World Concern, a Christian-based global relief and development organization.

Novinite attributed the high level of illicit trade to excise duties that double the price of cigarettes.

However, it quoted the BVT channel as having reported that Bulgaria suffered “losses” of nearly BGN500 million due to the “unpaid excise duty” on tobacco products.

The authorities have reported positive results in the fight against contraband, however. During 2013 alone, customs agents seized 44 million cigarettes and nearly 0.250 tonnes of tobacco.

Nevertheless, according to data obtained by BVT from various nongovernmental organizations, cigarette smugglers in Bulgaria make more money than drug dealers make.

Age limit checks beefed up in Davao City

| July 3, 2014

The Council of Davao City, the Philippines, is expected to add to an existing ordinance prohibiting minors from buying and selling alcoholic drinks and cigarettes a requirement that buyers present valid documents indicating their birthdates.

According to a story in the Sun Star (Davao), the council passed the proposed amendment at its first reading on Tuesday.

Based on the provisions of the draft ordinance, all business owners would be “mandated to determine the age of their would-be buyers by requiring them to present their identification documents that establish or indicate the person’s age before selling or serving to them liquors and cigarettes.”

Identification documents include a whole range of government-issued IDs, including drivers’ licenses and other documents, such as school and employee IDs.

In addition, the proposed ordinance would prohibit people from sending minors on errands to buy cigarettes and alcohol.

Imperial could play role in any merger between Reynolds and Lorillard

| July 2, 2014

Imperial Tobacco could help smooth the path toward the acquisition by Reynolds American of Lorillard, according to a story by Richard Craver for The Winston-Salem Journal.

Such an acquisition has been the subject of speculation since early March.

Imperial, which operates as Commonwealth Brands in the U.S., is said to have U.S. growth ambitions, and the current speculation is that it might buy Reynolds’ non-growth cigarette brands that include Kool, Winston, Salem, Doral, Misty and Capri.

Those brands combined hold a 7.3 percent U.S. market share, and their sale might be enough to persuade the Federal Trade Commission to approve the purchase of Lorillard.

Craver’s story is at

Graphic pack warnings of marginal worth

| July 2, 2014

The Indonesian Consumer Foundation (YLKI) has admitted that graphic pack warnings showing the dangers of tobacco use will not lead to a significant decrease in the numbers of smokers in Indonesia, according to a story in The Jakarta Post quoting the Antara news agency.

Graphic warnings became mandatory in Indonesia on June 24.

“Therefore, apart from the pictorial warnings, the government needs to increase tobacco taxes to 57 percent of retail prices, up from the current 30 percent,” Tulus Abadi of the YLKI said in Jakarta on Monday.

Tulus said tobacco tax increases were much more effective than graphic warnings at reducing smoking rates. But at present, Indonesia had a low tobacco tax, he said, and an increase was needed to make people think twice before buying tobacco products.

Tulus said the number of smokers in Indonesia had reached 75 million out of a population of 253 million. “We should keep the number from growing further and reduce it if it is possible,” he said.

And he called on the government to tighten regulations on cigarette marketing and advertising.

Tax inspection proposal a non-starter

| July 2, 2014

A group that supported the passage of the Philippines’ so-called sin tax law has said it is willing to assist the government in conducting inspections of tobacco companies’ facilities to determine their level of compliance with regulations, according to a story in The Philippine Star.

Maricar Limpin, president of the Framework Convention on Tobacco Control Alliance of the Philippines, said the alliance was supportive of a proposal that aimed to tighten the government’s watch on cigarette companies amid reports of sales of illicit tobacco products.

The idea apparently came from the tobacco industry, however, when PMFTC asked the Bureau of Internal Revenue to install third-party inspectors in all cigarette manufacturing facilities 24 hours a day, seven days a week, to ensure that manufacturers were paying all of the taxes due.

But the idea seems unlikely to get off the ground because the proposal as it currently stands would violate the tax code, according to BIR commissioner Kim Henares.

“The National Revenue Code said that it’s only the commissioner and the officers who can be involved in excise tax functions and doing functions of surveillance, so we cannot have third-party [inspectors],” she said.

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