MANILA, (PNA) — The Federation of Philippine Industries (FPI) issued its concern regarding the new modus operandi on cigarette smuggling in the country.
A small player in the cigarette industry which used to corner a miniscule portion of the market has made a meteoric leap and now has 18.7 percent share of market. Interestingly, this company sells its products to retailers at P16.00 per pack.
Simple arithmetic will show that after paying excise tax of P12 and the 12 percent VAT, the company is left with P2.30 to cover direct material cost, factory overhead and operating margins. Indeed, it is impossible to manufacture low-priced cigarettes at that amount especially for a small scale manufacturer with lower economies of scale.
Hence, this unfair practice can undercut the competition thru low prices which is made possible through illicit trade practices.
Independent market research study shows that the company’s volume in the trade is much higher compared to the actual withdrawals it reports to the Bureau of Internal Revenue.
Moreover, there is possible under-payment of customs duties and taxes, under-valuation of raw materials, and diversion of raw materials imported under warehousing entries which were used for domestic production without payment of duties and taxes.
If proven true, this practically creates an unlevel playing field.
Worse, it is also inimical to the stability of the country in general considering that it is cheating on the excise tax which is due to the government to fund its various sensitive programs.