Brazen theft

The magnitude of the losses from tax evasion is nowhere more glaring than in the cigarette industry where the use of fake tax stamps alone has deprived the government of as much as P10 billion in foregone revenues a year.

The brazenness of the cheating was evident from the results of the joint operations of the Bureaus of Customs and of Internal Revenue last week: 62,000 master cases of cigarettes worth P1.96 billion confiscated in San Simon, Pampanga, and 11,000 master cases valued at P215 million seized in General

Santos City. In all, the 73,244 master cases contained 36.62 million packs which, at an excise tax of P30 a pack, will translate to P1.1 billion in lost income for the government.

Revenue authorities are now considering slapping a tax evasion case against Mighty Corp., the homegrown manufacturer of the confiscated cigarettes. Customs will also look into the possibility that the impounded products might have been manufactured using smuggled raw materials.

While the government reiterated that it was not singling out any company in its investigation on the proliferation of fake tax stamps, Mighty was suspected of using fake tax stamps even during the Aquino administration, which the company denied. However, last week’s incidents may have given the government enough evidence against Mighty.

Customs officials noted that the five 3,000-square-meter warehouses stuffed with Mighty products in the San Simon Industrial Park were found to be subleased to the cigarette manufacturer, hence “we can presume they (Mighty) have knowledge of this.”

Any criminal case, however, has to be filed by the BIR. If found guilty, the people involved face imprisonment for a minimum of six years. The government has assured Mighty of due process as it promised to subject the confiscated items to further investigation and validate the names and personalities involved in the warehouses where the products had been stored.

Prior to last week, there was the case of the seized cigarettes in a Cebu mall, again involving Mighty. The BIR conducted an inventory at the Metro Mandaue Mall in Mandaue City on Feb. 7-8. BIR personnel found 33 master cases of Marlboro cigarettes, 11 master cases of Fortune cigarettes and seven master cases of Hope cigarettes—all products of PMFTC Inc.; 19 master cases of Jackpot and 164 master cases of Mighty products (on top of 902 loose packs of Mighty cigarettes).

After checking the authenticity of the tax stamps, it was discovered that all cigarette products bearing the Mighty brand of cigarettes registered a red-colored reading, which indicated, according to a BIR report, that fake or counterfeit stamps had been used on the products. The other brands had legitimate stamps. At an excise tax of P30 a pack, foregone revenues from the confiscated products would reach P2.49 million.

The operator of the mall pointed to the Bulacan-based manufacturer as the direct source of the products in question. Metro Retail Stores Group Inc. president and CEO Arthur Emmanuel confirmed in a Feb. 15 letter to Internal Revenue Commissioner Caesar R. Dulay “that the products of Mighty, which were seized by your [BIR] examiners, were purchased directly by our company from Mighty Corp., as borne by our records.” By way of proof, Emmanuel indicated Mighty’s tax identification number in his letter to Dulay.

The BIR is hoping that things will change for the better starting in July, with the introduction of new tax stamps that are reportedly more difficult to counterfeit as these will have better security features. In the meantime, however, there should be no letup in the prosecution of those involved in last week’s incidents in General Santos City and San Simon, Pampanga, involving more than P1 billion in lost revenues for the government. The previous

administration seemed to have looked the other way and allowed the rampant use of fake tax stamps on cigarettes. It’s time this shameless theft of public funds was ended.