The local unit of international cigarette giant Japan Tobacco International (JTI) is urging the government to address the growing illicit trading activities in the country amid the coronavirus crisis.
In a statement, John Freda, JTI Philippines general manager, said over the weekend that unscrupulous cigarette traders have began exploiting the “perfect storm” bought about by the pandemic.
Citing a report entitled “The Gathering Storm” commissioned by JTI, the Geneva-based cigarette and vaping company claimed that the global public health crisis and financial downturn created the conditions for a “perfect storm” where organized criminal groups will further exploit.
Based on the JTI report, covering 50 countries including the Philippines, illicit cigarette traders are now capitalizing on dwindling buying power of consumers, particularly in countries with high tax regimes.
The JTI report, independently verified by Intrinsic Insight Ltd, also noted “a strong presence” of tobacco smugglers in the Philippines.
“I believe the problem of illegal trade in tobacco is a growing one and requires more attention.” Freda said. “While the government is striving hard to stamp out the illicit tobacco trade, the current situation still requires absolute vigilance.”
Freda warned the situation of cigarette smuggling in the country could “go badly wrong,” like in Malaysia where illicit tobacco products account for over 60 percent of the market.
“The illegal tobacco trade is a feast for criminals who make huge profits often with very low risk of being caught and insignificant penalties,” Freda said.
He noted that the government needs stronger deterrents as the Philippines’ archipelagic nature presents “a huge challenge” for law enforcement.
“Stiffer sanctions are required - we need to see people being caught and brought to justice in a way that deters others from being part of this criminal endeavor,” Freda said.
Illicit cigarette trade has affected the government’s tax haul and hurt legitimate tobacco manufacturers, the JTI official said.
“As legitimate businesses, we are a very effective tax collector and clearly we can’t do that if there is an illicit problem. Illegal trade cheats everyone: governments, consumers and legitimate businesses,” Freda said.
“Aside from the lost tax revenue, counterfeit and contraband cigarettes are not subject to any quality controls,” he added.
According to the World Bank, the global trade in illegal tobacco is already worth an estimated $40 billion to $50 billion each year.