Tobacco smugglers in the Philippines have taken advantage of the pandemic to push their cheap and inferior products to consumers suffering from diminished income, the maker of Winston cigarettes said.
In a statement, John Freda, Japan Tobacco International (JTI) Philippines general manager said that smuggling syndicates are not letting up despite law enforcement agencies’ back-to-back successful raids of warehouses, factories, container trucks and residential houses.
Citing JTI intelligence data, the global tobacco company said that illegal cigarettes from Vietnam, Cambodia and other countries reach the Philippines with “ever-increasing frequency.”
Freda said the P50-million minimum cash fine and possible jail time of eight to 12 years as provided in Republic Acts 11346 and 11467 of the National Internal Revenue Code have also not deterred illicit traders from plying their trade.
“Illegal tobacco makers are directly stealing from the state. 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, farmers, and legitimate businesses,” he said.
Freda said he understands that for a country with so many islands like the Philippines, it is a huge challenge to control the problem but believes the deterrents need to be stronger.
“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.
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.
“A lucrative business indeed for anyone who has the logistics in place and can copy our products and import without paying the taxes, which is unacceptable,” he added.
According to JTI, the counterfeit goods market in ASEAN, or Association of Southeast Asian Nations, is worth over $35.9 billion, with $3.3 billion in tax revenue lost annually from smuggled cigarettes.
During a recent anti-illicit trade webinar, Ian Monteith, JTI senior global director said tobacco smugglers are taking advantage of increased unemployment and reduced disposable income.
“So, COVID has not prevented criminals from profiting. Rather, the pandemic has put pressure on consumers’ purchasing power and pushed them to turn to illegal products,” Monteith said.
Monteith disclosed that organized criminals are highly adaptable, creative, exploiting public anxiety and enriching themselves not just from tobacco, but other products such as personal protective equipment (PPE) and alcohol.
Even counterfeit COVID vaccines have been identified in Asia, he noted.
Citing a JTI report, Monteith said that across the 30 European countries, 34.2 billion cigarettes smoked last year were illegal, representing 7.8 percent of total cigarette consumption in the region.
JTI estimated that tax loss for European countries reached €8.5 billion annually or nearly P500 billion.
He pointed out that France is the European country with the highest illicit cigarette trade incidence – 32 percent at the end of 2020 while South Africa is showing that its “Prohibition” regulation against cigarettes did not work.
“Some consumers believe illegal tobacco is a victimless crime. We need to inform them of the broader social impact of buying illicit products. One important action is to educate consumers that with every illegal pack they buy they support criminal groups,” Monteith said.
“Many of these groups also traffic people and weapons, with far-reaching consequences for society,” he added.
In addition, Monteith said illegal trade impacts everyone, such as farmers, millions of retailers, and hundreds of thousands of suppliers to consumers.
“The loss of revenue to law-abiding people is significant, as is the impact on consumers lured into buying sub-standard products,: the JTI official said.
The World Bank has decried the rising trend in global illegal tobacco trade stressing that the trade is estimated at $40 billion to $50 billion yearly.
The International Chamber of Commerce, which also attended the webinar, predicts that the global counterfeit trade, including tobacco, would reach $4 trillion by 2022, primarily driven by e-commerce.