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The Bureau of Internal Revenue (BIR) is looking into reports of under-statement by cigarette manufacturer Mighty Corp., a Filipino company which vends the one-peso-per stick cigarette brand of the same name. A representative of BIR said that the BIR is investigating the problem following complaints from other tobacco industry makers. The BIR has sent groups to Mighty’s warehouses to check on the volume and statements made by the company. On the other hand, cigarettes sold by PMFTC and Japan Tobacco Inc. usually sell at P5 per stick. Representatives of Mighty Corp. could not rapidly be reached for comment.Putting into practice of Republic Act 10351 or the Sin Tax Law has permitted the re-entry of makers such as British American Tobacco and Mighty Corp. Cigarette use in the Philippines has shifted to the cheap P1 per stick brands, an unexpected outcome of the putting into practice of the sin tax law. According to tobacco industry estimates, 25%t of premium and average smokers have switched to cheap ciharette brands since the law came into action in 2012. Makers of cheap brands may be resorting to under-declaration given the lower prices. “If the assumption is right, government sustains an additional loss of P600-million in excise taxes for every one billion sticks of under-declared cigarettes.” Moreover, tobacco industry makers said the law may also be failing to discourage smoking, especially among teens who turn to cheaper cigarette brands. Industry estimates demonstrate that the average daily use grew to 14.13 sticks per smoker in the second quarter of the year from 13.53 sticks per smoker in the first quarter. The increase is ironic because government has packaged the new sin tax law as a smoking reduction measure. The Sin Taw Law, adopted in 2012, increased taxes on alcohol and cigarettes. For 2013, the government expects to increase an estimated P51.6-billion excise taxes from cigarette products; P6.2-billion from VAT, and P6.7-billion from corporate income tax for a total of P64.5-billion from the tobacco industry alone.
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