Senator Win Gatchalian urged the government to address illicit trade in order to generate higher revenue collection and provide some relief for its limited fiscal space.
“The government needs to come up with a novel plan to address illicit trade,” Gatchalian told the executive department’s economic team during a recent Development Budget Coordination Committee briefing in the Senate on the 2024 national budget.
In the case of the tobacco industry for instance, Euromonitor data provided by Philip Morris showed that cigarettes sold from illicit trade have been steadily increasing from 10.8% in 2018 to 16.7% in 2022. This figure is projected to further rise this year to 18.5% or equivalent to P30 billion.
Gatchalian has earlier emphasized that instead of imposing new taxes, revenue-collecting agencies such as the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) need to enhance tax administration efforts as the imposition of new taxes is only to the disadvantage of taxpayers who fulfill their obligation to the government.
“When we increase taxes, we are penalizing those who are paying taxes. We have to address illicit trade or it will be very hard to justify new taxes because some people are making P30 billion a year from illicit trade,” Gatchalian said.
“If you raise taxes, it becomes very attractive for illicit traders to go into this type of business because the reward is very high. How are we addressing illicit trade? What type of enforcement are we doing to curb illicit trade in the different products that we have imposed taxes on?” he asked the economic team.
Gatchalian emphasized that while he fully supports the goal of increasing revenue collection, the government must adopt mechanisms that would minimize, if not eradicate, illicit trade. He suggested revenue collecting agencies should tap the support of various local government units (LGUS) in undertaking a campaign against illicit trade.
“Why don’t we ask for the help of LGUs? They know each and every bodega in their localities. We can put in place a reward system if they find a bodega being used for illicit trade,” he added.