Tobacco firm Japan Tobacco International (JTI) Philippines is calling for harsher penalties on illegal tobacco trade in the country, as criminals continue to operate amid the ongoing health crisis.
JTI Philippines has released its statement over the weekend after a report it published warned of a “gathering storm” in the black market.
JTI intelligence found that the global public health crisis and financial downturn has created the conditions for a ‘perfect storm’ where organized criminal groups will further exploit public demand for cheap goods, and capitalize on dwindling buying power in the impending global recession, particularly in countries with high tax regimes.
The company said that the report is based on 63 field studies, conducted across 50 countries “including Russia, Canada, Malaysia, and the Philippines where tobacco smugglers currently have a strong presence.”
“I believe the problem of illegal trade in tobacco is a growing one and requires more attention,” John Freda, JTI Philippines general manager, said.
“I understand that for a country with so many islands like the Philippines, it is a huge challenge to control the problem, but the deterrents need to be stronger,” he added.
“In my previous role, I had seen situations where if the issue is not mitigated early, things can go badly wrong like Malaysia where over 60 percent of the cigarette market is illegal,” he also said.
Freda said that while the government is striving hard to stamp out the illicit tobacco trade, the current situation still requires absolute vigilance.
“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. 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.
Freda said that aside from the lost tax revenue, counterfeit and contraband cigarettes are not subject to any quality controls.
“If you see the factories these illicit makers are using, you will be surprised how they treat their products and where they store them. We have done tests on these products and they have been found to contain animal feces, plastic materials, dirt and high levels of lead,” Freda said.
“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 and legitimate businesses,” he added.