The Philippines will require cigarette manufacturers wanting to set up operation in special economic zones (SEZs) to register with the bureau of internal revenue (BIR). According to the department of finance, the move comes after some companies allegedly produced unregistered cigarettes and supplied them to the domestic market while enjoying tax exemptions.
In a letter to trade secretary Ramon M. Lopez, finance secretary Carlos G. Dominguez III said, “The fact that the alleged illicit activities occurred inside the PEZA ecozone is alarming. Not only did PEZA provide tax breaks to the alleged perpetrators, the government has lost billions of pesos in income taxes, excise taxes, VAT and customs duties when these illicit goods entered the local market.”
Current Philippine Economic Zone Authority (PEZA) registration requirements do not mandate licenses or authorization from agencies like BIR for companies manufacturing regulated products such as cigarettes, medicines, oil, and alcohol. BIR is now drafting revised rules to change this loophole.
PEZA also works with BIR to integrate its systems to boost tax compliance and monitoring, especially those covering PEZA-registered manufacturers of cigarettes and tobacco products who are exporting all of their products. In addition, PEZ coordinates with the customs department to align systems and requirements when moving goods of companies in economic zones.