Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Eighteenth Congress
First Regular Session

6507
HOUSE BILL NO.

Introduced by Hon. Deogracias Victor “DV” B. Sayellano

AN ACT
INSTITUTIONALIZING THE TASK FORCE AGAINST ILLICIT TRADE OF
TOBACCO PRODUCTS, APPROPRIATING FUNDS THEREFOR, AMENDING FOR
THE PURPOSE SECTION 288-A OF REPUBLIC ACT NO. 8424, AS AMENDED,
OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997,
AND FOR OTHER PURPOSES

EXPLANATORY NOTE

In 2017, the Department of Finance (DOF) made history by collecting from cigarette
manufacturer Mighty Corporation a total of P30 billion, the biggest sum on record raised by the
government from a tax settlement. This was the result of a heightened joint campaign by the
Bureaus of Internal Revenue (BIR) and of Customs (BOC) against tax cheats.

However, it is observed, that from 2017, the illicit trade landscape has evolved. Rather
than illicit products mainly coming from one source, there are now several small to medium-
sized illicit factories operating in various parts of the Philippines. During raids conducted by
both the Bureau of Internal Revenue and Bureau of Customs, it has been observed that several of
these smaller factories are principally operated by foreign nationals. Based on available data
shared with the House Committee on Ways and Means, the number of illegal factories
manufacturing cigarettes are increasing. From two (2) illegal factories raided in 2016 and 2017,
there were seven (7) factories raided in 2018 and an alarming twelve (12) factories in 2019.
Based on conservative estimates, one line of cigarette maker and packer can produce more than
3.6 million sticks of cigarettes per day or about 43.68 million packs per year, At the current
excise tax rate of P45 per pack, the government is losing around P1.965 billion per line one line
of cigarette maker and packer.

Following the recent increases in the excise taxes on cigarettes, DOF Secretary Carlos G.
Dominguez ordered the BIR and the BOC to intensify its efforts against illicit trade of cigarettes
given that higher excise tax rates plausibly leads to increased instances of smuggling. While the


efforts and accomplishments of the current Strike Force of the BIR is to be lauded, there is a
need to strengthen and consolidate the government's efforts against illicit trade.

In view of the foregoing, the passage of bill is earnestly sought.

HON. DEOGRACIAS VI “DV” B. SAVELLANO

W499 VAIL OTS


Republic of the Philippines
House of Representatives
Quezon City, Metro Manila

Eighteenth Congress
First Regular Session

HOUSE BILL noo 507

Introduced by Honorable Deogracias Victor “DV” B. Savellano

AN ACT
INSTITUTIONALIZING THE TASK FORCE AGAINST ILLICIT TRADE OF TOBACCO
PRODUCTS, APPROPRIATING FUNDS THEREFOR, AMENDING FOR THE PURPOSE
SECTION 288-A OF REPUBLIC ACT NO. 8424, AS AMENDED, OTHERWISE KNOWN AS
THE NATIONAL INTERNAL REVENUE CODE OF 1997, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Section 288-A of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

SEC. 288-A. Disposition of Revenues from Excise Tax on Sweetened
Beverages, Alcohol, Tobacco Products, Heated Tobacco Products, and Vapor
Products. -

(A)Revenues from Excise Tax on Sweetened Beverages from Republic Act
No. 10963. - xxx

(B) xxx

(C)Revenues from Excise Tax on Tobacco Products. — The provision of
existing laws to the contrary notwithstanding, the total revenues collected
from the excise tax on tobacco products shall be distributed in the following
manner:

(1) x5

(2) xxx;

(3) TO FURTHER CURTAIL THE PROLIFERATION OF ILLICIT
TRADE OF TOBACCO PRODUCTS, THE BUREAU OF

INTERNAL REVENUE SHALL INSTITUTIONALIZE THE
STRIKE TEAM ON ILLICIT TRADE OF TOBACCO PRODUCTS.


THE STRIKE TEAM SHALL ACT AS THE LEAD AND POINT
COORDINATOR OF ALL OF THE BUREAU’S ENFORCEMENT
ACTIVITIES AGAINST LOCALLY MANUFACTURED
COUNTERFEIT TOBACCO PRODUCTS.

AN AMOUNT OF NOT LESS THAN TWO HUNDRED MILLION
PESOS (P200,0000,000.00) ANNUALLY SHALL BE EARMARKED
FOR THE TASK FORCE. THE STRIKE TEAM SHALL BE
COMPOSED OF BUREAU OFFICIALS AND EMPLOYEES
HOLDING PERMANENT POSITIONS. THE FUNDS ALLOTTED
SHALL BE USED PRIMARILY ON THE FOLLOWING:

a) SALARIES OR ADDITIONAL PAY FOR MEMBERS OF
ENFORCEMENT TEAMS;

b) PURCHASE OF PROTECTIVE GEAR DURING
ENFORCEMENT ACTIONS;

c) TRANSPORT, HAULING, WAREHOUSE AND

DESTRUCTION EXPENSES OF SEIZED ILLICIT FINISHED

GOODS, RAW MATERIALS AND MACHINES, INCLUDING

THE HIRING OF THIRD PARTY SECURITY SERVICE

PROVIDERS FOR THE STORAGE FACILITIES;

FUNDS FOR INTELLIGENCE GATHERING AND

SURVEILLANCE OPERATIONS;

e) VEHICLES, FUEL AND MEAL ALLOWANCES DURING
ENFORCEMENT ACTIONS;

f) TRAINING FUNDS FOR INTELLIGENCE GATHERING AND
SURVEILLANCE OPERATIONS.

d)

THE TASK FORCE SHALL SUBMIT AN ANNUAL REPORT TO
‘THE COMMISSIONER OF INTERNAL REVENUE AS WELL AS
TO THE SECRETARY OF FINANCE. SUCH REPORT SHALL
ALSO BE SUBMITTED TO THE JOINT CONGRESSIONAL
OVERSIGHT COMMITTEE ON ILLICIT TRADE ON
EXCISABLE PRODUCTS CREATED UNDER SECTION 290-A OF
THE NIRC, AS AMENDED.

(D) xxx
(E) xxx

XXX.
SECTION 2. Repealing Clause. All laws, executive orders, presidential decrees, rules

and regulations and other issuances contrary to or inconsistent with this Act shall be deemed
repealed or modified accordingly.


SECTION 3. Separability Clause. — If any provision of this Act is subsequently
declared invalid or unconstitutional, the other provisions hereof which are not affected thereby
shall remain in full force and effect.

SECTION 4. Effectivity. This Act shall take effect fifteen (15) days from the date of
publication in the Official Gazette or in a newspaper of general circulation.

Approved,