Proposed two-tier tax on cigarettes hurdles House committee

A MEASURE seeking to impose a twotier tax rate on cigarettes depending on the per-pack net retail price has been approved at the House committee level despite the opposition of the Finance department.

The House committee on ways and means, chaired by Quirino Rep. Dakila Carlo E. Cua, approved yesterday House Bill No. 4144 that seeks to amend the Section 145 (c) of the National Internal Revenue Code.

Deputy Speaker Fredenil H. Castro moved to approve the measure, which did not meet any objections from the members of the committee.

Under the proposed measure, a pack of cigarette with a net retail price (excluding the excise tax and the value-added tax) of P11.50 be taxed at P32.00, while a pack with a net retail price of more than P11.50 will be taxed at P36.00.

Republic Act 10351, or the Sin Tax Reform Law of 2012, which took effect in 2013, provides that for 2017, cigarettes, regardless of net retail price, should have a unitary tax rate of P30.00 per pack.

The author of the measure, ABS party-list Eugene Michael B. De Vera, said in the explanatory note of the bill with the unitary tax rate that consumers will come to prefer “high-priced cigarettes because the price disparity between the high priced and low priced cigarettes would be minimal.”

Mr. De Vera also said that cigarette manufacturers might opt to import tobacco leaves instead of purchasing locally produced tobacco.

However, the Finance department, in a position paper submitted to the House ways and means committee, said that it “strongly” opposes the proposed law, saying that the “sin” tax law is a health measure in principle.

“The Sin Tax Reform Law or RA 10351 is a health measure with a primary goal of curbing tobacco use in particular among the young and the poor because of its known detrimental effects to health,” the Finance department said.

The DoF also noted that a unitary tax rate “is simpler and easier to administer.”

The department added that the two-tier structure will only promote “downshifting” to low-tax, low-priced cigarettes and does not fully discourage tobacco consumption.

It also noted that in the long run, the proposed two-tiered structure “leads to widening of price dispersion” which is not good for both fiscal and public health.

Meanwhile, the National Tobacco Administration (NTA), a government body designed to handle the Philippine tobacco industry, “interposes no objection” to the two-tier structure.

The NTA said in its own position paper that the tobacco industry faced challenges in recent years primarily due to the global campaign against smoking and the passage of the “sin” tax law.

“The increase in the prices of cigarettes compelled the cigarette manufacturers to upgrade their products to match the increasing prices,” said the NTA.

After securing committee approval, the measure will now be forwarded to the plenary for debate, interpellation and second-reading approval. —