HB 4144 a delicate ‘balancing’ act on competing interests

From a national policy standpoint, the recently passed House Bill No. 4144 is a delicate balancing act as it seeks to address competing concerns of government revenue, health and legitimate interests of tobacco farmers according to a former Bureau of Internal Revenue (BIR) commissioner.

Ex-BIR chief Dakila Fonacier, a certified public accountant, said HB 4144 attempts to alleviate the regressive nature of the unitary tax system now in place.

"Under the current unitary tax of R30.00 per pack (regardless of classification) the poor who tend to buy the cheaper brand shoulder a heavier tax burden than the rich who tend to smoke the more expensive premium brands," Fonacier said.

He added that a regressive tax takes a larger percentage of income from low-income earners than from high-income earners and thus, in that sense, is anti-poor. A regressive tax is one that is imposed in such a way that the tax rate decreases as the amount subject to taxation increases; that is how the current unitary tax is structured. HB 4144 takes this issue of social equity into account.

Based on a 2015 report by SEATCA (Southeast Asia Tobacco Control Alliance), a combination of ad valorem and specific tax has been the favored mode in many Southeast Asian countries and not the unitary tax.

The bill proposes to increase the current taxes on cigarettes from R 30.00 to R32.00 per pack on lower priced brands and from R30.00 to R36.00 per pack on premium brands followed by a 5% instead of 4% annually.

Fonacier contended from the perspective of promoting health and discouraging consumption, the higher taxes and consequent higher prices imposed by HB 4144 have an even better chance of addressing important health concerns while at the same time increasing government revenues.