Lawmakers rush to defend fresh two-tier tax on cigarettes
A bill filed before the House of Representatives is seeking to keep the two-tiered tax system for tobacco, a move said to be supported by a domestic cigarette manufacturer.
The House Ways and Means Committee has included on its agenda today House Bill No. 4144, which was filed by ABS Partylist Rep. Eugene Michael B. de Vera. The bill seeks to further amend the Sin Tax Reform Law, specifically tobacco taxation in 2017.
Under the current Sin Tax Reform Law, tobacco products will be slapped a unitary rate of P30 per pack starting next year. This follows a two-tiered system implemented this year whereby cigarettes priced at P11.50 per pack were being taxed P25 while those priced higher were slapped P29 per pack.
The bill agreed that a unitary tax in 2017 would level the playing field in the tobacco industry by vigorously promoting competition.
However, “concerns have been raised that when the unitary excise tax is imposed next year, this would displace more local tobacco farmers especially those situated in Northern Luzon.”
It added consumers would subsequently choose higher priced cigarettes, such as imported ones, considering that the price disparity in a uniform excise tax rate regime would not be that huge.
“Imbued by competition, cigarette manufacturers may also opt to import tobacco leaves instead of purchasing the locally grown tobacco leaves considering that tobacco leaves grown abroad are of better quality, thus diminishing the demand for tobacco leaves produced domestically, especially the lower grade tobacco types,” HB 4144 read.
HB 4144 pitched a two-tiered system should best be maintained. It proposed slapping an excise tax rate of P32 per pack on cigarette packs priced P11.50 and below, and P36 for those priced higher.
The bill said such move was expected to further increase incremental revenues from the Sin Tax Reform Law implementation.
Sources said the bill was being backed by homegrown Mighty Corp., while other players led by multinational firms were seen opposing HB 4144.
For the part of the Department of Finance, Undersecretary Karl Kendrick T. Chua said last Friday that “our position now is that the Sin Tax Reform Law implementation is ongoing so we want to do the review before we decide” if the proposal is feasible or not.
Chua said the mandated review of law was also ongoing.
