The Department of Finance is pushing for a “better version of a sin tax” law that will remove current rules that bar competition and hinder the inflow of revenue to state coffers.
The existing tax regime has “created practically a monopoly where one company has cornered more than 90 percent of the market,” Finance Secretary Cesar V. Purisima said in a briefing.
Purisima was alluding to the PMFTC combine, which was formed in February 2010 through an agreement between Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco Corp. to meld their business operations and selected assets.
According to PMFTC’s website, it is “the market leader in the local cigarette industry with [more than] 90 percent share of the adult cigarette market,” manufacturing and distributing various brands across the price spectrum.
“This situation was caused by the existence of this Annex D [of the Tax Code] that classifies brands into old and new,” Purisima said. “Taxation varies substantially for new brand compared to old ones.”
He was referring to a document accompanying Republic Act No. 8240, which amended the Tax Code, concerning levies on products like liquor and spirits as well as tobacco. Annex D is based on a survey of net retail prices of cigarette packs that was conducted before the amendment took effect in 1997.
The finance chief added that retail prices of cigarettes being “pegged at 1996 or 1997 prices (is) clearly not conducive to increasing prices (and tax collection).”