Senate to look into cigarette tax issue

AFP FILE PHOTO

With the bill aimed at keeping the two-tier excise tax system on cigarettes expected to be passed by the Lower House this week, the Senate vowed to look closely into the measure amid an ongoing review of the Sin Tax Reform Law.

Separately, Inquirer sources claimed that cigarette firm PMFTC Inc. has found an ally in the Philippine unit of global tobacco giant British American Tobacco (BAT), which was reported to be backing the Department of Finance’s statement last week seeking to fully implement Republic Act No. 10351 or the Sin Tax Reform Law, which mandates a single excise tax rate on cigarettes next year. BAT produces the Lucky Strike and Pall Mall brands.

“We would have to study the pros and cons of any proposed reform,” Senate ways and means committee chair Juan Edgardo “Sonny” Angara said in a text message last Friday when asked for his position on the looming passage of House Bill No. 4144 before Congress goes on break this week.

Angara, who also chairs the congressional oversight committee on comprehensive tax reform, earlier told the Inquirer that the scheduled review of RA 10351 was already ongoing.

Industry sources are betting that the bill authored by ABS Partylist Rep. Eugene Michael B. de Vera and reportedly pushed by homegrown low-priced cigarette manufacturer Mighty Corp. will breeze through third reading at the Lower House plenary by Wednesday.

Industry and government sources claimed the bill was railroaded—it was filed only on Oct. 19 and had undergone only two hearings at the committee level, the first one last Nov. 28. After it was approved by the House ways and means committee without amendment on Dec. 5, HB 4144 was already tackled in the plenary the next day as the bill was also adopted as the committee report submitted to the committee on rules. The bill was approved on second reading by the Lower House last week.

Health groups last week lambasted House members belonging to the so-called “Northern Luzon alliance” for railroading the bill to allegedly protect the tobacco industry’s interest.

For its part, PMFTC said in a Dec. 5 position paper addressed to House ways and means committee chair and Isabela Rep. Dakila Cua that it “supports the current tobacco excise tax structure under RA 10351.” PMFTC corporate affairs director Richard James said pursuing two new tax tiers in 2017 under HB 4144 instead of the unitary rate under RA 10351 “will drive legal cigarette industry volumes lower, thereby impacting tobacco leaf demand, negatively impacting farmers.”

“The provisions of [HB 4144] therefore go against the stated objectives, that being to protect the livelihood of tobacco farming families and communities,” James said.

Citing reports of still rampant illicit cigarette trade, James said PMFTC would not support any tweak to the Sin Tax Reform Law at this point as well as reverting to a two-tier tax system.

“We also caution against the proposals in [HB 4144] for excessive specific rate hike that will aggravate legal volume declines, harm tobacco farming communities and promote illicit trade,” the PMFTC official said.

Once a virtual monopoly when Philip Morris International Inc. merged its Philippine operations with taipan Lucio Tan’s Fortune Tobacco Corp. in 2010, PMFTC’s market share is sliding amid stiffer competition posed by Wongchuking family-owned Mighty’s cheaper products. It had been alleged that Mighty was engaged in “systematic and endemic” tax fraud to keep the prices of its products lower.

PMFTC is behind the global brands Marlboro, L&M and Philip Morris as well as homegrown Fortune, Jackpot, Champion and Hope.