Oldest Filipino-owned tobacco firm supports government policy

“The two-tier tax system will benefit the government in terms of revenue. Not only will it benefit local farmers, it will also continuously help the local economy. Nevertheless, we will support any decision that the executive branch will make,’’ according to retired Lt. Gen. Edilberto P. Adan, president of Mighty Corporation, the oldest Filipino-owned tobacco company.

“We have always conformed without resistance to government tobacco industry policies aimed at the welfare of the people and the State,’’ Adan said in an interview Friday.

Adan issued the remarks in relation to House Bill No. 4144, which was approved on third and final reading last Dec. 13, and which seeks to amend Section 145 (c) of the National Internal Revenue Code.

It proposes to hike existing excise tax rates next year to P32 per pack on low-priced cigarettes or those retailing at P11.50 per pack and to P36 for premium brands or those priced higher than P11.50 per pack. It also imposes an annual 5 percent increase thereafter.

Under Republic Act 10351, or the Sin Tax Reform Law, the current two-tier tax system for tobacco products will be replaced by a unitary tax rate of P30 per pack regardless of price starting in January 2017.

Based on Department of Finance (DOF) data, the local cigarette industry suffered a significant downtrend in the collection of excise tax over the past year which became one of the reasons for passing HB 4144.

Various industry analysts have pointed out that the unitary tax system was a regressive tax system because it will be indiscriminately applied to all consumers irrespective of their buying power.

The two-tier approach, on the other hand, supports the constitutional directive for Congress to adapt a progressive taxation system that considers a taxpayer’s capacity to pay.

They also argued that HB 4144 ultimately strikes a balance to address both the decline in sin tax collection and the need to curb smoking prevalence most especially in the youth and poor sectors since it raises cigarette prices altogether.