House approves proposed cigarette tax bill on 3rd reading

MANILA, -- The House of Representatives on Tuesday approved on third and final reading the proposed bill seeking to retain the present two-tier excise tax rate on tobacco products from going to the scheduled unitary tax system by January.

House Bill 4144 was approved through nominal voting with 176 votes, 30 against and 3 abstentions.

Filed by ABS party-list Rep. Eugene Michael de Vera, the proposed measure will amend Section 145 paragraph (c) of the National Internal Revenue Code.

Under the present set-up, cigarettes with a net retail price of PHP11.50 per pack are taxed PHP25 per pack; while those priced higher than PHP11.50 will be taxed PHP29 per pack.

By Jan. 1, 2017, the system will shift to a unitary tax rate of PHP30 per pack regardless of retail price.

But under HB 4144, a pack of cigarettes with a net retail price (excluding excise and value-added tax) of PHP11.50 will be taxed at PHP32; while a pack with a net retail price of more than PHP11.50 will be taxed at PHP36.

In pushing for the bill's passage, De Vera said his proposal will protect local tobacco farmers, especially from Northern Luzon who would be displaced by the uniform excise tax rate.

"If the law is not amended, this would not prevent consumers from buying high prized cigarettes because the prize disparity between the high priced and low prized cigarettes would be minimal," De Vera has pointed out.

"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 for the lower grade tobacco types such as Grade D, E, F-1, F-2 and R," he said.

House leaders have fully supported the bill.

Quirino Rep. Dakila Carlo Cua, chairman of the House committee on ways and means, earlier said the proposed amendment to the Sin Tax Reform Law of 2012 is a balancing act of Congress as it takes into consideration the original objective of RA 10351, which proposed higher excise tax rates for tobacco products on one hand, and the livelihood of Filipino tobacco farmers on the other hand.

He said the upcoming unitary taxation is unreasonable because this is tantamount to imposing the same amount of tax in buying either an imported Mercedes-Benz or an owner-type jeep.

"Would you impose the same PHP1 million excise tax to both vehicles? Doing that would result in the displacement of the local manufacturer of owner-type jeep," Cua said.

"The situation would be similar to Filipino tobacco farmers who are about to lose their livelihood under a unitary system that will be implemented starting January next year unless the Sin Tax Law is amended," he stressed.

Cua, whose committee approved the proposed amendment last December 5, said the proposal will protect local tobacco farmers, raise more revenues for the Duterte administration and promote public health because raising tax will help lessen the number of smokers.

"Our aim is to strike a balance. We could only achieve that if we can pass a law where the livelihood of our tobacco farmers are protected, where we have reduced the prevalence of smoking and where we can increase government revenues to fund its various projects," the lawmaker said.

Meanwhile, House Majority Floor Leader and Ilocos Norte Rep. Rodolfo FariAas, underscored the importance of passing the bill as a revenue-increasing measure and also as a measure to level the playing field.

"It is plain common sense. Which will provide higher revenue: is it in unitary where all brands pay a flat rate of PHP30 per pack or is it in the two-tier system where the lower priced brand will pay PHP32 and the other one pays PHP36?" he said.

"If you are buying a more expensive brand of cigarette, the tax should be higher. And rightfully so because our taxation is based on progressive taxation, -- the higher you can afford, the higher you pay," FariAas said.

Source: Philippines News Agency