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Tobacco farmers support two-tier cigarette tax

The National Federation of Farmers Association and Cooperatives, the biggest group officially recognized by the National Tobacco Administration, threw their support for the passage of House Bill No. 4144 or the proposed two-tier tax classification system for cigarettes.

NAFTAC Pangasinan chapter president Saturnino Distor and La Union chapter president Franklin Dumpit dismissed allegations that House Bill 4144, authored by party-list Rep. Michael de Vera, would be detrimental to local tobacco farmers.

HB 4144 seeks to amend provision of Republic Act 10351 that mandates a unitary tax rate for cigarettes starting Jan 1, 2017 to replace the current two-tier classification.

“A unitary tax rate will benefit only the premium cigarette brands. They will just import higher quality tobacco leaves. This means we, the local farmers, who also produce low-grade tobacco will suffer the most,” Distor said.

Tobaccos have the low and high grade yields.  About 65 percent to 70 percent are high grade and 30 percent to 35 percent  are low grade and reject tobacco, he said. 

“Farmers often sourced their farming inputs and capital by borrowing from different sources. In harvest times, tobacco farmers would only be able to pay their borrowed farming capital by using almost all proceeds from harvested high grade tobacco,” Distor said.

“Once the unitary tax system takes effect, this would mean that the 30 percent to 35 percent of the sale from the low grade tobacco harvest intended to be the farmer’s profit will be lost,” Distor said.

RA 10351 or the Sin Tax Reform law, which was passed in 2012, restricted the country’s old excise tax system and introduces a two-tier system that classified cigarettes into low priced and premium, replacing the old four-tier system.

The current tax rate is P25 per pack for low prices brands and P29 per pack for premium brands. RA 10351 mandates a unitary rate of P30 per pack for both low-priced and premium brands starting January next year, increasing by 4 percent every year.

HB 4144 seeks to reinstate the two-tier system but with a tax rate of P32 per pack for low-priced brands and P36 per pack for premium brands, with an annual increase of five percent every year.

“The government should listen to our concerns. We raised them during the hearings on HB 4144. We actively participated in the hearings and we told Congress that a unitary tax rate would directly threaten the livelihood of our tobacco farmers,” Dumpit said.

“Our fear is that if a unitary tax rate is imposed, there will be no purchase of low-grade tobacco. Tobacco farmers will no longer have profit and no profit means death of our livelihood,” Dumpit said.

He said it was unfair for critics of the proposed bill to say the measure would be detrimental to tobacco farmers.

“Claims that the measure would hurt local tobacco farmers are not true. HB 4144 will keep providing tobacco farmers with livelihood opportunities. It is the impending unitary tax rate that will be detrimental to tobacco farmers. In the end, we will be the ones on the losing end,” Distor said.

He said arguments against HB 4144 were just “muddling the real issue, which is the survival of the country’s tobacco industry.”

Topics: Tobacco farmers , National Federation of Farmers Association and Cooperatives , cigarette tax , House Bill No. 4144 , two-tier tax classification system for cigarettes
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