The approval of House Bill 4144 which aims to maintain a unitary tax rate for cigarette packs may violate the recently-enacted anti-trust law, an industry leader said over the weekend.
“Imposing two tax rates on cigarettes is creating market segmentation that favors manufacturers that sell cheaper brands and are subject to lower taxes. It’s against the competition law,” Federation of Philippine Industries chair Jesus Arranza said in a statement.
“If you are going to have a bigger market share, it should stem from fair competition in the market and not because the tax system is favoring you,” he said.
Cigarettes under Republic Act 10351 passed in December 2012 are subject to a single tax rate of P30 per pack regardless of price, brand, and origin (whether imported or locally-made) beginning January 1 this year. The law will replace that two-tier system that has been in place since January 2013
The Lower House, however, swiftly approved last month House Bill 4144 that will retain the two-tier tax system, although the rates will be higher at P32 per pack for cigarettes with a net selling price of P11.50 per pack, and P36 for those priced above P11.50.
The previous rates imposed last year were P25 for those priced at P11.50 a pack, and P29 for those with a net selling price of more than P11.50.
“Once HB 4144 is passed in the Senate and becomes a law, I will file a case because that’s anti-competitive behavior,” Arranza said.
RA 10667, or the Philippine Competition Act, passed in July 2015 created the Philippine Competition Commission.
A quasi-judicial body, the PCC is mandated to protect consumer welfare by promoting a level playing field among businesses. The PCC is empowered to conduct inquiries, investigate and penalize all forms of anti-competitive agreements, abuse of dominant market position and anti-competitive mergers and acquisitions.
Arranza noted that HB 4144 came at a time when the objectives of RA 10351 were being achieved. The law aims to promote health by discouraging smoking and funding the government’s universal health care program, as well as finance livelihood and other projects that will benefit tobacco farmers.
“Based on reports from the Bureau of Internal Revenue and the Department of Health, the government is achieving the objectives of RA 10351. The law will even be more effective with a single tax rate as tax collections will go up because there will be less room to avoid paying taxes, and at the same time, there is a higher probability that the number of smokers will go down further,” Arranza said.
“It is ironic that the same Congress that passed RA 10351 are the same ones who are pushing for the retention of a two-tier tax system,” he said.
Arranza said if lawmakers were serious in helping tobacco farmers, they should pass laws that would help elevate the quality of their produce so that they could compete even in the world market.