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Tobacco tax bill sparks cigarette war

A NEW bill has triggered a war among cigarette companies while government tax collection agencies have clashed with Congress after lawmakers pushed for the amendment of the Sin Tax Law that has yet to mature next year.

In the middle of the clash are the tobacco farmers who complain that they were not consulted on the plan to “prematurely” amend the bill and warned against “railroading” of its passage following a November 28 hearing where farmers were not invited by the House committee on ways and means led by Quirino Rep. Dakila Carlo Cua.

“This bill is being rammed through Congress and we have never been asked for our opinion,” said Saturnino Distor, an official of the PhilTobacco Growers Association. 

“The whole process is a sham and we call on the leadership of the House to seek proper consultation and a complete impact assessment before proceeding with it.” 

HIGH VALUE CROP. Farmers gather tobacco leaves in La Union, one of the tobacco-producing provinces  which  account for  the lion’s share of  annual revenue from excise tax collection. David Chan
Distor said the PTGA and the Philippine Aromatic Tobacco Development Association representing 50,000 tobacco farmers across the Philippines had expressed their opposition to House Bill 4144, which seeks to introduce a big increase in the tobacco Sin Tax.

ABS Rep. Eugene Michael de Vera, principal author of House Bill 4144, wants Congress to discard the unitary tax imposing a 30-peso excise tax on all brands slated for January 2017 and opts for higher tax impositions.

De Vera said the bill aims to discourage smoking and raise revenues.

He is pushing for a two-tier tax that increases the tax on cheaper brands to P32 a pack and P36 for high-end brands.

The proposal also includes an annual increase of five percent on these rates as against the current Sin Tax on tobacco (Republic Act 10351) that sees a unitary rate of P30 per pack in 2017, with an annual four percent adjustment thereafter. 

The present law imposes a tax of P25 per pack on cheaper brands with a net retail price of P11.50 and a tax of P29 per pack for brands that sell at more than P11.50 a pack.

De Vera seems to have the backing of the House leadership as sources told Manila Standard that House Majority Leader Rodolfo Fariñas, before the hearing, summoned the panel members to convince them to approve the new bill.

Mighty, a Chinese-Filipino owned cigarette company that sells cheaper brands, was pushing for the passage of the De Vera bill.

Philip Morris, a multinational company that sells the high-end brands worldwide, is opposing it and backs the existing Sin Tax Law that will implement the unitary tax next year.

Mighty hired Philip Sigfried Fortun as lawyer and former National Economic Development Authority director general Romulo Neri as spokesman.

During the hearing, Neri said the bill would address an “inequitable situation” as cigarettes for the rich would be taxed higher.

The House leadership did not only find resistance from the farmers but also from all government agencies: the Department of Finance, Department of Health, Bureau of Internal Revenue, National Tax Research Center, and advocacy groups Action for Smoking and Health, Action for Economic Reform and Philippine College of Physicians.

The National Tobacco Administration has no objection to the bill.

“Why are they proposing to hit tobacco again even before another big 20-percent excise tax increase in January next year, and we don’t even know what the impact of that will be,” Distor said. 

“Tobacco farmers are struggling with the fall in demand for tobacco because of the huge 340-percent excise tax increases introduced in 2013, with annual compound increases of 20 percent or more ever since worsening the situation,” he said.

Distor said tobacco excise taxes contributed around P100 billion in 2015, up from P32 billion in 2012, and were now more than two-thirds of the sin tax take.

“We are giving more than our fair share of the contribution,” Distor said. 

Finance opposed a two-tier excise tax structure on cigarettes saying it will encourage “downshifting.”

“A unitary structure is simple to administer, tax differentiation is not germane to sin taxation, the harmful effects of high priced and low priced cigarettes on poor is the same,” Finance  Undersecretary Bayani Agabin said.

Topics: Tobacco tax bill , cigarette companies , tax collection agencies , Congress , Sin Tax Law , House Bill 4144
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