The recently passed House Bill No. 4144 is a delicate balancing act from a national policy standpoint, as it seeks to address competing concerns of government revenue, health and legitimate interests of tobacco farmers, a former Bureau of Internal Revenue commissioner said Wednesday.
Ex-BIR chief Dakila Fonacier, a notable certified public accountant, said HB 4144 attempts to alleviate the regressive nature of the unitary tax system now in place.
“Under the current unitary tax of P30.00 per pack (regardless of classification), the poor who tend to buy the cheaper brand shoulder a heavier tax burden than the rich who tend to smoke the more expensive premium brands,” Fonacier said.
He added a regressive tax takes a larger percentage of income from low-income earners than from high-income earners and is, thus, anti-poor. A regressive tax is one that is imposed in such a way that the tax rate decreases as the amount subject to taxation increases; that is how the current unitary tax is structured. HB 4144 took this issue of social equity into account.
Based on a 2015 report by the Southeast Asia Tobacco Control Alliance, a combination of ad valorem and specific tax has been the favored mode in many Southeast Asian countries, and not the unitary tax.
The bill proposes to increase the current taxes on cigarettes from P30.00 to P32.00 per pack on lower priced brands and from P30.00 to P36.00 per pack on premium brands followed by a 5-percent increase, instead of 4 percent, annually.
Fonacier said from the perspective of promoting health and discouraging consumption, the higher taxes and consequent higher prices imposed by HB 4144 had an even better chance of addressing important health concerns, while at the same time increasing government revenues.
Quirino Rep. Dakila Cua said the bill also sought to anticipate foregone revenues from the administration’s goal to reduce personal income tax rates to lighten the load of ordinary Filipinos.
During Lower House deliberations, the young lawmaker reiterated that the measure was beneficial to government on the revenue side, the public on the health side and to the tobacco-producing regions on the agricultural side.
Cua said “two-tier tax supporters believe every peso will count whether it will generate only P10 billion, P14 billion or P20 billion annually, it goes a step closer for the government to realize its promise to lower the income tax rates.”