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THERE
are parallel efforts to reform the excise tax on
cigarettes and replace the current four-tier system with
a single excise rate.
The
proposal, authored by Rep. Danilo Suarez, seeks to
impose a uniform rate of P14 per pack regardless of
brand and origin of production.
Suarez’s
House Bill 3759 will increase the tax burden for
cigarette manufacturers when it passes, generating
additional revenues of P64 billion for the government.
Like the
earlier proposal to overhaul the excise system on
alcohol products, the cigarette excise reform seeks to
abolish the “legislative protection” the cigarette
industry has enjoyed for many years.
“The
bill seeks to amend the excise structure of cigarettes
packed by machines by imposing a uniform excise-tax rate
of P14 per pack on all brands of locally manufactured or
imported cigarettes sold in the domestic market,” Suarez
said.
According to him, the three-year old Republic Act 9334
failed to reclassify and rerate the various brands as
these remain categorized in their 1996 retail prices
yet, no matter that current retail prices are way above
threshold.
“And
because the increase in tax rates were prescribed up to
2011 only, the problem of the specific tax being
nonresponsive to changes in the price of cigarettes
could arise again,” he said.
Suarez
proposed the reform measure will address the
inflexibility of the current system by allowing for
annual adjustment of the excise rate, which is linked to
the consumer price index starting on the third year of
its implementation.
As the
rate is applied uniformly across the brands, the system
is simpler to administer and more efficient in
collection terms, Suarez added.
One
foreign brand, Pall Mall, previously had to withdraw a
planned capacity expansion for $20 million as its
product was moved up the classification scale and made
to pay the highest possible excise of P26.06 a pack.
Pall
Mall, manufactured locally by La Suerte Cigar and
Cigarette Factory for its owners, the British American
Tobacco, retailed for only P14 a pack.
The
recent imposition of the excise effectively priced the
brand out of the market, making inevitable its
discontinuance as a viable product. |
