Metro Manila (CNN Philippines) — The House of Representatives passed a measure retaining the two-tier tax system for cigarettes on 3rd reading on Tuesday.
The Department of Finance is alarmed by the speedy passage of House Bill 4144, which the Lower House passed in just two weeks.
Under the bill, cigarette packs with net retail price of ₱11.50 should be taxed ₱32 per pack. Those with net retail price of more than ₱11.50 should be taxed ₱36.
The original law, Republic Act 10351 or the Sin Tax Reform Law of 2012, provides that by next year, cigarettes would have only one tax rate of ₱30 per pack.
Read: Sin tax collection drops in March
The bill is opposed by global tobacco giants, like British American Tobacco and Fortune Philip Morris, but supported by local cigarette maker Mighty Corp.
“The establishment under HB No. 4144 of two new tax tiers above the 2017 unitary rate under the current law will drive legal cigarette industry volume lower, thereby impacting tobacco leaf demand, negatively impacting farmers,” Philip Morris Fortune Tobacco Corporation said.
“The newly proposed bill has two main flaws, the level of net retail price and no mechanism for the net retail price to increase in future. Therefore, we should avoid rushing a new law into effect without a full study of both intended and unintended consequences,” added James Michael Lafferty, general manager of British American Tobacco.
But for Mighty Corp. President Edilberto Adan, the two-tier tax system will boost government revenue.
“Not only will it benefit local farmers, it will also continue to help the economy,” he added.
Adan however said the company would support any government decision on the issue.
Researchers and industry experts say the excise tax should be increased further to cut cigarette consumption.
They are asking for a higher sin tax of at least ₱40 to ₱60 pesos per pack.
They say this could force down the number of smokers in the country by 1.23 million to 2.46 million.
Madeline Aloria, economic research associate of Action for Economic Reforms, said, “Itong mga nag propose ng HB 4144 they should prove na may mali sa sin tax law at unitary bago sila mag propose ng 32-36 na dual tax tier.”
[Translation: Those who proposed HB 4144 should prove that there is something wrong with the sin tax law and the unitary before they propose a 32-36 dual tax tier.]
