DoF vows to oppose two-tier cigarette tax

29 January 2017:

The Finance Department said it will oppose a bill reverting to the two-tier tax system on cigarette packs in the country once it reaches deliberations in the Senate.

Finance Secretary Carlos Dominguez III reiterated the department’s opposition to House Bill 4144 filed by ABS Rep. Eugene Devera, which aims to switch back to a two-tier system classifying cigarette packs as “low-tier” and “high-tier.”

“The way that bill moved was with more than lightning speed. I guess it was a priority of people in Congress. However, it hasn’t started in Senate yet so it’s not really that fast,” Dominguez said during a forum last week. 

“We’re against it, and we know that we have three other places where we can get our own ideas… the Senate, the (bicameral conference) and the presidency, there’s still time to modify approach,” he said.

Dominguez earlier said “it would be difficult” to shift from two-tier to unitary then to the two-tier tax system again. 

Republic Act No. 10351, or the Sin Tax Reform Act, passed in 2017, called for a shift to a unitary tax system.

The law mandated the merger of the current two-tiered tax rate into a unitary tax rate of P30 per cigarette pack for all brands starting Jan. 1, 2017, and the rate indexed to inflation by increasing to 4 percent annually.

Meanwhile, the Federation of Philippine Industries asked the Senate last week to junk the House-approved bill seeking to revert to the two-tier system of taxation for cigarettes.

quoted the legal doctrine “he who comes to court should come with clean hands.”

“How can the Senate act on a tax bill openly being pushed by a company now under investigation for tax evasion? No senator especially the re-electionists would want to be associated with this bill,” FPI chairman Jesus Arranza said, referring Bulacan-based Mighty Corp.

BIR Commissioner Caesar Dulay ordered the investigation of Mighty after receiving field reports from his agents, who discovered fake tax stamps affixed on Mighty products. Dominguez backed Dulay’s move and ordered tighter monitoring and enforcement. Tax stamps on cigarette packs are proof of excise tax payment.

Arranza said government revenue losses from the non-payment of excise taxes had reached an alarming P10 billion a year.

Mighty, represented by former National Economic and Development Authority director-general Romulo Neri, testified before the House Ways and Means committee, that the company favored House Bill 4144.

All cigarette manufacturers also objected to the bill, except Mighty, the leading producer of cheap cigarettes.