2-tier tax on tobacco seen causing govt revenue dip


THE recently approved House Bill (HB) 4144 that seeks to further amend the Sin Tax Reform Law by returning to a two-tier approach on tobacco tax is seen by Sen. Juan Edgardo Angara as a move that could further lead to diminution of revenues for the government.

This is contrary to the claims of proponents of the proposed measure that a two-tier tax scheme on tobacco could help increase government revenue as it would impose higher tax rates on tobacco products.

Angara, in an interview noted that the Bureau of Internal Revenue (BIR) recorded a decline in the collection of excise tax on tobacco in 2016 compared to the revenues in 2015.

At the hearing of the Senate ways and means committee on the proposed tax reform package of the government last week, the BIR noted an P8-billion decrease in sin tax collection from tobacco products, from P99.5 billion in 2015 to P91.6 billion in 2016.

The tax bureau attributed the decline to the proliferation of fake tax stamps, smuggled cigarettes and the bigger graphic health warning on cigarette packs.

Angara noted that the high price of tobacco products brought by high levies also contributed to the low revenues collected because of low sales in cigarettes.

He said the two-tier tax system on tobacco could further lead to the decline because it would also bring taxes higher.

“We need to study the proposal carefully because we don’t want the revenues collected from tobacco sin tax go down further considering that the government is using it to fund universal health care,” according to Angara, who heads the Senate ways and means panel.

The House of Representatives in its approved HB 4144 proposes a P32 tax rate per pack for cigarettes priced at P11.50 and below and P36 per pack for cigarettes with a net retail price of above P11.50.

Under the current Sin Tax Reform Law, tobacco products, regardless of the price, are charged with a unitary rate of P30 per pack.

The unitary tax rate started January this year.

Prior to the imposition of the uniform tax rate, the government was imposing a two-tiered system whereby cigarettes priced at P11.50 per pack were being taxed P25 while those priced higher were slapped P29 per pack.

“It [HB 4144] may lead to further diminution of revenues because at P29 and P25, the last two tier before the unitary system this year, revenue went down, so if we further increase taxes, it could lower revenue collection, That’s just but logical, right?” Angara pointed out.

The senator said he sees no reason to rush deliberations on the House proposal noting that there are more important measures, like the tax reform package, that need attention.

“What is good with the sin tax law is that there is a built-in amendment every year. There’s a built-in increase of 4 percent, so even if we don’t introduce amendments to it, the government is still earning,” Angara added.

He assured his counterparts at the House of Representatives that his panel would immediate act on a House bill that seeks to grant amnesty on unpaid estate taxes once it is passed and transmitted to the Senate.

Angara said his committee will be adopting an Una ang Pamilya (Family First ) philosophy, “by setting rules that are easy to comply with, and rates that are affordable.”

“We will lighten the tax burden on a deceased’s assets in order to lighten the grief of the heirs,” he added.

The House Committee on Ways and Means also approved the substitute bill “An Act Granting Amnesty in Estate Tax.”

Angara also filed Senate Bill 980 that seeks to “trim estate tax rates” and increase the tax deductible expenses, such as the medical expenses incurred by the deceased.



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  1. Eloisa Concepcion on

    Yes, tobacco is extremely harmful to health even to non smokers and we let these cigarette manufacturers get away with not paying the correct taxes and even protect them under the 2 tier tax system. Asan ang hustisya?

  2. It’s a good thing we still have thinking lawmakers. Why rush a bill when there are still a lot of issues that must be addressed like the proliferation of illicit tobacco and fraudulent tax stamps.