Former NEDA chief bats for two-tier tax system

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Former NEDA (National Economic and Development Authority) Director-General Romulo Neri has debunked arguments that a two-tier excise tax system proposed under House Bill (HB) 4144 is an anti-health measure.

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Pro-health advocates are arguing against the proposed amendment noting that smokers’ projected downshifting will negatively impact the bill’s intention to curb smoking prevalence.

According to Neri, himself a noted economist, “while some downshifting from premium brands to cheaper ones is expected to happen under a non-unitary tax system, this is limited in quantity and therefore has little detrimental effect on overall health. Downshifting to lower priced brands is an absolute economic right of consumers.”

In a statement, he said the pro-health advocates might also be missing the point that a unitary tax system also encourages consumers of cheaper brands to shift to premium ones since the resulting marginal difference in price will be negligible especially when sold by tingi (per piece).

HB 4144, authored by Rep. Eugene Michael de Vera of ABS party-list, proposes a two-tier tax system, non-premium brands at P32 per pack and premium brands at P36 per pack plus an annual increase of 5 percent on these rates.

Neri said ensuring the fairness of a tax system is a paramount social goal, pointing out that administrative ease of collection should not be an excuse for enacting a regressive tax system, which will result by imposing a unitary specific tax.

“The claim of using tobacco taxes to benefit the health of the poor is a tenuous argument. The poor will immediately feel the impact of the high tobacco tax draining his pocket while the benefit of government spending on his health is a highly uncertain future event. If the tobacco tax revenue is spent on general health services and not targeted directly, the poor smoker may end up subsidizing for the health care of non-smokers, making the situation even worse for the poor smoker,” he added.

According to earlier reports, lawmakers, particularly ways and means committee chairman Rep. Dakila Cua said the higher prices proposed in HB 4144 is more discouraging to the smoking public than the original schedule of P30.00.

He said among the main reasons in approving HB 4144 were to instill offsetting measures to the foreseen effects of the Duterte administration’s main objective to lower personal income tax to ease overburdened taxpayers.

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3 Comments

  1. Charity Omayan on

    Two-tier system is not beneficial to the government for tax collection. It will keep the cigarette brands affordable to the masses. If this bill gets fast-tracked this means more money in their pockets.

  2. Eloisa Concepcion on

    Of course it is! You are making cigarette cheaper and more available and promoting more tax evasion with cigarette manufacturers and traders!

  3. This two tier tax system is to benefit one company only, the same company that was involved in technical smuggling and is currently being investigated for using fraudulent tax stamps. They have dominated the market because they were able to sell at a dirt cheap price even with the humongous tax hike in the previous years.