An industry leader said the Senate should junk the House-approved bill seeking to revert to the two-tier system of taxation for cigarettes, charging that it is being openly pushed by cigarette manufacturer Mighty Corporation, which is currently being investigated by the Bureau of Internal Revenue for alleged use of fake tax stamps.
“How can the Senate act on a tax bill openly being pushed by a company now under investigation for tax evasion?” Federation of Philippine Industries (FPI) Chairman Jesus Arranza asked in a statement.
Arranza was referring the investigation against Mighty ordered by Bureau of Internal Revenue Commissioner Cesar Dulay after receiving field reports from his agents who discovered fake tax stamps affixed on Mighty products.
Finance Secretary Carlos Dominguez 3rd backed Dulay’s move and ordered tighter monitoring and enforcement. Tax stamps on cigarette packs are proof of excise tax payment.
“No senator especially the re-electionists would want to be associated with this bill,” Arranza said.
He also pointed out that based on various sources and estimates, government revenue losses from non-payment of excise taxes has reached an alarming P10 billion a year.
Mighty, represented by former National Economic Development Authority Romulo Neri, testified before the House Ways and Means committee that they favor House Bill (HB) 4144, which seeks to impose higher tax excise taxes on cigarettes while changing the current unitary system to the old two-tier structure, which opponents have said encouraged the practice of tax under-declaration for low price cigarette manufacturers.
The Department of Finance, Department of Health, Department of Agriculture, Bureau of Internal Revenue, and various farmers’ groups openly opposed HB 4144, saying it would set back the revenue and public health gains of the successful Sin Tax Law. The Federation of Free Farmers and the PhilTobacco Growers Association are especially opposed to the very high tax rates under HB 4144.
All cigarette manufacturers also objected to the bill except Mighty, the leading producer of cheap cigarettes, Arranza added.
In an unprecedented move, Arranza said FPI has joined major business groups in the country in expressing strong opposition to the proposal. The groups publicized their disagreement with the measure in a series of recent print ads in major newspapers.
The others signatories included the Philippine Chamber of Commerce and Industry, Employers Confederation of the Philippines, Makati Business Club, the Financial Executives Institute of the Philippines, Management Association of the Philippines and the Foundation for Economic Freedom.
The print ad manifesto was also signed by various international business chambers including the American Chamber of Commerce of the Philippines, the Federation of Filipino-Chinese Chamber of Commerce and Industry, Inc., the European Chamber of Commerce of the Philippines, Australian-New Zealand Chamber of Commerce, the Canadian Chamber of Commerce, the Japanese Chamber of Commerce and Industry of the Philippines the US-Asean Business Council, and the Korean Chamber of Commerce Philippines.
Earlier, Arranza said going back to the two-tier system in taxing cigarettes might violate the country’s anti-trust law.
“Imposing two tax rates on cigarettes is creating market segmentation that favors manufacturers that sell cheaper brands and are subject to lower taxes. It’s against the competition law. If you are going to have a bigger market share, it should stem from fair competition in the market and not because the tax system is favoring you,” he said.