Excise threatens cigarette industry

MANILA, Philippines - The local cigarette industry might go up in smoke if the government does not act quickly. The government may be deluding favoring an excise duty which creates an uneven playing field in the field of local cigarettes.

Revenue Regulation 22-2003 requires an increase in excise duty only on certain brands of cigarettes according to their current retail price, while maintaining the excise taxes of others even though retail prices have increased since 1997.

Case in point is how the branding of a local cigarette manufacturer, which the Bureau Internal Revenue (BIR), classified as an existing one, is taxed at P1.12 per pack despite the net retail sales already exceeding the P5, the cut-off for lower taxed category. If your P6.82 net retail prices is considered, the tax must be paid P8.96 per pack.

Meanwhile, La Suerte Astro and Memphis are taxed higher at P5.60 per pack based on their recent price survey (both exceeding P5), which are used as the basis for fixing the new level of excise duties. Both have been ranked by BIR as new brands. Other brands with price levels similar to Memphis and Astro enjoy no change in excise duty because their rate is pegged at 1997.

Furthermore, brands Marlboro and Philip Morris, which are currently higher than retail Lucky Strike, continue to pay an excise tax of P8.96 while Lucky Strike was imposed a tax of P13.44 higher under the latter having been classified as a "brand new." In fact, there is no level playing field with the taxation of cigarette brands because RR 22-2003 favors the so-called "existing brands" for the "new brands".

This "system" is unfair cigarette manufacturers who pay taxes to consumption of more than cry for the abolition of RR 22-2003 for many reasons, one of which runs counter to the agreements with the World Trade Organization (WTO) and Regulation of the ASEAN Free Trade Area (AFTA). Their argument is that if RR 22-2003 causing alienation of foreign cigarette companies, what is to keep the same happen to foreign companies in other sectors? If this happens, it is unlikely that the products of the exports and imports and income and savings they will be hit hard.

As a country that promotes free and fair trade, the Philippine government should not support such a restrictive measure of trade that is clearly contrary to the principles of the WTO and FTAA. The system clearly discriminates against imported brands like Lucky Strike, which entered the local market after 1997.

Another point that raised the ire of farmers affected is like the BIR believes that the net retail sales of "new brands" in determining the tax rate, but not for other brands that are considered by law and RR 22-2003 as existing brands. "The" uniformity in taxation "in principle states that the current prices of all brands should be recognized, or not at all. The BIR should focus on all brands, not just some. In this context, all brands of cigarettes of all holdings of tobacco sold at local level must be subject to the same conditions. In short, they want equal treatment before the law.

The third is inconsistent with the law dictating that "variants of existing brands of cigarettes which are introduced after the onset of RA 8240 are taxed under the highest classification of any variant of this brand, new variants with higher prices should be taxed as such. This shows the imperfect nature of the position of the BIR on the latest versions of the historic brand is not subject to adjustment at current prices.

Inconsistencies some cigarette makers have noted in RR 22-2003 are the reasons why many consumers have been surprised to see the brand that no longer attend.

The smoke signals are loud and clear, the government must suspend RR 22-2003 and instead introduce a new tax system that will pave the way for a level playing field. Ultimately, the idea is to benefit both the country by collecting more excise tax, and all the industry through fair competition.