No new tax bills seen without improved excise tax collection

Malacañang cannot expect Congress to act on pending revenue measures unless the Bureau of Internal Revenue (BIR) finally reclassifies and collects the right excise taxes from new cigarette brands, it was disclosed yesterday.

In a public hearing yesterday, the House ways and means committee approved a motion by Ilocos Sur Rep. Eric D. Singson to suspend consideration of all pending revenue bills endorsed by the Department of Finance (DoF) saying that government should first collect the right excise taxes from new cigarette brands introduced after October 1996.

"For the past six years since the passage of the Comprehensive Tax Reform Law, the BIR has failed to conduct mandatory price surveys of new cigarette brands. Without this survey, no reclassification and therefore no additional revenue was earned by government from these new brands," Singson said.

Echoing Singson’s position, Antique Rep. Exequiel B. Javier said government has been nagging Congress for the passage of more tax laws, particularly the so-called indexation of sin taxes. "But we believe that before government asks for new taxes, it must first do its job by collecting the right taxes under existing laws," Javier stressed.

"In fact," he added, "finance undersecretary [Grace Pulido] Tan admitted in open hearing that about P1.6-billion in excise taxes each year have not been collected due to the BIR’s failure to conduct price surveys that would enable it to determine the correct excise tax classification of new cigarette brands."

Earlier, the BIR disclosed the results of a price survey done in March 2003 where cigarette brands were found to have higher retail prices than originally declared with the BIR. These brands, which include Astro and Memphis of La Suerte Cigar and Cigarette Company and Lucky Strike of British American Tobacco, will soon pay higher excise taxes to government once their reclassification to a higher tax category becomes final.

Although it came six years late, congressmen welcomed the price survey and the resulting reclassification of new cigarette brands. They stressed, however, that government should go after the estimated P4 billion in excise taxes that the BIR was unable to collect due to years of non-reclassification of new brands.

Based on BIR records, La Suerte has been paying an excise tax of only P1.12 per pack of Astro and Memphis because the suggested retail price it declared with the BIR in 1999 was below P5. However, survey results showed that Astro and Memphis were actually selling at an average retail price of P7.74, thus making it liable for P5.60 in excise taxes per pack.

With La Suerte’s 2002 production volume of 357.8 million packs, the BIR expects to collect more than P1.6 billion in additional excise taxes from the said company alone if the tax is implemented prospectively. It was not immediately clear if the BIR will go after nearly P3 billion in uncollected excise taxes arising from the incorrect tax classification of Astro and Memphis since it was introduced to the market four years ago.

Per Revenue Regulation 1-97, the BIR was supposed to have conducted the surveys as early as 1997. For unknown reasons, however, no survey or reclassification was done in the last six years which, in BIR’s estimates, cost government nearly P4 billion in uncollected revenues.