BIR to increase taxes on new cigarette brands

The Bureau of Internal Revenue (BIR) can now implement a new tax regulation increasing the excise tax on new cigarette brands following the decision of the Parañaque Regional Trial Court to reject the request of La Suerte Cigar and Cigarette Factory to issue an injunction against Revenue Regulation 22-2003.

Revenue Regulation 22-2003, signed by former Finance Secretary Jose Isidro Camacho, states that the excise tax on cigarette brands introduced in the market after Jan. 1, 1997 will now be based on their net retail price which will be determined through a nationwide survey.

Prior to the ruling, the BIR used the manufacturer’s suggested retail price as basis for the excise tax rates on the new cigarettes not classified under the Tax Code of 1997.

Based on the initial survey, the majority of new cigarette brands will be slapped with higher taxes.

La Suerte Cigar and Cigarette Factory’s new brands–including Astro Filter KS, Atro Menthol 100s, and Astro Methol KS– will be levied a P5.60 per pack excise tax, four times higher than the existing P1.12 per pack.

Imported brands such as Lucky Strike Filter, Lucky Strike Lts., and Lucky Strike M. Lts of British American Tobacco will also be subjected to higher excise tax of P13.44 pack from the present P8.96 per pack.

Reacting to the RTC ruling, La Suerte called the decision penned by Judge Leoncia Real Dimagiba as "unfair" because if only covers new cigarettes.

La Suerte said that it would pay the higher taxes "under protest."

Because of the higher tax payments, La Suerte warned that it may be forced to layoff some of its employees.

La Suerte cigarette brands account for 80 percent of the market.

Excise taxes on tobacco and alcohol products were one of the components of the Comprehensive Tax Reform Law completed in 1997.

Under Republic Act 8240 or the Tax Reform Law, excise taxation on the so-called sin products was changed from a value based or ad valorem system to a specific tax system which is based on a physical unit of measure such as liters for beverages and number of sticks or packs for cigarettes. – Marianne Go

The Department of Finance (DOF) said that since 1997, the government had lost some P40 billion in foregone revenues due to the non-reclassification of new cigarette brands.

The new measure is expected to have positive impact on the tax collections as most of the new cigarettes will now be classified under higher rates based on an initial survey conducted by the BIR.

The government has been seeking new revenue sources because of the continuing budget deficit.