New tax scheme seen to hike cigarette prices by up to 83%

MANILA, Philippines - The Department of Finance (DOF) sees prices of local cigarettes surging by as much as 83 percent as early as next year based on seven proposed bills pending before the House of Representatives seeking to restructure the current excise tax on alcohol and tobacco products.

In an “estimation” submitted to the House committee on ways and means, the DOF compared revenue estimates and prices increases under the various proposals to reform the excise tax on alcohol and tobacco products.

The DOF based its estimates on the survey of current net retail prices (NRPs) of tobacco and alcohol products done by the Bureau of Internal Revenue (BIR) in major supermarkets.

The DOF said cigarette prices would jump 82.9 percent next year if House Bill 3465 of Batanes Rep. Henedina Abad which seeks to impose a unitary tax system and index excise tax on inflation or HB 3489 of Iloilo Rep. Niel Tupas Jr. which provides for an increased and unitary tax rate adjusted annually to present values using the consumer price index are adopted.

On the other hand, the price of local cigarettes could go up by 72.2 percent next year under HB 3183 of Quezon Rep. Danilo Suarez that seeks to reduce cigarette classification to two-tiered rates from the current multi-tiered scheme.

Furthermore, HB 3059 of Batangas Rep. Hermilando Mandanas that seeks to promote equitable sharing of costs and benefits in the alcohol and tobacco industry would translate to a 59-percent increase in the prices of cigarettes in 2012.

HB 2687 filed by Negros Oriental Reps. Jocelyn Limkaichong, George Arnaiz and Pryde Henry Teves that provides for the indexation of the rates using the appropriate price index for tobacco and alcohol and proposes a unitary tax rate for each category of alcohol and tobacco products would translate to a 20.1-percent rise in cigarette prices.

The DOF projected a 16.7-percent hike in prices of local cigarette if HB 2485 of Bohol Rep. Erico Aumentado seeking an additional P3 tax per pack of cigar and cigarettes is adopted.

On the other hand, HB 3666 of Antique Rep. Paolo Javier that seeks to raise tobacco excise tax rates by adjusting these to inflation and by adding an absolute amount of P0.17 per pack across all tiers would translate to a minimal 2.3-percent increase in cigarette prices.

The DOF sees cigarette prices rising by 17.9 percent under HB 2687 and by 14.2 percent under HB Nos. 3465 and 3489 in 2013.

Likewise, HB 3332 of Ilocos Sur Rep. Eric Singson Jr. that seeks to maintain the automatic tax increases every two years from 2013 to 2017 would translate to a 2.2- percent rise in cigarette prices in 2013. It would also raise cigarette prices by 2.3 percent in 2015 and by 2.4 percent in 2017.

Furthermore, HB 3465 would result in a 9.2-percent rise in cigarette prices while HB 3666 would raise prices by 2.3 percent by 2014. HB 3666 would also result to a 2.4-percent rise in cigarette prices in 2016.

During a recent hearing of the subcommittee on national internal revenue chaired by Singson, representatives of the tobacco and alcohol industries questioned the survey methodology used by the BIR as they noted discrepancies in the surveyed retail prices of their products.