MANILA, Philippines - The Department of Finance has welcomed a suggestion floated by the Bureau of Internal Revenue (BIR) to set a minimum price on cigarettes to create a fairer marketplace and curb smoking amid the widespread availability of discounted tobacco products.
Finance Undersecretary Jeremias N. Paul Jr. said the idea of setting a standard minimum price for all cigarettes is something that the agency would look at as the government pursues its anti-smoking campaign.
Paul said the proposal, which would require legislative action, could be an effective policy tool that can support the beneficial health impacts of the sin tax law, which raised taxes on tobacco and alcohol products beginning January 2013.
“We’re okay with it. In fact, the industry is open to it. But its still too early to discuss the minimum potential revenue from this [measure] because we’ll have to wait for the review to be completed. There are technical details that we need to look at,†Paul said.
By introducing a flat rate minimum price for all tobacco products, consumers will not get to buy at a lower price from the amount set by the state. This will cause the quantity demanded to decline, especially among consumers with lower income.
Ensuring high prices of tobacco products are proven ways to discourage the use of tobacco and coerce smokers to kick the habit.
One of the objectives of the sin tax law is to make tobacco and alcohol products less accessible to the public and raise the needed funds for health programs of the government.
Excise tax reform act advocates such as the FCTC Alliance of the Philippines and the Action for Economic Reforms likewise posed no objection to the suggestion of legislating a minimum price for all cigarette brands sold in the country.
In an industry dominated by global giant Phillip Morris, the 63-year old Bulacan-based cigarette firm Mighty Corp. has managed to stay around by selling its products for P1 to P1.50 per stick despite the higher excise tax imposed by the government. This strategy has worked well for the Wongchungking family-owned company as low-income consumers turned to lower priced cigarette brands to satisfy their nicotine craving.
As a result, Mighty’s market share zoomed to over 20 percent from only seven percent in less than a year while Philip Morris lost 13 percent of the market last year after it was forced to raise the prices of its products.
Owned by the Wongchungking family, Mighty is under investigation by tax and customs authorities for allegedly evading payment of taxes and engaging in anomalous transactions which include technical smuggling and underdeclaration of imported tobacco leaf and raw materials.