Two-tier tax on cigarettes anti-competitive, says FPI

MANILA, Philippines – A proposed measure that seeks to revert to the two-tier tax system on cigarettes may violate the country’s anti-trust law, Federation of Philippine Industries chair Jesus Arranza said.

“Imposing two tax rates on cigarettes is creating market segmentation that favors manufacturers that  sell cheaper brands and are subject to lower taxes. It’s against the competition law. If you are going to have a bigger market share, it should stem from fair competition in the market and not because the tax system is favoring you,” Arranza said in a statement.

Tobacco products are currently subject to a single excise tax rate of P30 each pack as mandated under the Sin Tax Reform Law or RA 10351 passed in December 2012.

The House of Representatives, however, swiftly approved last month House Bill 4144, which seeks to amend the Sin Tax Reform Law.

HB 4144 is not even a priority bill of the administration but it only took less than 10 days to have it approved in the Lower House. It  only went through  two meetings at the Ways and Means committee and two plenary sessions. 

Backed by local tobacco firm Mighty Corp. and some lawmakers, House Bill 4144 proposed slapping an excise tax rate of P32  on cigarette packs priced at P11.50 and below, and P36 for those priced higher.

“We in the business community were surprised with the passage of HB 4144 because we did not hear any complaints against RA 10351 in the last three months.

“It is ironic that the same Congress that passed RA 10351 are the same ones who are pushing for the retention of a two-tier tax system,” Arranza said.

“Once HB 4144 is passed in the Senate and becomes a law, I will file a case (before the Philiippine Competition Commission) because that’s anti-competitive behavior,” Arranza said.

A quasi-judicial body, the PCC is mandated to protect consumer welfare by promoting a level playing field among businesses. Its task is to conduct  inquiries, investigate and penalize all forms of anti-competitive agreements, abuse of dominant market position, and anti-competitive mergers and acquisitions.

Arranza said the Sin Tax Reform Law has resulted in increased budget for health, and reduced smoking prevalence.

“Based on reports from the Bureau of Internal Revenue and the Department of Health, the government is achieving the objectives of RA 10351. The law will even be more effective with a single tax rate as tax collections will go up because there will be less room to avoid paying taxes, and at the same time, there is a higher probability that the number of smokers will go down further,” Arranza said.

According to the Philippine Society of General Internal Medicine, eight million Filipinos had already quit smoking since the Sin Tax Reform Law was implemented. Zinnia Dela Peña