House to review sin tax law

MANILA, Philippines - The ways and means committee of the House of Representatives will review the sin tax law so it can plug certain loopholes, which it said some cigarette producers are apparently taking advantage of.

The inquiry was prompted by Resolution 425, which Antique Rep. Paolo Javier has filed.

Javier said he and his colleagues want to find out how certain cigarette brands can be sold at low prices despite the tax increases, and whether the government is maximizing the revenue potential when smokers shift to low-priced cigarettes.

In particular, he said he is seeking explanation on why Mighty Tobacco Corp. (MTC) is able to sell its products as low as P1 per stick, while bigger players like Philip Morris price their cigarettes at as much as P5 per stick.

Bureau of Internal Revenue (BIR) Commissioner Kim Henares has said she was interested in finding out why this is the pricing strategy of cigarette producers and whether there are loopholes in the law and how these could be plugged.

MTC said its books of accounts are open to the BIR, and that its lower production cost enables it to sell its products at lower prices.

“There is a need to review the consequences and implications of the recent excise tax increases in view of current market conditions to ensure that the objectives and purposes of the law are realized,” Javier said.

He said the committee should determine whether there is proper reporting and monitoring of raw materials used in the manufacture of cigarettes.

It should ensure that the government is not deprived of its rightful tax revenues, he said.

He cited studies showing that as of December 2012, smoking incidence among adults was close to 50 percent, which went up to 51 percent in June 2013 despite the tax increase.