Inconsistencies In Law Wreak Havoc On Cigarette Brands Life Span

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Submitted by: Karla Gae Pascua

MANILA, Philippines — The local cigarette industry might go up in smoke if the government does not act fast.

The government may be deluding itself over by favoring an excise tax law which creates an uneven playing field in the local cigarette industry.

Revenue Regulation 22-2003, also known as the cigarette tax, seems to favor local brands over foreign brands.


Case in point is how Fortune International FK, which the Bureau of Internal Revenue (BIR) has classified as an old brand, is being taxed at P1.12 per pack despite the net retail price exceeding P5, the cut-off for the lower-taxed category. If its net retail price, P6.82, is to be considered, tax paid should be P8.96 per pack. Likewise, La Suerte s Astro & Memphis is being taxed at P5.60 per pack based on their newly surveyed prices (both of which exceed P5).

On the other hand, Philip Morris L&M, a new brand according to the survey, is being taxed at P5.60 per pack despite its net retail price of P4.92. In effect, there is no level playing field in the taxation of cigarette brands because RR 22-2003 favors old brands, of which a lot are local brands, over newer brands, of which many are foreign ones.

This unfair system has cigarette manufacturers who pay higher excise taxes crying for the abolishment of RR 22-2003 for many reasons, one being it goes against agreements with the World Trade Organization (WTO). The system does not protect new, foreign brands that have entered or would like to penetrate the local market. Their contention is if RR 22-2003 causes the alienation of foreign cigarette firms, what s to keep the same from happening to foreign businesses in other industries? If that happens, it isn t farfetched that products the country exports and imports and revenue and savings from these will be sorely affected.

Another point that has raised the ire of affected manufacturers is how the BIR considers the net retail price of new brands in determining the tax rate but not new launches, which are viewed by the law and RR 22-2003 as old brands. The uniformity in taxation states that current prices of all brands must be recognized, or not at all. The BIR should focus on all brands, not just some. In this setting, all cigarette brands of all tobacco firms sold locally are to be subject to the same conditions. Simply put, they want equal treatment under the law.

The third inconsistency is with the law dictating that variants of existing brands of cigarettes which are introduced after the commencement of RA 8240 shall be taxed under the highest classification of any variant of that brand, new variants with higher prices should be taxed as such. This shows the flawed nature of the BIR s position on variants of an old low-priced brand not being subject to the current price adjustment.

The inconsistencies some cigarette manufacturers have pointed out in RR 22-2003 are the reasons why many consumers have been surprised to see the brand they patronize is no longer available. This is also why new brands seem to materialize all of a sudden. This is just in the cigarette industry.

The smoke signals are loud and clear, the government must amend RR 22-2003 into a tax system that will pave the way for a level playing field which will benefit both the country and cigarette manufacturers.

About the Author: Karla Gae L. Pascua is a senior copywriter at Agatep Associates, Inc., one of the country’s leading public relations agencies. Pascua has been writing professionally for over a decade, seven years of which were under the stewardship of the industry’s acknowledged father of public relations, former UST professor, and journalism textbook author, Charlie Agatep.


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