Tobacco farmers decry higher sin tax proposal

MANILA, Philippines - The country’s tobacco farmers have strongly objected to a proposed measure that seeks to introduce a bigger increase in tobacco sin tax.

House Bill 4144 authored by Rep. Eugene Michael de Vera plans to introduce two new increased tax tiers, one at P32 per pack and the other at P36 per pack, plus an annual increase of five percent on these rates.

“The bill seeks to protect the welfare of tobacco farmers by maintaining the current excise tax system on the cigarette packed by machine to two tiers instead of shifting to unitary excise tax rate in 2017,” De Vera said.

The current sin tax on tobacco sees a unitary rate of P30 per pack in 2017, with an annual four percent adjustment thereafter.

The PhilTobacco Growers Association and the Philippine Aromatic Tobacco Development Association said the bill is now being rammed through Congress and stakeholders have never been asked about their opinion.

“The whole process is a sham and we call on the leadership of the House to seek proper consultation and a complete impact assessment before proceeding with it,” PTGA head Saturnino Distor said.

“Why are they proposing to hit tobacco again, even before another big 20 percent excise tax increase in January next year, and we don’t even know what the impact of that will be,” he added.

Distor emphasized that tobacco farmers are struggling due to weakening demand for tobacco because of the huge 340 percent excise tax increase introduced in 2013, with annual compound increases of 20 percent or more.

Tobacco excise taxes contributed around P100 billion last year, up from P32 billion in 2012 and now comprise more than two-thirds of the sin tax take.

“Why is only tobacco being targeted and not other excisable goods? We are giving more than our fair share of the contribution,” Distor said.

The Sin Tax Reform Act, which took effect in 2013, introduced higher excise rates for alcohol and tobacco products which signalled the move towards a unitary rate system by 2017 and indexed the tax rate to inflation by increasing it four percent annually.

Before the passage of the law, the country’s excise tax system on cigarettes had four tiers and it gradually shifted to two tier this year.

The incremental revenue is expected to increase even more with much higher excise tax rates that may be used to fund more social and vital infrastructure projects of the government.