Higher excise taxes failed to reduce smoking in the country

By on June 30, 2015


MANILA — Despite the higher excise taxes on cigarettes, R. A. No.10351 or the “Excise Tax Reform Law of 2012” has failed to considerably reduce smoking incidence, particularly among the youth, Rep. Eleandro Jesus F. Madrona declared.

“There are no less than 20 million smokers today in the Philippines, the same number of smokers in 2011, prior to the tax increase,” Madrona (Lone District, Romblon) revealed.

Hon. Madrona, chairman of the House Committee on Accounts, is author of HB 5013 entitled “An Act to prevent youth access to tobacco by mandating a minimum cigarette price,” or “The Minimum Cigarette Price Law,” now under consideration by the House Committee on Trade and Industry.

The author noted that in a survey commissioned by the Department of Health (DOH), the Social Weather Station (SWS) reported that while there was a reduction in cigarette consumption in some socio-economic classes and age groups, the overall smoking incidence had not significantly decreased since R.A. 10351 came into effect.

Based on the same survey, Madrona said, 45 percent of smokers merely switched to cheaper brands when taxes were increased.

“Undoubtedly, this is due to the proliferation of super cheap or discount brands in the market,” he said, adding that when a cigarette pack or stick is sold very cheap, smokers, including the youth, have easy access to affordable cigarettes, resulting in the lack of change in overall smoking incidence.

Madrona opined that under the new tax structure, any cigarette manufacturer that sells products below the tax it pays to the government is not operating in the spirit of achieving the intents of RA 10351, which is to reduce the overall smoking incidence especially among the youth.

The author insists that while the newly-enacted Graphic Health Warning Law or RA 10643 aims to further discourage youth smoking by attaching scary pictures on cigarette packs, it needs to be complemented with some form of price discipline.

“This is because a young smoker needs to buy or have a face-to-face encounter with a graphic-laden cigarette pack before the desired impact of the law is achieved,” Madrona added.

With his proposed minimum price scheme, Madrona surmised that the mere recitation of the minimum cigarette price would be enough for a young smoker to reconsider and realize that buying cheap is no longer a pocket-friendly option.

Under HB 5013, setting a minimum cigarette price (MCP) per pack of cigarettes will decisively deny youth access to cheap affordable cigarettes and support the beneficial health impact of the excise tax reform law.

The proposed MCP for the cheapest cigarette is P38.00 per pack on the first year of implementation, P44.00 on the next year, and P51 per pack the following year. The MCP shall be increased by four percent (4%) thereafter. In computing the MCP, the following components should be taken into consideration, excise tax, VAT, production cost, operating cost and annual inflation.

Among the intents of HB 5013 are: 1) tobacco players who resort to tax evasion will no longer be able to sell their products at cheap affordable prices; 2) there will be no more price discounting or offers of cheap affordable cigarettes below the MCP; 3) increased revenue for government through higher tax and VAT collection; 4) robust enforcement of significant financial penalties and imprisonment for repeat offenders.

Among other vital provisions of the Madrona bill, the penalties for non-compliance include imprisonment for a period of not less than six (6) months nor more than five (5) years and a fine ranging from P50,000.00 up to P2-million, depending on the quantity of cigarettes, shall be imposed upon any manufacturer, importer or retailer who sells any cigarettes less than the MCP, or who violates any provision of the proposed Act.

The measure also provides that in case the violator is a business entity or establishment, both penalties shall apply in addition to the suspension or revocation of business licenses or permits.

Likewise, whenever any of the offenses is committed by a corporation or association, the president and each of the directors or managers of said corporation or association, or its agent or representative in the Philippines in case of a foreign corporation or association who shall have knowingly permitted or failed to prevent the commission of such offenses, shall be held liable as principal offenders.