Reclassification of Cigarettes into Two Categories to Generate Bigger Revenues

By Lilybeth G. Ison

The minority bloc of the House of Representatives is pushing for a reclassification of cigarettes into two categories to generate bigger revenues for the government.

House Deputy Minority Speaker and Quezon Rep. Danilo Suarez on Monday said the position of the minority is in line with President Benigno Simeon “Noynoy” Aquino III’s no new taxes policy.

“We, in the Minority (bloc), have taken this initiative to limit the classification of cigarettes into two. Reclassification is not taxation,” he said.

Officials of the Bureau of Internal Revenue (BIR), during the deliberation of the proposed P12.2-billion budget of the Department of Finance (DoF) for 2011, agreed with Suarez’s position that the administration will be complying with the President’s commitment of not imposing new taxes if it opts for a reclassification scheme.

“Hence, the administration and the ruling majority should listen and consider our position in the minority to limit the classification of cigarettes into two — high and medium, and let the premium stay as is,” said Suarez.

The Quezon solon said there are a number of cigarette brands in the market, which are difficult to control at present.

“Iyung premium ay palalabasin na low-priced cigarette, at right there ay napakalaki na ang nawawala sa gobyerno.” he said.

Davao City Rep. Isidro Ungab, who sponsored the DoF budget on the floor as vice chairman of the House appropriations committee, said the BIR is very much interested to adopt the Minority’s position to reduce the classification of cigarettes into two.

He said reducing the classification of tobacco products into two would raise revenues by P20 billion and if the classification would be reduced into one, this would raise revenues by P40 billion.

The BIR vowed to assist the House members if ever legislation would be passed with regard to the proposal.

Suarez said four issues and concerns will be addressed by reclassification — weakness in the removal, protection of tobacco farmers, health concern and better revenues for the government.

On the other hand, Ungab said removal and monitoring are the two main weaknesses in the collection of revenue from tobacco products.

To address these, he said the BIR earlier contemplated on putting stamps on the cigarette boxes, but the agency had been stopped by the Department of Justice (DoJ), which ruled that they cannot do it without legislation of Congress.

Batangas Rep. Hermilando Mandanas, chair of the House committee on ways and means, earlier filed House Bill 3059 that would reclassify alcohol and cigarette brands to enable the government generate more revenues without imposing new tax rates.

HB 3059 would amend Sections 141, 142, 143 and 145 of the National Internal Revenue Code (NIRC).

“We are presently stuck with 1996 prices. The net retail prices being used since 1996 are still used to classify brands and excise taxes are being increased by programmed legislated provisions, completely ignoring current market realities,” said Mandanas.

He said HB 3059 intends to delete annexes A-D of the NIRC containing the classification of brands of distilled spirits, wines, liquors, and cigarettes and their net retail prices as of October 1, 1996.

“Since 1996, the net retail prices of these alcohol and tobacco products have substantially increased and in some products by at least 100 percent,” he added.

Mandanas said his proposed measure will generate revenues for the government without increasing the tax rates for the current net retail prices which will be used as basis and entail a corresponding change in brand classification.

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