The recently passed House Bill (HB) No. 4144 is a “delicate balancing act” as it seeks to address competing concerns of government revenue, health and the legitimate interests of tobacco farmers, a former Bureau of Internal Revenue (BIR) commissioner said.
Former BIR chief Dakila Fonacier said HB 4144 attempts to alleviate the regressive nature of the unitary tax system now in place.
“Under the current unitary tax of P30 per pack [regardless of classification] the poor who tend to buy the cheaper brand shoulder a heavier tax burden than the rich who tend to smoke the more expensive premium brands,” Fonacier said.
He added that a regressive tax takes a larger percentage of income from low-income earners than from high-income earners and thus, in that sense, is antipoor. A regressive tax is one that is imposed in such a way that the tax rate decreases as the amount subject to taxation increases; that is how the current unitary tax is structured.
According to the Southeast Asia Tobacco Control Alliance, a combination of ad valorem and specific tax has been the favored mode in Southeast Asia and not the unitary tax.
HB 4144 proposes to raise the current taxes on cigarettes from P30 to P32 per pack on lower priced brands and from P30 to P36 per pack on premium brands.
Fonacier argued that from the perspective of promoting health and discouraging consumption, the higher taxes and consequent higher prices imposed by HB 4144 would have a better chance of addressing health concerns while increasing government revenues.