Proposed Bill Pushing for Uniform tax for cigarettes

A new bill was submitted to the House of Representatives by The Department of Finance. The proposed bill imposing a uniform excise tax of P14 a pack on nearly all cigarettes brands starting 2010, and adjusting the rate annually to account for inflation.
The proposed bill, which the administration claimed contained minimal amendments to the bill earlier filed by Rep. Danilo Suarez, also calls for the imposition of two tax rates in 2009 prior to the adoption of a single rate in 2010.
In 2009, the excise tax will be P8 for brands with a net retail price of P6.50 a pack or below, and P14 for those whose net retail prices above P6.50 a pack.
“We are trying to gain support for this bill from Congress,  it is always difficult to push for new tax laws,” Finance Undersecretary Gil Beltran claimed.
Finance Secretary Margarito Teves earlier claimed the government was pushing for a single excise tax rate on the cigarettes purchase because the current system was too complicated and difficult to administer.
There are four tax brackets for cigarettes based on prices:
P2.23 a pack (for cigarettes with net retail price of below P5 a pack)
P6.74 a pack (for those costing between P5 and P6.50)
P10.88 a pack (for those costing between P6.50 and P10)
P26.06 a pack (for those costing more than P10)
Beltran claimed that with a uniform rate, tax administration would be easier. A simple tax system helps encourage tax compliance and therefore shore up tax collection, the finance official claimed.
The complexity of the cigarette tax structure was one factor blamed for shortfalls in excise tax collection in the past.
But while the bill seeks uniformity, it does not allow lowering of current tax rates that are already higher than the rates being proposed in the bill. This means that cigarette brands currently imposed a tax of, say P26 a pack, cannot have its tax lowered to P8 in 2009 and P14 in 2010.
The P8 and the P14 rates cited in the proposed bill cover only cigarettes packed by machines, which are the most common type.
Cigarettes packed by hand, according to the proposed bill, will be levied an excise tax of P2.47 a pack on the first year, and the rate will increase every year commensurate with inflation.
The draft bill also claimed cigars will be taxed P200 a piece on the first year, and the rate will increase annually thereafter by an amount equal to the product’s inflation.