“In the best case scenario, the total tobacco market will fall by 26% under House Bill (HB) 5727. From 100 billion sticks sold last year, it could decrease to only 74 billion,” PMFTC President Chris Nelson said in a press conference.
At worst, the drop could be sharper — roughly 30% to 40% — if losses to illicit trade are taken into account.
The “dramatic” increase in excise taxes under HB 5727, which range from 150-700% in the span of two years, will encourage smuggling and counterfeiting, he warned.
The presence of the black market ensures that, while sales fall, consumption will not, Mr. Nelson said. It could also put a dent in the expected P32 billion in additional excise tax revenues.
“It does no good for the government, the Filipinos or the legitimate industry which employs almost 2.7 million people,” he stressed.
However, Finance Assistant Secretary Ma. Teresa S. Habitan downplayed PMFTC’s claims.
“How labor-intensive is tobacco manufacturing? The numbers they give include sari-sari stores [and street vendors]. They do not sell cigarettes alone,” she said.
HB 5727, which aims to reform the excise tax regime on “sin” products such as tobacco and alcohol, passed a historic hurdle as it was approved by the House of Representatives last week. The measure will head to Senate for further deliberations once sessions resume in July. The Finance department aims to have the bill enacted into law within the year.
PMFTC decried the “sin” tax bill greenlighted by the lower chamber, arguing that tobacco received the shorter end of the stick.
“Since excise taxes began in 1996, alcohol and tobacco had a 50-50 share in the contribution of revenues. Under the new bill, the share will be 85-75,” Mr. Nelson said.