Solons push bill seeking tax hike suspension to address illicit tobacco trade 

- Advertisement -

HOUSE leaders have filed a bill seeking to temporarily suspend the annual excise tax hikes on tobacco products due to the growing illicit cigarette trade and declining revenue collections.

The multi-partisan group, which includes two House Deputy Speakers, said the surge in illegal tobacco trade undermines the Sin Tax Law’s twin goals of increasing government revenue and promoting public health.

House Bill (HB) 11279 proposes a one-year suspension of the automatic 5 percent annual excise tax increase on cigarettes, heated tobacco products, vapor products, and cigars.

- Advertisement -

“Due to the prevalence of illicit tobacco products, the government’s excise tax collection has been declining since 2022. From a peak collection of ₱176 billion in 2021, tobacco excise revenues declined to ₱160 billion in 2022. In 2023, the Bureau of Internal Revenue (BIR) reported that the government has lost around 15.9% or ₱25.5 billion in revenue due to illicit trade in cigarettes, ending collections in 2023 with ₱135 billion,” the bill said.

“This lost revenue amounting to billions of pesos adversely affected the government’s funding for health programs,” the authors added.

The bill is sponsored by Deputy Speaker and Isabela 1st District Rep. Antonio “Tonypet” Albano, Deputy Speaker and Ilocos Sur 2nd District Rep. Kristine Singson-Meehan, Ilocos Norte 2nd District Rep. Angelo Marcos Barba, Kabayan Party-list Rep. Ron Salo, Ifugao Lone District Rep. Solomon Chungalao, and PBA Party-list Rep. Margarita Nograles-Almario.

In their explanatory note, the authors said that steep excise taxes on tobacco products may have inadvertently boosted the illicit tobacco trade.

“While it is in the country’s legitimate interest to impose higher taxes on sin products, the increase in the amount of excise taxes imposed on registered cigarette products unintentionally resulted in the proliferation of illicit and counterfeit products due to their low-entry point and affordability,” they said.

The bill notes that illicit trade now represents 13.2 percent of the total tobacco market, up from 5.3 percent in 2020. In 2023, the average number of illicit cigarette users rose to 13.9 percent.

“It is imperative for the government to recalibrate its existing revenue measures and ensure that our tax laws do not unduly incentivize nor give premium to the illicit traders at the expense of legitimate business,” the lawmakers stressed.

The authors also highlighted the connection between the illicit tobacco trade and national security threats.

“Illicit trade of tobacco products, which may now include vapor products, has been linked to the financing of terrorist organizations,” the bill warned.

The proposed suspension is expected to reduce the price gap between legitimate and illicit products, discouraging the use of illegal goods and curbing the growth of illicit trade.

The bill also seeks to protect legitimate businesses, ensure fair competition, and stabilize government revenue collections.

“Destroying legitimate businesses through excessive taxation, while illicit traders continue to dominate the market, is unacceptable. Such actions are counterproductive and undermine the nation’s goal of fostering a stronger economy, which ultimately benefits the greater public,” the lawmakers said.

Author

- Advertisement -

Share post: