Philippines: DOH Backs Proposed Cigarette Floor Price

Source from:  Manila Bulletin 09/23/2014

Health Secretary Enrique T. Ona is amenable to a proposal to set a minimum price on cigarettes to discourage tobacco manufacturers from selling at a loss and reduce youth access to tobacco products.

Ona said the health department is seriously considering the minimum floor price proposal floated by the Bureau of Internal Revenue (BIR), but added the direction on how to go about it should come from the Department of Finance (DOF).

"Well, our thinking in the DOH is that if the BIR will find that strategy effective to avoid smuggling or underpayment of taxes, we support that," Ona said in an interview with reporters.

He, however, said the minimum floor price proposal is a revenue measure as it aims to discourage smuggling or tax evasion by tobacco companies, thus the BIR or DOF should aggressively push for it.

Additional revenue in terms of value-added tax (VAT) collection is also expected when cigarette minimum price is imposed.

Under the envisioned minimum floor price regime, cigarette companies could no longer sell their products below the law-mandated minimum price, which could consequently drive up prices of cigarettes and make it less affordable to smokers.

Even under the regime of higher excise taxes under the amended Sin Tax law, intense competition among tobacco players has resulted in cheaper cigarettes sold in the market that could be bought by youth smokers, thus, negating the objectives of the law.

BIR Commissioner Kim S. Jacinto-Henares floated the minimum floor price concept as a counter proposal when pressed by anti-tobacco groups to have the Sin tax law amended anew to usher in a new round of higher excise taxes.

During the recent forum on sin law reform law held early this year, Jacinto-Henares has said that "if there's something you [health advocates] should lobby for, I think you should lobby for a law which will require a minimum floor price."

BIR chief later said "it's just a suggestion because health advocates were complaining about the proliferation of cheaper cigarette brands."

Some of the brands are reportedly sold at a loss and are priced not even enough to cover the combined excise tax and VAT payments.

Jacinto-Henares also explained such a proposed measure should emanate from the DOH since it's a health measure and not from the fiscal authorities.

Health advocates or anti-tobacco groups are seen to push for such legislation to complement their successful lobby to have the Graphic Health Warning law enacted.

The suggestion of minimum floor price also comes amid calls on the government to immediately address the issue on illicit trade in the country that resulted in about P15.6 billion in foregone revenues in 2013 alone.

According to the report by London-based Oxford Economics, total illicit cigarette consumption in the country tripled last year to 19.1 billion sticks from only 6.3 billion in a year before, while legal consumption fell to 86.3 billion from 102.2 billion sticks.

Congress recently enacted the DOH-driven Graphic Health Warning law mandating picture warnings on cigarette packs on top of existing text warnings while the BIR will roll out next month its tax stamp regulation, mandating the affixing of security stamps on cigarette packs to also curb smuggling. Enditem