The approval on Wednesday night of the so-called "sin tax" reform bill may force smokers to kick the habit but not liquor drinkers.
Proponents of House Bill 5727 agreed to water down the Malacanang-backed measure but this reportedly benefited only manufacturers of fermented alcoholic drinks such as beer.
Despite the reduction in tax rate reflected in the original bill, tobacco products will still pay steep rates as soon as the measure is enacted.
Reacting to the 210 to 21 approval of the measure, Zambales Rep. Mitos Magsaysay lamented the House's failure to address the inequities in the approved version of the restructured excise tax system which did not include amendments proposed by lawmakers from the country's tobacco-producing regions.
Northern Luzon congressmen led by La Union Rep. Victor Ortega had proposed a three-tiered tax system for cigarettes and more reasonable rates as part of a compromise proposal that would take into account the plight of over 2.9 million Filipinos dependent on the tobacco industry.
But his appeal was flatly rejected by the pro-administration bloc in the chamber that approved instead a two-tiered system that would slap tax adjustments of up to 700 percent on low-priced locally produced cigarette brands.
Magsaysay said that edging low-priced cigarettes out of the market as a result of this absurd tax system will pave the way for the entry of untaxed, smuggled cigarettes and counterfeit brands in the country.
The resurgence of cigarette smuggling in both industrialized and developing countries that have imposed excessive tax hikes on tobacco products prove that high taxes are counterproductive.
HB 5727 originally sought to impose a P10 tax per cigarette pack if the net retail price is P22 while the adopted version imposes a P12 tax per pack for cigarettes with retail prices of P11.50 and below starting 2013.
Under the old version, a tax of P30 is charged if the retail price was more than P10 per pack while the new version imposes P28.30 if the price is above P11.50.
The old bill levies a uniform tax of P30 per pack starting 2014 while the adopted version carries a two-tiered taxation which imposes a tax of P22 per pack of the price is below P11.50 and P30 if it is above P11.50.
The approved version adopted the provision which provides that rates of tax imposed shall be increased by eight percent every two years thereafter effective January 1, 2015.
For fermented liquor like beer, except tuba, tapuy and similar liquors, the original bill adopted a three-tier taxation based on an excise tax of P25 per liter provided that every year thereafter, the excise tax rate shall be adjusted to its present value using an appropriate price index for alcoholic drinks as published by the National Statistics Office.
It provides that if retail price per liter of volume capacity is less than P14.50, the tax is P8.27 per liter.
The new bill however provides for a two-tier system, imposing a tax of P13.75 starting 2013 if the retail price per liter is P50.60 or less.
The original bill charges P12.30 for net retail prices worth P14.50 up to P22 while the new version carries an P18.80 tax if the price is more than P50.60 per liter.
The original bill also imposes a P16.33 tax if the price of the products is P22 but this was disregarded under the adopted version.
Cagayan De Oro City Rep Rufus Rodriguez noted that the governments of the United Kingdom, Singapore, Malaysia, Canada and Sweden, among others, had to reverse their high tax policies on tobacco products to control smuggling.
He said: "In some cases like the UK, the share of smuggled cigarettes reached 40 percent of the market after the government imposed high tobacco taxes. The increases imposed in the countries we have mentioned does not even come close to the whopping 700 percent tax hike for low-priced cigarettes that they are proposing here."
"Imagine what would happen if this pushes through. The local market will be teeming with smuggled cigarettes that have passed undetected through our highly undermanned, porous borders," Rodriguez added.
The bill's final version heavily favors foreign imported cigarette brands and alcohol products, particularly beer, with lower tax rates