Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS

Second Regular Session

House Bill No__ 9013

Introduced by HON. ELEANDRO JESUS F. MADRONA.

EXPLANATORY NOTE

The passage of Republic Act 10351 or the Excise Tax Reform Law in 2012
enabled the government to achieve some gains in additional revenues. However, it has
created copious questions and issues with regard to tax collections as well as tax
evasion and it has failed to considerably reduce smoking incidence

Considering that this law was enacted on the premise that higher excise taxes
would also bring better tax collections and would make smoking less affordable for
smokers, particularly the youth, additional solutions need to be brought to bear so the
country can address these unintended consequences with a view to benefit the general
public,

In a survey commissioned by the Department of Health (DOH), the Social
Weather Stations (SWS) reported that while there was a reduction in cigarette
consumption in some socio-economic classes and age groups, the overall smoking
incidence had not significantly decreased since R.A. 10351 came into effect. This
means that there are still 20 million smokers today in the Philippines, the same number
of smokers as in 2011, prior += to. the_~—s'tax _ increase.

Based on the same SWS survey, 45 percent of smokers merely switched to
cheaper brands when tax increased. Undoubtedly, this is due to the proliferation of
super cheap or discount brands in the market. When a cigarette pack or stick is sold
very cheap, smokers including the youth, have easy access to affordable cigarettes
resulting in the lack of change in overall smoking __ incidence

Under the new tax structure, any cigarette manufacturer that sells products
below the tax it pays to the government is not operating in the spirit of achieving one of
the intentions of RA 10351, which is to reduce the overall smoking incidence especially
among the youth. Any cigarette manufacturer that sells products at cheap prices by
avoiding paying tax is doing so against the laws of the country and is simply producing
and selling products at more affordable prices to smokers, including the youth. This is
also contrary to the — spirit. and = objective of += RA 10351

While the newly-enacted Graphic Health Warning Law or Republic Act 10643
aims to further discourage youth smoking by attaching scary pictures on cigarette
packs, it needs to be complemented with some form of price discipline


This is because a young smoker needs to buy or have a face-to-face encounter with a
graphic-laden cigarette pack before the desired impact of the law is achieved

Meanwhile, the mere recitation of the minimum cigarette price would be
enough for a young smoker to reconsider and realize that buying cheap is no longer a
pocket-friendly option

This bill also aims to bring to life the following provisions of the 1987 Constitution
which states that: “The State recognizes the vital role of the youth in nation-building and
shall promote and protect their physical, moral, spiritual, intellectual, and social well-
being (Section 13, Article i” and “The State shall protect and promote the right to
health of the people and instill health consciousness among them (Section 15, Article
ne

Setting a Minimum Cigarette Price (MCP) per pack of cigarettes will decisively
deny youth access to cheap affordable cigarettes and support the beneficial health
impact of the excise tax reform law by delivering the following

1) Tobacco players who resort to tax evasion will no longer be able to sell their
products at cheap affordable prices;

2) There will be no more price discounting or offers of cheap affordable
cigarettes below MCP;

3) _ Increased revenue for government through higher tax and VAT collection;
and

4) Robust enforcement of significant financial penalties and imprisonment for
repeat offenders.

The Department of Trade and Industry (DT!), in coordination with the Bureau of
Internal Revenue (BIR), shall implement this initiative

In view of the foregoing, the passage of this bill is earnestly requested.

oa

ELEANDRO JESUS F. MADRONA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
Second Regular Session

House Bill No. 5013

Introduced by HON. ELEANDRO JESUS F. MADRONA

“AN ACT TO PREVENT YOUTH ACCESS TO TOBACCO BY MANDATING A.
MINIMUM CIGARETTE PRICE”

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

Section 1. Short Title— This Act shall be known as “The Minimum Cigarette
Price Law."

SEC. 2. Declaration of Principles.— The State shall protect and promote the
right to health of the people and instill health consciousness among them. The State
also recognizes the vital role of the youth in nation-building and shall promote and
protect their physical, moral, spiritual, intellectual, and social well-being.

SEC. 3. Purpose. - The objectives of this Act are:
a

To impose a Minimum Cigarette Price (MCP) per pack on cigarettes in order
to prevent access of smokers, particularly the youth, to cheap cigarettes;
b)

To address tax evasion of tobacco companies selling cigarettes at cheap
prices;

¢) To prevent discounting and price offers below the MCP; and

d) To bring in fresh revenues for government as tax evasion is averted and
value added tax (VAT) collection will increase with a corresponding increase
in the prices of cigarettes.

SEC. 4. Coverage.— This Act shall apply to all locally-manufactured and
imported cigarettes intended for sale in the Philippines.


SEC. 5. Definition of Terms. — As used in this Act:

a) “Cigarette” refers to any roll or tubular construction, which contains tobacco
or its derivatives and is intended to be burned or heated under ordinary
conditions of use;

“Minimum Cigarette Price” (“MCP”) means the floor price of cigarettes per
pack sold by manufacturers, importers and retailers to consumers. When

b)

cigarettes are sold per stick, the aggregate price of the individual sticks in a
pack should not be less than the MCP per pack. The MCP shall apply to
cigarettes packed by machine in twenties (20s);

Cc)

“Operating Cost” refers to non-production cost such as marketing,
distribution, selling and other operating related expenses; and
d)

“Production Cost” means the basic cost incurred in producing a pack of
cigarettes, including among others, all other costs associated with cigarette
manufacturing such as tax stamps, warehousing costs, freight, transportation,
security, insurance and other production-related expenses.

SEC. 6. Minimum Cigarette Price — Within thirty (30) days after the effectivity
of this Act, the Department of Trade and Industry (DTI) and the Bureau of Internal
Revenue (BIR) shall issue a price memorandum or advisory specifying the MCP on a
pack basis, as follows

Effective on January 1, 2015, Thirty-eight pesos (Php38.00) per pack;
Effective on January 1, 2016, Forty-four pesos (Php44.00) per pack; and
Effective on January 1, 2017, Fifty-one pesos (Php51.00) per pack

Thereafter, consistent with the increase in excise taxes under Republic Act No.
10351, the MCP shall likewise be increased annually by four percent (4%) effective
January 1, 2018, through a similar price memorandum or advisory issued by the
aforementioned agencies.

In the computation of the MCP, the following components were taken into
consideration: excise tax, VAT, production cost, operating cost and annual inflation.

SEC. 7. Selling Below MCP.— It shall be unlawful for any manufacturer,
importer or retailer to sell cigarettes less than the MCP. When cigarettes are sold per
stick, the aggregate price of the individual sticks in a pack should not be less than the
MCP per pack.


SEC. 8 Prohibition on Price Promotions Related to MCP. - No
manufacturer, importer or retailer shall engage in price promotion that would undermine
the purpose of this Act

SEC. 9. Implementing Agencies. — The DTI, in coordination with the BIR, shall
implement the provisions of this Act and shall be vested with the following powers and
functions:

a) Promulgate and publish within three (3) months from the effectivity of this Act

the necessary implementing rules and regulations;

b) Cause the immediate dissemination of the MCP, including liabilities such as
fines and penalties in case of violation, through publication in a newspaper of
general circulation or other means of communication deemed effective to
convey the information to the public, such as radio, television and other mass
media;

¢)

Deputize law enforcement agencies such as the Philippine National Police,
National Bureau of Investigation and the Bureau of Customs as well as local
government units to effectively implement this Act;

d)

Without prejudice to the power to issue temporary closure or temporary
restraining order for a period which shall not be more than ten (10) days, the
aforesaid implementing agencies may, after due notice and hearing, issue
cease and desist orders, reprimand, censure, suspend, revoke or cancel any
permit, license, authority or registration or order the permanent closure of any
establishment violating the provisions of this Act; and

Require tobacco manufacturers and importers to submit quarterly sworn
declarations of their selling prices or as frequently as may be required under
the implementing rules and regulations.

e)

SEC. 10. Liability of Manufacturers, Importers and Retailers. Tobacco
manufacturers, importers and retailers shall be directly liable for violations of Sections 6,
7 and 8 of this Act. In the case of a business entity or establishment, the owner,
president, manager and the corporate officials thereof shall be directly responsible and
shall be made accountable.

SEC. 11. Penalties for Non Compliance— Imprisonment for a period of not
less than six (6) months nor more than five (5) years and a fine ranging from Fifty
Thousand Pesos (Php50,000.00) up to Two Million Pesos (Php2,000,000.00)
depending on the quantity of cigarettes, shall be imposed upon any manufacturer,
importer or retailer who sells any cigarettes less than the MCP, or who violates any


provision of this Act or any order, rule or regulation issued pursuant to this Act. In case
of a business entity or establishment, both penalties shall apply in addition to the
suspension or revocation of business licenses or permits.

Whenever any of the offenses described above is committed by a corporation or
association, the president and each of the directors or managers of said corporation or
association, or its agent or representative in the Philippines in case of a foreign
corporation or association who shall have knowingly permitted or failed to prevent the
commission of such offenses, shall be held liable as principals thereof.

SEC. 12. Separability Clause.— If any provision or part of this Act is declared
invalid or unconstitutional, other provisions which are not affected thereby shall
continue to be in full force or effect.

SEC. 13. Repealing Clause— All laws, orders, rules and regulations, or parts
thereof which are inconsistent with the provisions of this Act are hereby modified or
repealed accordingly

SEC. 14. Effectivity— This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in at least two (2) newspapers of general
circulation

Approved,