Publishing Amendments to Section 137, now Section 149 of the National Internal Revenue Code of 1977, Pursuant to Presidential Decree No. 1158, titled "A Decree to Consolidate and Codify all the Internal Revenue Laws of the Philippines"

August 1, 1977 REVENUE MEMORANDUM CIRCULAR NO. 22-77 SUBJECT : Publishing Amendments to Section 137, now Section 149 of the National Internal Revenue Code of 1977, Pursuant to Presidential Decree No. 1158, titled "A Decree to Consolidate and Codify all the Internal Revenue Laws of the Philippines" TO : All Internal Revenue Officers and others concerned For the information and guidance of all concerned, quoted hereunder is the full text of Section 149 (formerly Section 137) of the National Internal Revenue Code of 1977, relating to cigarettes packed in 30's, among other things: "SEC. 149. Specific tax on cigars and cigarettes . On cigars and cigarettes, there shall be collected the following taxes: "(a) Cigars "(1) When the manufacturer's or importer's wholesale price, less the amount of the tax, does not exceed thirty pesos per thousand, on each thousand, two pesos and thirty centavos. "(2) When the manufacturer's or importer's wholesale price, less the amount of the tax, exceeds thirty pesos but does not exceed sixty pesos per thousand, on each thousand, four pesos and sixty centavos. "(3) When the manufacturer's or importer's wholesale price, less the amount of the tax, exceeds sixty pesos per thousand, on each thousand, seven pesos. "(b) Cigarettes "(1) On cigarettes packed in thirties, the retail price of which per pack does not exceed eighty centavos, on each thousand, three pesos. "(2) On cigarettes packed in thirties, the retail price of which per pack exceeds eighty centavos but does not exceed one peso on each thousand, five pesos. "(3) On cigarettes packed in thirties, the retail price of which per pack exceeds one peso but does not exceed one peso and ten centavos, on each thousand, eight pesos. "(4) On cigarettes packed in twenties, the retail price of which per pack does not exceed one peso and ten centavos, on each thousand, ten pesos. "(5) On cigarettes packed in twenties, the retail price of which per pack exceeds one peso and ten centavos, but does not exceed one peso and forty centavos, on each thousand, sixteen pesos. "(6) On cigarettes packed in twenties, the retail price of which per pack exceeds one peso and forty centavos, but does not exceed one peso and seventy centavos, on each thousand, eighteen pesos. "(7) On cigarettes packed in twenties, the retail price of which per pack exceeds one peso and seventy centavos, but does not exceed two pesos, on each thousand, twenty pesos. "(8) On cigarettes packed in twenties, the retail price of which per pack exceeds two pesos but does not exceed two pesos and fifty centavos, on each thousand, thirty two pesos. "(9) On cigarettes packed in twenties, the retail price of which per pack exceeds two pesos and fifty centavos, but does not exceed three pesos, on each thousand, forty pesos. "10) On cigarettes packed in twenties, the retail price of which per pack exceeds three pesos on each thousand, fifty pesos. "(11) If the cigarettes of local manufacturer are of foreign brands or trade marks and being manufactured locally under licensing agreements with the foreign brand or trade mark owners, the tax shall be increased by fifty per centum per thousand: Provided, That, any subsequent transfer or alienation of title or right over a cigarette brand or trade mark by a foreign owner to a local manufacturer in whatever manner, form or description shall not affect the rates of tax then prevailing after the effectivity of this Code. "(12) If the cigarettes of local manufacture are mechanically wrapped or packed, the tax shall be increased by one hundred twenty per centum per thousand. Cigarettes shall be considered mechanically wrapped or packed when at any stage of the wrapping or packing thereof, a machine or any mechanical contrivance shall have been used. "(13) If the cigarettes are of foreign manufacture, regardless of the retail price per pack or the manner of wrapping or packing thereof, on each thousand, eighty pesos. "Cigarettes subject to tax at lower rates before the effectivity of the new tax rates herein prescribed shall automatically be subject to the corresponding higher rates and there is nothing under this sub-section(b) which allows any downward reclassification of tax rates for existing brands of cigarettes duly registered at the time the herein rates become effective. "Duly registered and/or existing brands of cigarettes packed in 20's at the time of the new rates herein prescribed shall not be allowed to be packed in 30's. "The maximum price at which the various classes of cigars are sold at wholesale in the factory or in the establishment of the importer to the public shall determine the rate of the tax applicable to such cigars; and if the manufacturer or importer also sells, or allows to be sold, his cigars at wholesale in another establishment of which he is the owner or in the profits of which he has an interest, the maximum sales price in such establishment shall determine the rate of the tax applicable to the cigars therein sold: Provided , however, That when such maximum wholesale price is less than the cost of manufacture or importation plus all expenses incurred until the cigars are finally sold by the manufacturer or importer, such cost plus expenses shall determine the amount of tax to be applied. "Every manufacturer or importer of cigar shall file with the Commissioner on the date or dates designated by the latter, a sworn statement showing the maximum wholesale prices of cigars, together with the cost of manufacture or importation plus expenses incurred or to be incurred until the cigars are finally sold and it shall be unlawful to sell said cigars at wholesale at a price in excess of the one specified in the statement required by this Title without previous written notice to said Commissioner. In the case of imported cigars, the sworn statement required herein shall be accompanied by verified sales invoices of the manufacturers of the cigars as well as the consular invoice issued by a Philippine Consul, should one be available at the place of origin or shipment. "Every manufacturer or importer of cigarettes shall file with the Commissioner, on the date or dates designated by the latter, and often as may be required, a sworn statement showing, among other information, the brand or brands of cigarettes manufactured or imported; the approved maximum retail prices per pack of said cigarettes; and whether the cigarettes are mechanically wrapped or packed. In the case of imported cigarettes, the sworn statement required herein shall, in addition to the above information, be accompanied by a verified commercial invoice of the manufacturer of the cigarettes as well as the consular invoice issued by a Philippine Consul, if any, containing the information that Philippine Internal Revenue strip stamps have been affixed to each and every pack of cigarettes and that such pack bears the inscription "for export to the Philippines." "If the government of a foreign country permits the revenue stamps of such country to be affixed in the Philippines to tobacco (including cigars) or snuff manufactured in the Philippines and imported into such foreign country, internal revenue stamps of the Philippines may be affixed to tobacco (including cigars) or snuff manufactured in such foreign country to be imported into the Philippines from such foreign country, under such rules and regulations as the Commissioner of Internal Revenue with the approval of the Secretary of Finance may prescribe. "Except those used as samples, all packs of locally manufactured cigarettes shall, upon the effectivity of the new rates of tax herein prescribed, bear thereon in print the maximum retail prices at which the said cigarettes are sold. No cigarettes shall be allowed to be removed from any factory unless this requirement has been complied with. "Any manufacturer who, in violation of this section, knowingly misdeclares or misrepresents in his sworn statement herein required any pertinent data or information, including the approved maximum retail prices of its locally manufactured or imported cigarettes, and the manner of packing or wrapping thereof shall upon discovery be penalized by a summary cancellation or withdrawal of his permit to engage in business as a manufacturer or importer of cigarettes. If the violator is an alien, he shall be liable for deportation." Features of the Amendments 1. Under the National Internal Revenue Code of 1977, the maximum retail prices per pack of cigarettes packed in 30's have been increased without any change in the corresponding rates of specific tax thereon as follows: SECTION 149 (b) Cigarettes packed in 30's Maximum Retail Price Per Pack Paragraph Rate of Tax Old Price New Price Increase (1) P3.00 per M P0.60 P0.80 P0.20 (2) 5.00 per M 0.80 1.00 0.20 (3) 8.00 per M 1.10 l.10 None It was provided for under Sec. 137 of the old Tax Code and reiterated in Sec. 149(b) of the National Internal Revenue Code of 1977, there is nothing under this sub-section (b) which allows any downward reclassification of tax rates for existing brands of cigarettes duly registered at the time the herein rates become effective. Although the rates of specific tax for cigarettes packed in 30's under paragraphs (1), (2) and (3) have remained unchanged, the mere raising or increase of the maximum retail prices per pack of cigarettes taxable under paragraphs (1) and (2) does not authorize per se the downward reclassification of the tax rates for existing brands duly registered at the time the new Tax Code took effect as of the close of business hours, June 3, 1977. Illustration : Before the effectivity of the increase in the maximum retail price per pack of cigarettes packed in 30's, let us suppose Brand "A" has been previously registered under the P5.00 per M class with a maximum retail price of P0.80 per pack. Just because the maximum retail price per pack of cigarettes taxable at P3.00 per M has been increased from P0.60 to P0.80 per pack is no valid justification for the manufacturer of Brand "A" to apply for a downgrade reclassification of said brand from P5.00 to P3.00 per M class. Therefore, Brand "A" remains to be under the P5.00 per M class whether its maximum retail price of P0.80 per pack remains unchanged or is increased to a retail price over that price but not exceeding P1.00 per pack under the present provision of law. In order to update BIR records on existing brands of cigarettes packed in 30's at the time of the effectivity of the new Tax Code, the Chief, Manufactured Tobacco Tax Division, shall require all local manufacturers of this type of cigarettes to re-register those existing brands and submit to that Division new Manufacturers' Declarations, duly accomplished in accordance with tobacco tax regulations, within thirty (30) days from the date of the promulgation of this Revenue Memorandum Circular. The registration and manufacture of new brands of cigarettes packed in 30's now authorized under the new Tax Code shall be governed by the usual procedure and requirements prescribed by existing revenue regulations. 2. Under the provisions of paragraph (4) Section 131(b) of the Old Tax Code of 1939, cigarettes packed in 30's shall be packed in round shape only, consisting of 30 sticks for every package or 750 sticks for every roll, the latter wrapped in one secondary container. That statutory restriction on packaging of the so-called native type cigarettes has been repealed in toto under Section 149 of the National Internal Revenue Code of 1977 to enable local manufacturers of cigarettes packed in 30's to use more attractive or modern type of containers to enhance the salability of their products and thereby, increase their payments of specific tax to the government. 3. Section 137(b) of the old Tax Code, as amended, contained a provision that no new brand of cigarettes shall be registered or allowed to be manufactured if the same shall be packed in 30's. This statutory prohibition has been totally repealed in the new Tax Code of 1977 as it has served no useful purpose for either the government or the local cigarette industry. Because of that legal restriction, local manufacturers could not develop and promote new brands of cigarettes packed in 30's to replace their old brand which have already lost their markets. The repeal or lifting of that restriction is, therefore, intended to help the local cigarette manufacturers concerned so that they may be able to introduce new brands in the market in place of old brands that are no longer profitably feasible for them to manufacture and would only result in the decrease in their payment of specific tax. 4. The foregoing amendments now embodied in the National Internal Revenue Code of 1977 are effective as of the close of business hours (5:00 PM), June 3, 1977, when the President signed Presidential Decree No. 1158 on the codification of all internal revenue laws of the country. All internal revenue officers charged with the enforcement of cigarette tax laws and others concerned should give this Revenue Memorandum Circular as wide a publicity as possible. aisa dc EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8