Imposition of Ad Valorem Tax and Revision of the Specific Tax Rates and Maximum Retail Prices of Cigarettes

August 22, 1984

EXECUTIVE ORDER NO. 978

IMPOSING AN AD VALOREM TAX AND REVISING THE SPECIFIC TAX RATES AND MAXIMUM RETAIL PRICES OF CIGARETTES

WHEREAS, there is need to introduce on a gradual basis an ad valorem tax on cigarettes to provide built-in flexibility to price changes without endangering the viability of the cigarette industry; asia dc

WHEREAS, due to the increasing cost of production of cigarettes, it is also necessary to revise the statutory maximum retail prices to allow the manufacturers to adjust sales prices;

WHEREAS, in generating additional revenues to support the programs of government, it is necessary to devise an excise tax system that provides an equitable sharing in the additional tax burden.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, pursuant to the powers vested in me by law and under Section 290-B of the National Internal Revenue Code of 1977, as amended, do hereby direct and order that:

SECTION 1. Sub-paragraph (b), Section 149 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:

"(b) Cigarettes —

"(1) On cigarettes packed in thirties, the retail price of which per pack does not exceed two pesos on each thousand, three pesos and fifty centavos"

"(2) On cigarettes packed in thirties, the retail price of which per pack exceeds two pesos but does not exceed two pesos and forty centavos, on each thousand, six pesos;

"(3) On cigarettes packed in thirties, the retail price of which per pack exceeds two pesos and forty centavos, on each thousand, nine pesos;

"(4) On cigarettes packed in twenties, the retail price of which per pack does not exceed four pesos and fifty centavos, on each thousand, twenty-five pesos;

"(5) On cigarettes packed in twenties, the retail price of which exceeds four pesos and fifty centavos, but does not exceed five pesos and sixty centavos, on each thousand, thirty-five pesos;

"(6) On cigarettes packed in twenties, the retail price of which exceeds five pesos and sixty centavos, but does not exceed six pesos and eighty centavos, on each thousand, forty pesos; asia dc

"(7) On cigarettes packed in twenties, the retail price of which exceeds six pesos and eighty centavos, but does not exceed seven pesos and fifty centavos, on each thousand, fifty-seven pesos and fifty centavos;

"(8) On cigarettes packed in twenties, the retail price of which exceeds seven pesos and fifty centavos, but does not exceed eight pesos, on each thousand, eighty pesos;

"(9) On cigarettes packed in twenties, the retail price of which exceeds eight pesos, but does not exceed nine pesos, on each thousand, one hundred-fourteen pesos;

"(10) On cigarettes packed in twenties, the retail price of which exceeds nine pesos, on each thousand, one hundred fifty-one pesos;

"(11) If the cigarettes are of foreign manufacture regardless of the retail price or contents per pack, on each thousand, one hundred fifty-one pesos."

SECTION 2. The provisions of Section 186-A of the National Internal Revenue Code as amended, is hereby further amended to read as follows:

"SEC. 186-A. Ad Valorem Tax. — In addition to the specific tax imposed under Section 149 (b) of this Code, there shall be levied, assessed and collected an ad valorem tax on the manufacturer's or importer's gross selling price, net of specific tax, of the cigarettes to be removed from the place of production or to be removed from the place of production or to be released from customs custody which shall be paid by the manufacturer or importer, as the case may be, at the same time as specific tax as follows:

"On cigarettes packed in thirties	2%
"On cigarettes packed in twenties including those of foreign manufacture regardless of the contents per pack	4%

"The price at which the different brands of cigarettes are sold at wholesale in the factory or in the establishment of the importer or through their sales agents to the public shall determine the amount of tax due thereon; and if the manufacturer or importer also sells or allows to be sold, his cigarettes at wholesale in another establishment, of which he is the owner or in the profits which he has an interest, the wholesale price in such establishment shall determine the amount of tax applicable to the cigarettes therein sold: Provided, However, That when such price is less than the cost of manufacture or importation plus all expenses incurred until the cigarettes are finally sold by the manufacturer or importer, such plus expenses shall determine the amount of tax to be collected.

"Every manufacturer or importer of cigarettes shall file with the Commissioner on the date or dates designated by the latter, and as often as may be required, a sworn statement showing, among other information, the different brands of cigarettes manufactured or imported and their corresponding wholesale prices, together with the cost of manufacture or importation plus expenses incurred or to be incurred until the cigarettes are finally sold. It shall be unlawful to sell said cigarettes at wholesale at a price in excess of the one specified in the statement required herein without previous written notice to the Commissioner. In case of imported cigarettes, the sworn statement required herein shall be accompanied by verified sales invoices of the manufacturer of the cigarettes as well as the consular invoice issued by a Philippine Consul, should one be available at the place of origin or shipment, and that every pack of cigarettes shall bear the inscription "FOR EXPORT TO THE PHILIPPINES".

"Any manufacturer or importer who, in violation of this Section, accordingly misdeclares or misrepresents in his sworn statement herein required or in his sales invoice any pertinent data or information 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."

SECTION 3. The manufacturer's or importer's wholesale price of cigarettes subject to the herein ad valorem tax shall in no case be less than the prevailing wholesale price exclusive of the specific tax registered with the Bureau of Internal Revenue prior to the effectivity of this Order.

SECTION 4. The Minister of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate the necessary rules and regulations to effectively implement the provisions of this Order.

SECTION 5. All laws, rules and regulations inconsistent herewith are hereby repealed or amended accordingly.

SECTION 6. The revised ad valorem tax shall take effect on September 3, 1984 and the revised specific tax rates shall take effect on October 1, 1984.

DONE in the City of Manila, this 22nd day of August, in the year of Our Lord, Nineteen Hundred and Eighty-Four.

Published in the Official Gazette, Vol. 81 No. 8 page 719 on February 25, 1985.