Imposing an Ad Valorem Tax and Revising the Specific Tax Rates and Maximum Retail Prices of Cigarettes

EXECUTIVE ORDER NO. 978 August 22, 1984

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;

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:

Sec. 1. Sub-paragraph (b), Section 149 of the National Internal Revenue Code, as amended, is...

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Summary of Executive Order No. 978

Imposing an Ad Valorem Tax and Revising the Specific Tax Rates and Maximum Retail Prices of Cigarettes

- Introduces an ad valorem tax on cigarettes in addition to the specific tax to provide flexibility to price changes (Sec. 2)
• For cigarettes packed in thirties: 2% ad valorem tax on manufacturer's or importer's gross selling price, net of specific tax
• For cigarettes packed in twenties (including foreign manufacture): 4% ad valorem tax on manufacturer's or importer's gross selling price, net of specific tax

- Revises the specific tax rates on cigarettes based on retail price per pack (Sec. 1)
• For cigarettes packed in thirties, the specific tax ranges from ₱3.50 to ₱9 per thousand, depending on the retail price per pack
• For cigarettes packed in twenties, the specific tax ranges from ₱25 to ₱151 per thousand, depending on the retail price per pack
• For foreign-manufactured cigarettes, the specific tax is ₱151 per thousand, regardless of retail price or contents per pack

- Requires manufacturers and importers to file a sworn statement with the Commissioner of Internal Revenue (Sec. 2)
• The statement should show the different brands of cigarettes, their corresponding wholesale prices, and the cost of manufacture or importation plus expenses incurred until final sale
• It is unlawful to sell cigarettes at a wholesale price higher than the one specified in the statement without prior written notice to the Commissioner
• For imported cigarettes, the statement should be accompanied by verified sales invoices and consular invoices, and every pack should bear the inscription "FOR EXPORT TO THE PHILIPPINES"

- Imposes penalties for misdeclaration or misrepresentation in the sworn statement or sales invoice (Sec. 2)
• The penalty is summary cancellation or withdrawal of the permit to engage in business as a manufacturer or importer of cigarettes
• If the violator is an alien, they shall be liable for deportation

- Requires the manufacturer's or importer's wholesale price of cigarettes subject to the ad valorem tax to be no 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 (Sec. 3)

- Authorizes the Minister of Finance, upon recommendation of the Commissioner of Internal Revenue, to promulgate the necessary rules and regulations to effectively implement the provisions of this Order (Sec. 4)

- Repeals or amends all laws, rules, and regulations inconsistent with this Order (Sec. 5)

- Sets the effective dates (Sec. 6)
• The revised ad valorem tax shall take effect on September 3, 1984
• The revised specific tax rates shall take effect on October 1, 1984