Cheap cigarette brands keep Filipinos puffing
Cigarette consumption in the Philippines fell - but only marginally - in the second quarter from a year ago, with an increase in the production of cheap brands helping keep the demand up despite a hike in taxes.
Industry data showed that average cigarette consumption at 14.13 sticks a day in the second quarter compared to 14.84 sticks in the same period last year.
Daily consumption was an average 13.53 sticks in the first quarter of the year, but rose to more than 14 per cent between April and June as some cigarette firms increased the production of cheaper brands.
Data showed the market share of cheap brands rising from 5 per cent last year to 30 per cent in June this year.
Industry players said the market share of cheap brands could rise further as the tax on cigarettes increases annually.
Brands selling cigarettes at 1 peso (7 satang) a stick include Mighty Corp and Philip Morris Fortune Tobacco Corp.
The sin tax reform law, which took effect in January, mandates an annual increase in excise on cigarette and alcohol products. The rates of increase are specified for this year up to 2017. Afterwards, cigarette tax rates shall rise 4 per cent annually to cover inflation.
The new cigarette tax rates effective this year are: 12 pesos per pack for brands retailing for 11.50 pesos or less, and 25 pesos per pack for brands retailing at more than 11.50 pesos per pack.
The objectives of this law are to boost government revenues and discourage smoking.
However, some cigarette firms are trying to prevent a substantial drop in demand by producing cheaper brands.
For 2013, the government projects a collection of 51.6 billion pesos in excise taxes on cigarettes. This is on top of the 6.2 billion pesos in value-added taxes and 6.7 billion pesos in corporate income taxes that it aims to collect from cigarette firms this year.
The excise tax collection target for this year includes 33.9 billion pesos in incremental revenues estimated to come from the tax-rate hike.
