AMENDING CERTAIN PROVISIONS OF PRESIDENTIAL DECREE NO. 1994 AND INCREASING THE SPECIFIC TAX ON CIGARETTES.

Preamble

WHEREAS, there is an imperative need to simplify the system
of taxation and make more efficient the collection of internal revenue
taxes;
WHEREAS, there is an urgent need for additional tax revenue
in support of our national economic recovery Program;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Republic of the Philippines, by virtue of the powers vested in me by the
Constitution, do hereby order and decree:

Section 1

SECTION 1. Section 126 of the National Internal Revenue
Code, as amended by Presidential Decree No. 1994, is hereby further amended to
read as follows:
"SEC. 126. Cigars and cigarettes. —There shall be
collected on cigars and cigarettes, 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; and
"(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 packed in thirties. — "(1) When the retail price per
pack does not exceed two pesos and forty centavos, on each thousand, five
pesos;
"(2) When the retail price per pack exceeds two pesos and forty centavos, but
does not exceed two pesos and ninety ceatavos, on each thousand, nine pesos;
"(3) When the retail price per pack exceeds two pesos and ninety centavos, on
each thousand, thirteen pesos and fifty centavos.
"(c) Cigarettes packed in twenties. — "(1) When the retail price per
pack does not exceed four pesos and fifty centavos, on each thousand, eighteen
pesos;
"(2) When the retail price per pack exceeds four pesos and fifty centavos,
but does not exceed six pesos, on each thousand, thirty six pesos;
"(3) When the retail price per pack exceeds six pesos, but does not exceed
seven pesos and fifty centavos, on each thousand, fifty pesos;
"(4) When the retail price per pack exceeds seven pesos and fifty centavos,
but does not exceed nine pesos, on each thousand, sixty pesos;
"(5) When the retail price per pack exceeds nine pesos, but does not exceed
ten pesos, on each thousand, eighty six pesos;
"(6) When the retail price per pack exceeds ten pesos, but does not exceed
eleven pesos, on each thousand, one hundred twenty pesos;
"(7) When the retail price per pack exceeds eleven pesos, but does not exceed
twelve pesos, on each thousand, one hundred and seventy pesos; and "(8) When the
retail price per pack exceeds twelve pesos, on each thousand, two hundred twenty
six pesos;
"(d) Imported cigarettes. — If the cigarettes are of foreign
manufacture, regardless of the retail price or contents per pack, on each
thousand, two hundred twenty six pesos;
"(e) Ad Valorem Tax on Cigarettes. — In addition to the specific tax
imposed herein, there shall be levied, assessed and collected a 2% (two percent)
ad valorem tax on cigarettes based on the gross selling price, net of specific
tax.
''(f) Effect of change of rates or classification. — Whenever there
is a change of tax rates or classification of cigars and cigarettes; no downward
re-classification for tax purposes of any existing brand shall be allowed, and
cigars and cigarettes subject to tax at a lower rate before such change shall
automatically be subject to the corresponding higher rate or classification.
“In case a manufacturer introduces a new category of cigarettes using a
foreign brand or trademark under a licensing agreement, for tax purposes, the
maximum retail price of such cigarettes shall in no case be lower than the
prevailing maximum retail price of an existing category of cigarettes using a
foreign brand or trademark of comparable quality, blend, cost of production and
other relevant factors.
"Duly registered and/or existing brands of cigarettes pack in twenties shall
not be allowed to be packed in thirties.
"(g) Determination of rates applicable to cigars. —The 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. 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 wholesale price
in such establishment shall determine the rate of the tax applicable to the
cigars therein sold. Should such price be less than the cost of manufacture or
importation, such cost and expenses incurred until the cigars are finally sold,
plus 10% thereof shall constitute the wholesale price.
"(h) Printing of rates of tax. — All packs of locally manufactured
cigarettes shall bear thereon, in print, the amount of specific tax per pack
except those used as samples. No cigarettes shall be allowed to be removed from
any factory unless this requirement has been complied with.
"(i) As a necessary and urgent measure to conserve foreign exchange and to
prevent possible revenue loss, henceforth the Bureau of Internal Revenue shall
not authorize the local manufacture of non-essential commodities as cigarettes,
fermented liquor and wine using brand names of foreign products under licensing
arrangements other than the many existing brand names now
authorized.

Section 2

SEC. 2. All Laws, Decrees, Executive Orders and Regulations,
and other issuances or parts thereof which are inconsistent with this Decree are
hereby repealed, amended or modified accordingly.

Section 3

SEC. 3. Effectivity. This decree shall take effect
immediately.
Done in the City of Manila, on this 3rd day of January, in the year of Our
Lord, nineteen hundred and
eighty-six.
(Sgd.) FERDINAND E. MARCOS
President of the
Philippines
By the President:
(Sgd.) JOAQUIN T. VENUS, JR.
Deputy Presidential Executive
Assistant

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