WHEREAS, the local textile industry has been experiencing
lately a depressed market brought about by global inflation and rising
production costs;
WHEREAS, the local textile industry may experience further
drops in its export sales which may be brought about by competition from
other countries which have rationalized their textile industries to
attain economies;
WHEREAS, in order to help and promote the local textile
industry, bail them out of distressed conditions and meet foreign
competition, certain tariff incentives must be provided to reduce its
production cost;
WHEREAS, for health reasons, there has been a growing
preference for filter-tipped cigarettes here and abroad as may be
readily noted in the very significant trend toward the production of
said type of cigarettes even in the local cigarette industry;
WHEREAS, the increasing demand for cigarette filter rods by
the local cigarette industry has encouraged local entrepreneurs to
engage in the local manufacture of said filter rods, thereby
contributing to the dollar conservation program of the government even
in a modest degree;
WHEREAS, the development and growth of the local cigarette
filter rod industry, whose major raw material, acetate tow, is derived
from wood pulp, will be in line with the government's objective to
accelerate the economic development of the country by utilizing local
indigenous materials in the manufacture of industrial products with the
use of Filipino skill and labor.
WHEREAS, under the prevailing system of taxation, local
cigarette manufacturers producing filter rods for their own use in the
production of their brands of cigarette enjoy an undue advantage over
other cigarette manufacturers who patronize locally-made filter rods as
the former are exempt from the payment of advance sales tax on their
importation of acetate tow and other raw materials and are further save
from additional costs of packing, delivery and the like incidental
expenses, which situation results not only in an unfair competition in
the procurement of raw materials vital to the local cigarette industry
but also serves as a disincentive for the local producers of filter rods
to produce more to meet local demands as well as a barrier to a
possible participation in the world market for filter rods as a means of
bolstering our foreign exchange revenues;
WHEREAS, the exemption from advance sales tax of imported
materials to be used by the importer himself in the manufacture of
articles subject to specific tax provided in Section 183(B) of the Tax
Code was granted starting only in 1951 by Republic Act No. 594 when
there were still no local manufacturers of said imported materials.
Considering that there are now several local manufacturers of the
imported materials covered by the exemption, the continued grant thereof
prejudices local manufacturers, hence, the need for the removal of such
exemption in order to place, taxwise, local manufacturers on equal
footing with manufacturer of articles subject to specific tax, and at
the same time encourage and promote local manufacture of said articles;
WHEREAS, the specific tax on cigarettes is now based on
selling price and no longer on the kind of tobacco fillers and length,
thus rendering inapplicable to cigarettes the philosophy of the
exemption from the sales tax of articles used in the manufacture of
articles subject to specific tax;
WHEREAS, in line with the goals and objectives of the New
Society, it has now become imperative for the government to take a hand
in stabilizing the situation to insure fair competition in the local
cigarette industry as well as stimulate the development and growth of
the local manufacturers of cigarette filter rods and ultimately
encourage the exportation of locally produced filter rods.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers in me vested by the Constitution do
hereby decree and order as part of the law of the land: