The Department of Finance (DoF) has endorsed proposals in Congress to increase taxes on cigarettes by P1 to P2 per pack in a bid to plug loopholes in revenue collections on these so-called "sin products."

A P2 per pack increase in taxes on cigarettes is expected to raise P9 billion in additional revenues for the cash-strapped government which is on the brink of a fiscal crisis.

The DoF made the endorsement in a hearing last week by the House ways and means committee which will also tackle adjustments to the taxes of other sin products such as tobacco and liquor, after wrapping up deliberations on the proposed tax amnesty bill.

Rep. Marcelino Libanan noted that the government was losing revenues in the current four-lined system for tobacco products in which taxes varied per price bracket.

This means that under the current system, the lower the price of a cigarette brand, the lower is its tax. This has resulted in the production of cheaply priced cigarette brands.

Libanan is the author of House Bill No. 2733 which seeks to slap a uniform P1 per pack tax on all cigarette products.

Rep. Crispin Remulla has proposed a higher tax of P2 per pack.

The P2 per pack tax increase is contained in Remulla's House Bill No. 2871 which provides that a uniform tax increase would discourage further consumption shifts in favor of low tax brands.

Remulla noted that with the country's current consumption volume of 4.5 billion packs of cigarettes per year, the P2 tax would result in additional revenues of P9 billion.

The Libanan and Remulla bills also provide for automatic increases in tax rates every two years based on inflation-adjusted average tax rates.