Senate holds off action on cigarette tax hike bill

Senators held off action on a House bill increasing cigarette tax from $2 to $4 a pack, after the Senate Fiscal Affairs Committee decided to further review the measure to strengthen its enforcement provisions. Moreover, the Senate panel recommends that instead of an outright $2 increase, it would be done gradually—$1 increase for two years after March 31, 2014, and another $1 hike thereafter to reach the $4 a pack cigarette tax.

“What good is increasing taxes if there is no proper enforcement of provisions in place?” Sen. Paul Manglona (Ind-Rota), a member of the Fiscal Affairs Committee, told Saipan Tribune yesterday.

Manglona asked the committee to further review and amend the bill, before bringing it to the floor for a vote.

The Senate committee will work on the enforcement provisions with the help of the Department of Commerce’s Alcoholic Beverages and Tobacco Control Division, Manglona said.

Prior to the Senate session last week, the Fiscal Affairs Committee chaired by Sen. Jovita Taimanao (Ind-Rota) was already ready with its committee report.

The committee recommends amending House Bill 18-118, authored by House floor leader Ralph Demapan (Cov-Saipan), to make the $2 cigarette tax increase a gradual one.

“Your committee recommends that the cigarette tax shall be increased by $1 for a total of $3 per pack for two years after March 31, 2014. Thereafter, the cigarette tax shall be increased by another $1 for total of $4 per pack,” the committee said in its three-page report.

Of the eight members of the Fiscal Affairs Committee, six signed off on the report.

The committee acknowledges the increase in non-communicable diseases in the CNMI, and its negative impacts.

The panel notes public comments that the original bill’s intent of increasing cigarette tax by $2 is “excessive and that it could potentially hurt businesses.”

Others said imposing steep cigarette tax would force many to resort to buying illegal or smuggled cigarettes, which would have lower prices.

The Senate Fiscal Affairs Committee said it still strongly believes that the promotion of healthy living in the CNMI outweighs the costs of raising cigarette taxes.

“Your committee, however, finds that a gradual increase in the cigarette tax achieves the intent of the bill while making the tax increase more palatable to the business community,” the report said.