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Title 3: TRAIN Law: The impact of the excised tax on Cigarettes to Sari-sari Stores in Calbayog City

Kelly: Good morning, panelists! I hope that you had a very bright and good morning. This time we will
discuss the 3rd, Title. TRAIN Law: The impact of the excised tax on Cigarettes to Sari-sari Stores in
Calbayog City. The Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion or
TRAIN, was signed into Law on December 19, 2017 by President Rodrigo R. Duterte which took
effect on January 1, 2018.
Danica: The TRAIN aims to make the Philippine Tax System simpler, fairer, and more efficient to
promote investments, create jobs and reduce poverty. There are changes involved in this law which
includes amendments to several provisions of the National Internal Revenue Code of 1997 on excise
tax on cigarettes under Section 145.
Kelly: That is right, Ate Danica. As you can see on the screen, the RA 10963 increases the excise tax
rates on cigarettes packed by hand and packed by machine. From 30 pesos on 2018 to an annual
4% increase every year form 40 pesos.

Danica: Taxation is really an inherent power of the state. The government has been devising ways to
deter the public from smoking cigarettes and one thing that they consider is when the price of the
cigarettes went high, the smokers will limit or decrease their consumption of cigars or cigarettes.
Kelly: With that information, we ended up being curious into something. If the TRAIN LAW directly
affects the manufacturers, since they are the statutory taxpayers liable to file the return and pay the
taxes, how about the purchasers or the owners of stores who do not have a big capital or enough
money to add to their capital? How can they survive if their income depends primarily on selling
cigarettes? And many more to be mentioned.
Danica: That is the reason why we come up with the title: TRAIN Law: The impact of the excised tax
on Cigarettes to Sari-sari Stores in Calbayog City.
: Mai-Huong Vo and Ngoc - Anh Nguyen 2023 argued about the existence of a pass through
rate and the split of the tax burden between consumers and producers. Moreover, the tax burden can
be passed on to consumers to varying degrees, depending on demand conditions.
Kelly: The following are the variables that we acknowledge:
 1. Retail Cigarette Prices- excise taxes are typically levied at a specific rate per unit like
per pack or per piece of cigarette. Sari-sari stores often pass on the burden of these by
increasing the retail prices of cigarettes.
Danica:
2. Industry price-related- Sari-sari store may adopt different pricing strategies based on
their competitive positioning within the industry. Some retailers might absorb a portion
of the excise tax increase to maintain lower prices and attract price-sensitive
consumers, while others may pass on the full cost to maintain profitability.
Kelly
3. Selling Strategies- Sari-sari stores use different kinds of strategies in promoting their
products especially the brand names of the cigarettes that they sell to their customers.
One of these are the use of prominent and visually appealing in-store displays to
showcase a variety of cigarette brands.
Danica:
4. Brand Switching- Higher excise taxes lead to increased retail prices for cigarettes.
Some consumers may respond by switching to lower-priced or discount cigarette
brands to mitigate the impact on their budgets. This shift in consumer behavior can
affect the sales volume and revenue for higher-priced brands, potentially impacting
retailers who predominantly carry those brands.
Kelly:
5. Purchasing Frequency of Customer- Customers who purchase cigarettes more
frequently may be more sensitive to price changes. If excise taxes lead to higher retail
prices, these frequent buyers might be more inclined to explore cheaper alternatives or
reduce their overall consumption. Also, the impact of excise taxes on their purchasing
behavior can influence overall customer loyalty.
Danica:
6. Purchasing Quantity- Sari-sari stores may reduce or purchase cigarettes in larger
quantities can contribute to supply chain efficiency. The ability to buy in bulk may
enable retailers to negotiate better terms, discounts, or more favorable credit
arrangements, helping them manage the impact of excise tax-induced price increases.
Kelly
7. Purchasing location- The geographic distance between retailers and suppliers can
affect transportation costs. Retailers located closer to their suppliers may benefit from
lower shipping costs, allowing them to manage overall expenses, including those
related to excise taxes.

Danica:
Now we will proceed to the different research gaps we have found in relation to excise tax on
cigarettes. Gap no.1 (read pptx), gap no.2 (read pptx), gap no.3 (read pptx), gap no.4 (read pptx),
and gap no.5 (read pptx). These are the particular areas of excise tax on cigarettes that remains
unexplored or under explored. Identitying these gaps is crucial for us researchers, as it helps guide
future investigations and contributes to the advancement of knowledge in that particular field of study.