Chapter 24
TOBACCO TAX STAMPS
At the time of the American occupation of the Philippines in 1898, tobacco products were not subject to any specific tax. The system of internal taxation existing at that time was considered very iniquitous by early American officials and they almost immediately set about tearing down the existing system of internal taxation by abolishing one after another various existing taxes. They did not, however, make immediate provision for new sources of revenue. This fact, coupled with the additional fact that as a result of the war the prosperity of the people was at a low ebb during the early years of American occupation, which shrunk from a total of more than 11,000,000 pesos in 1896-97 to less than 4,500,000 in 1902-03. The Philippine Government was threatened with a deficit and the need for new sources of revenue was apparent. These new sources of revenue was created by the Internal Revenue Law of 1904. One of the important new sources of revenue thus created was a specific tax upon the manufactured products of tobacco.

Mr. john S. Hord, one of the framers of the new internal revenue law and the first collector of Internal Revenue under the law, writing in 1907 said: "The question as to whether the United States system of affixing stamps to boxes of cigar packages of cigarettes, bottles and demijohns of liquors, etc... should be adopted in the Philippines Islands was carefully considered, and it was decided that such a system was not locally applicable." The method which Mr. Hord devised for collecting the specific tax upon tobacco products was the use by the manufacturer of an official invoice covering each original sale, to which the invoice was detached from its stub, one half of each stamp remained affixed to the stub while the other half was attached to the invoice. This method has been more fully treated in the chapter devoted to INTERNAL REVENUE stamps, remained in effect until August 31, 1914.

Section 28 of Act No. 1189, known as the Internal Revenue Law of 1904, required that the specific tax on tobacco products be paid by the affixture of INTERNAL REVENUE stamps, at the time of removal from the place of manufacture for domestic consumption, to the official invoice describing each such removal. As long as this provision was in effect no change in the manner of paying the specific tax on tobacco products was possible.

Section 28 of Act No. 1189 was repealed, however, by Act No. 2339, known as the Internal Revenue Law of 1914, which became effective on July 1, 1914. Sections 5 and 6 of this Act, in part, are as follows:
 

Section 5. "REGULATIONS OF THE BUREAU OF INTERNAL REVENUE. -- The Collector of Internal Revenue shall have the power, and it shall be his duty, to make regulations, not inconsistent with law, necessary to carry this Act into full effect and to secure a harmonious and efficient administration of his branch of the service. Such regulations may be either general or local in application and shall become effective as law when approved by the Department Head and published."

Section 6. "SPECIFIC PROVISIONS TO BE CONTAINED IN REGULATIONS. -- The Regulations of the Bureau of Internal Revenue, shall, among other things, contain provisions specifying, prescribing, or defining: (j) The manner in which the revenue shall be collected and paid, instrument, document, or object to which revenue stamps shall be affixed, the mode of cancellation of the same, the manner in which the proper books, records, invoices, and other papers shall be kept and entries therein made by the person subject to the tax, as well as the manner in which licenses and stamps shall be gathered up and returned after serving their purpose."

Since September 1, 1914, in accordance with the authority conferred upon him by the sections o Act No. 2339, above quoted, and other Acts which have succeeded Act No. 2339 in effect, the Collector of Internal Revenue has required that the specific taxes on tobacco products of domestic manufacture which are sold for domestic consumption be collected, prior to removal of such products from the place of manufacture, by affixing tobacco tax stamps, called Internal Revenue Strip Stamps, to the original packages of such manufactured products of tobacco. A separate series of Internal Revenue Strip Stamps is provided for each of the four principal manufactured products of tobacco - cigars, cigarettes, smoking tobacco and chewing tobacco. The label on the Internal Revenue Strip Stamps are classified as Cigar Stamps, Cigarette Stamps, Smoking Tobacco Stamps and Chewing Tobacco Stamps. The label also indicates the tax rate per thousand, or per kilogram, the price of the stamp and the quantity of manufactured tobacco in the package to which the stamp is to be affixed.

Although a specific tax has been levied upon snuff since August 1, 1904, not tobacco tax stamps have been provided for collection of tax on snuff. This is due to the fact that little or no snuff has been manufactured in the Philippines.

In accordance with the provisions of Act No. 1940, and of Executive Order No. 64, Series of 1901, specific taxes have been collected on imported tobacco products at the same rates as those collected on domestic manufactured tobacco products since August 7, 1909. Tobacco tax stamps are not, however, affixed to imported tobacco products in payment of the tax. The tax in paid by the importer in cash on each shipment before it leaves the Customs House.