AMENDING PARAGRAPH (f) OF SECTION 126 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED.

WHEREAS, there is need to provide additional safeguards for
the proper implementation of Presidential Decree No. 2007 which increased the
tax rates and maximum retail prices of cigarettes.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Republic of the Philippines, by virtue of the powers vested in me by the
Constitution, do hereby order and decree:

SECTION 1. Paragraph (f) of Section 126 of the National
Internal Revenue Code, as amended, is further amended to read as follows:

“SECTION 126.-

“(f) Effect of Change of Rates & Classification. — A change in
specific tax rates and maximum retail prices of cigars and cigarettes per tax
bracket shall not allow a downward re-classification of the tax bracket of any
existing cigar or cigarette brand.

“In case a manufacturer introduces a new category of cigarettes using a
foreign brand or trademark under a licensing agreement, for tax purposes, the
maximum retail price of such cigarettes shall in no case be lower than the
prevailing maximum retail price of an existing category of cigarettes using a
foreign brand or trademark of comparable quality, blend, cost of production and
other relevant factors.

“Duly registered and/or existing brands of cigarettes packed in twenties
shall not be allowed to be packed in thirties.”

SEC. 2. Under P.D. No. 2007, the per bracket specific tax
rates, except on cigars, have been increased by 42% to 50%. Cigarettes taxed
under a particular tax bracket before the change in rates shall automatically be
subject to the new specific tax rate corresponding to the said bracket. No
cigarette manufacturer or producer shall be allowed to pay on their cigarette
brands an amount less than 142% of the applicable specific tax rates before the
change.

SEC. 3. Effectivity.—This Decree shall take effect
on January 6, 1986.

Done in the City of Manila, on this 11th day of January, in the year of Our
Lord, nineteen hundred and eighty-six.