Congress ratifies sin tax bill

MANILA, Philippines - Prices of cigarettes will soon go up substantially after the Senate and the House of Representatives ratified the sin tax measure last night.

Voting 10-9 with no abstention, senators ratified the measure restructuring the taxes on tobacco and alcohol products. The House later followed with its own ratification.

The measure now awaits President Aquino’s signature. 

Those who voted in favor of the bicameral report were Senators Edgardo Angara, Franklin Drilon, Panfilo Lacson, Pia Cayetano, Miriam Santiago, Serge Osmeña, Francis Pangilinan, Manuel Lapid, Aquilino Pimentel III and Antonio Trillanes IV.

Those who voted against the measure were Senators Joker Arroyo, Jinggoy Estrada, Francis Escudero, Ferdinand Marcos Jr., Ralph Recto, Vicente Sotto III, Gregorio Honasan, Ramon Revilla Jr. and Senate President Juan Ponce Enrile.

Senators Manuel Villar, Loren Legarda, Alan Cayetano and Teofisto Guingona III were absent yesterday.

Prior to the voting, senators took turns voicing their concerns about the measure.

Enrile sought an explanation on why the aggregate target revenue was reduced to P35 billion. Enrile also wanted to know whether the reduction was cleared by President Aquino.

Marcos said the discussions on the measure were “rushed,” and that “we were put in a position to take it or leave it.” He said the bill will effectivelydestroy the tobacco industry.

Recto said he did not sign the bicam report because the panel did not agree with his proposal to earmark specific funds for health-related concerns.

“When these were removed, we are now not assured that the generated revenue will indeed be used for health,” Recto said.

Drilon explained that they needed to “bargain” during the bicameral meeting, which is why the target revenue is now lower than the Senate version of P40 billion, and way below the initial P60-billion target of the finance department and the Bureau of Internal Revenue (BIR).

“Let me just state that the secretary of finance and the BIR commissioner were fully aware,” Drilon said.

“Let me state for the record that the resulting P33.96 billion as the final figure has the approval of the secretary of finance, and the BIR,” Drilon added.

Enrile also questioned the computation used by the bicameral panels in coming out with the rates and figures in the measure.

“There have been moves to kill the tobacco industry… it was a calibrated mechanism,” Arroyo noted. “I have been bothered by the bill because it was introduced as a health measure.”

“What has never been really understood is that: is it a health measure for the entire health problem of the country or a health measure for the tobacco-related (diseases)?” Arroyo asked.

Drilon argued that the sin tax measure is a health measure, noting that Filipinos smoke 10.7 million sticks per day, including children as young as 13.

“The entire increment would go to the health sector except for RA 7171 and 8424. In general, this is a health measure,” Drilon said.

Arroyo also asked why there was no general figure in the earmarking of the revenues in the measure.

“I am against lump sum allocations,” Arroyo said, adding that lack of specific allocation makes the measure a lump sum appropriation for the Department of Health.

Drilon argued that once Congress appropriates the exact amounts, then there would be a problem if the government misses the target.

Drilon noted that it would be difficult to set specific amounts for some provincial and district hospitals because it is hard to pinpoint their needs.

“We cannot live in that kind of mystery that you give just such amounts and give percentages… why can’t we put the amounts? Otherwise, we are kidding ourselves that this measure will raise such amount, and then we could not,” Arroyo said.

Shortly after the measure’s ratification, Zambales Rep. Mitos Magsaysay said the proposed law on higher sin taxes would hurt tobacco farmers.

“The tax increase for tobacco products will be at least 1,000 percent by 2017. This is ridiculous. I have never seen this kind of tax increase in my entire career as a lawmaker,” she said.

She said it would be the consumers who would absorb the huge tax increase since an excise tax is a pass-on levy.

“There are 2.9 million Filipinos dependent on the tobacco industry. If we increase the taxes excessively, they will lose their livelihood. Without any income, our tobacco farmers and their families will starve to death. Are we really willing to do this?” Magsaysay asked.

On the other hand, Bayan Muna Rep. Neri Colmenares said the approved bill is a “regressive, anti-Filipino form of taxation that favors imports over local brands and jeopardizes the job security of small farmers and workers in the tobacco and alcohol industries.”

“These tax hikes are too much for our farmers and small local manufacturers to bear. They are the ones being punished even though they are the ones who are investing here in the country, and toiling hard to sustain the tobacco industry as a stable, steady source of revenues for the government,” he said.

He said the huge adjustments could result in unabated smuggling of sin products.   

BIR chief Kim Henares, who witnessed the signing of the bicam report, said she is happy that the measure obtained congressional approval.

“For us those are the structural reforms that we were really pushing for. We’re happy in that sense,” Henares said.

“But of course when we went in, we were targeting P60 billion. It went down to P 31.5 billion, it went up to P34 billion, P39.5 billion, it came down to P 34.5 billion but that is part of the legislative (function), you cannot get everything that you go in for,” she added.

The approved measure also mandates the Department of Labor and Employment to identify and create the mechanism for the displaced workers in the two industries.

On the recommendation of Lacson, the measure also provided a definition on what is considered as major supermarkets, which can be subjected by the BIR to price surveys on cigarettes and alcoholic beverages.

The final version excluded the proposal of Enrile on the earmarking of P2 billion for the government’s tax administration program.

However, to protect the local tobacco producers, the lawmakers placed a provision that “of the total volume of cigarettes sold in the country, any manufacturer and/or seller of tobacco products must procure at least 15 percent of its tobacco leaf raw material requirements from locally grown sources, subject to adjustments based on international treaty commitments.”

According to Drilon, the revenues from the new sin tax reform measure aim to benefit an initial 5.2 million Filipino families next year under the government’s Philhealth program. 

The 5.2 million beneficiaries are in addition to the 5.2 million families already covered under the General Appropriations Act for 2013.

“In 2014, the entire budget of about P25 billion for PhilHealth premiums to cover 10.4 million families will now come from the sin tax. I think also in 2015, there will be an increase in the premium so that there can be more benefits,” Drilon explained.

Drilon added that the tobacco farmers will get the 15 percent of the total revenue to be generated by the sin tax in accordance with Republic Acts 7171 and 8240.

– With Jess Diaz