House approves cigarette tax hike

MANILA, Philippines – The House of Representatives, voting 176-30 with two abstentions, approved on third and final reading last night a bill that seeks to raise cigarette taxes starting next year.

Bill 4144, authored by Rep. Eugene Michael de Vera of party-list group Arts, Business and Science Professionals, also proposes to keep the present regime of two tax rates on cigarettes based on their retail prices.

Also yesterday, the bicameral conference committee on the national budget agreed to approve the P3.35-trillion outlay for 2017, which is President Duterte’s first budget proposal.

The move came after weeks of deadlock over the allocation for the Autonomous Region in Muslim Mindanao (ARMM).

But due to time constraints, the Senate was not able to ratify the conference committee report last night, as originally planned. The chamber will complete the final step today.

The new rates under Bill 4144 are P32 per pack for cigarettes with a retail price of up to P11.50 and P36 for those selling above P11.50 per pack.

Under the present law, a single rate of P30 per pack regardless of the retail price will be imposed starting Jan. 1, 2017.

The House temporarily shelved the proposal to reduce income tax to give priority to the cigarette tax measure, which was passed after two hearings by the committee on ways and means and two plenary sessions.

During the debates, committee chairman Rep. Dakila Cua of Quirino, responding to questions raised by opposition Rep. Edcel Lagman of Albay, admitted that the Department of Finance, the Bureau of Internal Revenue, the National Tax Research Center and the Department of Health all opposed Bill 4144.

Cua said only the National Tobacco Administration supported it.

He said even tobacco farmers’ groups, non-governmental organizations and tobacco producers, including industry giant Philip Morris-Fortune Tobacco, were against it.

He said only two cigarette makers – Mighty Corp. and British-American Tobacco – were in favor of keeping the two-rates system.

Lagman said he hoped the bill was “not favoring an individual tobacco producer or a group of producers.”

He said the present law does not have to be changed, since it is bringing in the amount of revenues the government needs to fund the health insurance coverage of millions of Filipinos.

In opposing the De Vera proposal, the DOF said it would not discourage smoking, which is the primary objective of the law, since smokers would just shift to low-priced cigarettes.

“Differences in price as a result of different tax rates change the behavior of smokers by downshifting to the low-taxed, low-priced brands from high-taxed, high-priced brands,” it said.

On the other hand, Philip Morris-Fortune Tobacco, the largest cigarette maker in the country, said it is for keeping the present law intact and for a single tax starting next year.

“We do not support further changes in the law at this time, and reverting to a multi-tier system that is widely discredited,” the company said in a letter to the Cua committee.

An erstwhile obscure industry player, Bulacan-based Mighty Corp., has grown phenomenally by taking advantage of the present two-tier scheme and offering mostly low-priced cigarettes.

Earlier yesterday, the bicameral conference panel agreed on the final shape of the budget after the House contingent headed by appropriations committee chairman Rep. Karlo Nograles of Davao City did not insist on keeping P8.3 billion in pork barrel funds in the Department of Public Works and Highways (DPWH).

The amount was originally part of the P40-billion funding proposed by the President for ARMM.

Sen. Panfilo Lacson, who heads a Senate finance subcommittee in charge of the ARMM budget, returned the P8.3 billion to the ARMM, bringing the budget conference to a deadlock.

Lacson considers the amount as pork barrel funds of lawmakers in the autonomous Muslim region.

As a compromise, Nograles said the House agreed to allot the amount to the Commission on Higher Education (CHED) for scholarships to poor but qualified students in state universities and colleges.

He said the P8.3 billion represents infrastructure funds allocated by the national government to the ARMM.

Nograles explained the House transferred the amount to the DPWH “because of slow project implementation” by the ARMM public works department.

He added that the autonomous region still has backlogs from previous years as shown by a Commission on Audit report.

House Majority Leader Rodolfo Fariñas of Ilocos Norte said that while the House panel agreed to the version of the Senate, “we maintain that what we did was within the law because what the Organic Law prohibits is the use of funds appropriated for the autonomous region by other agencies.”

“But Congress is free to allocate funds even outside of the autonomous region for implementation by other departments,” Fariñas said.

No offense to DPWH chief

Lacson, meanwhile, lamented insinuations that his decision to return the P8.3 billion to the ARMM reflected negatively on Public Works Secretary Mark Villar.

“He (Villar) has nothing to do with the amendment I introduced and accepted by the Senate. It’s all me. Secretary Mark (Villar) has nothing to do with it. In fact, he’s appealing (for the amount to be retained with the DPWH) through his mother but I stood my ground,” he said, referring Sen. Cynthia Villar. Nograles shared Lacson’s statement.

In spite of the realignment, Lacson still cast a dissenting vote on the bicameral conference committee report.

He explained that there were still a number of questionable items in the budget that he also wanted removed.

Among these were some P4.8 billion – also in the DPWH budget – which includes another P3.6 billion for projects within the ARMM; P500 million for feasibility study and engineering design, which was on top of P5.9 billion with exactly the same description in the agency’s budget; P705 million for school building program, on top of P118.37 billion for the same item “but which didn’t pass through the DepEd’s planning and vetting.”

Senate President Pro Tempore Franklin Drilon, for his part, explained that under the Organic Act, lump sum appropriations are placed in the ARMM budget for the region’s infrastructure projects.

Drilon said it is the regional legislative assembly of the ARMM that determines the use of the funds and identifies the projects to be financed by these funds.

Under the proposed 2017 national budget, Drilon noted that P18.3 billion was allocated to the ARMM, which was P8.3 billion higher than the current year’s budget.

“Nobody knows why but anyway it’s P8 billion higher. Some are speculating that it is in anticipation of the Bangsamoro Basic Law passage. Remember that this budget was done in February,” Drilon said.

‘Socially inclusive’

Senate committee on finance chair Sen. Loren Legarda described the 2017 national budget as “socially inclusive.”

“For the first time we have a provision for free irrigation for farmers. We finally have universal health care coverage. This means eight million who are not yet members of PhilHealth now will be covered. These are the poorest of the poor who are not registered with PhilHealth,” Legarda said.

Legarda said that the President is expected to sign the 2017 national budget on Dec. 22.

Senate Minority Leader Ralph Recto noted that the amendments he introduced in the budget were carried in the final version approved by the bicameral committee.

He cited the P8.3-billion free college tuition fund in the CHED that will benefit close to a million state university and college (SUC) students next year.

Also included is the P397 million for additional building and equipment for SUCs, thus raising their budget for capital outlays to P9.68 billion.

The budget of the Department of Social Welfare and Development for its school feeding program was increased by P1 billion to P4.42 billion.

“With this P4.42 billion, it can serve 1.74 million two- to four-year-olds a nutritional meal each day for 120 days,” Recto said.

The budget for the Department of Health’s Doctors to the Barrios and Rural Health Practice Programs was also increased to P7.81 billion.

“I am also happy to note that the bicameral conference committee adopted our proposal for the creation of a P100-million emergency repatriation fund the labor secretary could use to bring home distressed OFWs next year. Our advocacy for a bigger help fund for Filipinos abroad continues,” Recto said.

A P5.63-billion fund for capacity enhancement of the Philippine National Police was also included in the unprogrammed fund. – With Marvin Sy