Tobacco tax gets full Congress nod

MANILA, Philippines — The two chambers of Congress last night approved the bill increasing the excise tax on cigarettes and other tobacco products.

Under the measure, the levy on cigarettes would go up by P10 per pack, from the current P35 to P45 starting next year. The tax will rise to P50, P55 and P60 in the succeeding years.

Final approval came when the House of Representatives adopted the Senate version of the proposed law, Senate Bill 2233, to obviate the need for a bicameral reconciliation conference and shorten the enactment process.

SB 2233 was briefly tackled again in plenary yesterday just a day after it was passed on third and final reading Monday night.

Senators promptly submitted their approved version to the House but it was returned yesterday morning due to opposition to some of its provisions from congressmen from northern Luzon.

Senate Majority Leader Juan Miguel Zubiri told reporters that Speaker Gloria Macapagal-Arroyo relayed to him the congressmen’s objections.

He said earlier yesterday senators were reconsidering Monday’s approval of their version so they could introduce changes to accommodate Arroyo’s colleagues from the north.

The chamber would eventually make a second-round approval in accordance with the wishes of the House.

The amendments were on the sharing of the revenues from taxes on tobacco and alcohol products under Republic Act 7171 or the Sin Tax Law of 1997, and RA 8240 of 1996, which also imposed levies on these products.

Both laws created the tobacco fund – derived from 15 percent of the collections to be distributed to 16 provinces producing Virginia, burley and native tobacco, namely Abra, Kalinga, Mountain Province, Ilocos Norte, Ilocos Sur, La Union, Pangasinan, Cagayan, Isabela, Nueva Vizcaya, Quirino, Tarlac, Occidental Mindoro, Misamis Oriental, Maguindanao and North Cotabato.

Arroyo admitted that she had asked senators to amend their version. “They are going to amend it this afternoon, and then the amended version is going to be adopted by the House. That’s our plan,” she said earlier yesterday.

She said House members from the north were opposed to the 50-50 sharing of tobacco taxes between provinces, on one hand, and cities and towns under them, on the other.

“They don’t want 50-50, so the Senate version will be amended,” she said.

Under the current sharing formula, provinces get a bigger share of tobacco taxes.

House members hailed the approval of the tobacco tax increase bill.

“It’s a victory for the expanded health care program, for which the bulk of incremental collections will be appropriated,” Quezon Rep. Angelina Tan, who chairs the House committee on health, said.

Tan is one of the authors of the bill and the recently enacted Universal Health Care (UHC) Act. 

She said she hoped the tax adjustment would fill the funding gap for the program.

Swift approval

Senators decided to swiftly approve the new sharing ratio, as deliberations on the House proposal would have left Congress no more time to pass the measure that President Duterte certified as urgent.

Sen. Sonny Angara, chairman of the ways and means committee and sponsor of the measure, said the government would be in a better position to fill the massive funding gap for the UHC program.

“We look forward to seeing President Duterte sign this important bill into law,” Angara said.

The UHC law, enacted last February, automatically enrolls all Filipino citizens in the National Health Insurance Program and prescribes complementary reforms in the country’s health care system.

Productive Congress

 Camarines Sur Rep. Luis Raymund Villafuerte said the approval of the tax hike “caps the highly productive 17th Congress that has written landmark legislation in support of President Duterte’s commitment to ensure that all Filipinos truly benefit from sustained high growth by way of better living standards for all.”

“Passing a ‘sin’ tax reform law that provides for significant increases in the prices of tobacco products will be a fitting last gift of the 17th Congress to the people and a concrete demonstration of support for the President’s pro-poor agenda,” he said.

While the Senate passed the tobacco tax bill, it failed to approve a companion measure the House had approved for beer, liquor and other alcohol products.

Quirino Rep. Dakila Cua, former chairman of the ways and means committee, said the last time Congress adjusted alcohol taxes “was in 2011 or 2012.”

In the case of tobacco, he said the Tax Reform for Acceleration and Inclusion (TRAIN) Law already increased its tax.

The TRAIN law took effect in January last year.

The Senate also failed to approve at least 10 other House-passed priority administration bills enumerated by Arroyo in a letter to Senate President Vicente Sotto III on May 21.

Dave Gomez, corporate communications head of tobacco-company PMFTC, raised some concerns over unintended consequences of higher taxes on cigarettes.

“We call on the government to exercise vigilance to curb the illicit cigarette trade which may worsen as a result of this excise tax increase and undermine government efforts to raise funds for the UHC,” Gomez said.

“We are also counting on the government to provide the appropriate safety nets for farmers, workers and retailers whose livelihood would be impacted by this new round of tax increase,” he said.

But he said the Senate version is a step forward as it will enable smokers to switch to less harmful alternatives to cigarettes while generating additional revenues from previously untaxed e-vapor products.

Health advocacy groups welcomed the approval of the P45 per pack adjustment in the price of cigarettes even if the amount would still not be enough to fully cover funding for UHC.

“Though a welcome development, it failed to reach the targeted P60 in 2020 which is estimated to save one million lives and fund majority of the funding gap for UHC. However, it is a hard fought battle and all advocates deserve a big pat on the back,” said New Vois Association president Emer Rojas in an interview.

The group, along with the Department of Health and Department of Finance, was pushing for P60 tax adjustment to meet the funding gap of P62 billion for UHC next year.

According to Anthony Leachon, convenor of Sin Tax Coalition, he is “quite happy” with the P45 tax hike “since it’s higher than the Congress version for P37.50.” 

He added that the Senate also had “to address concerns of the tobacco farmers and Department of Health’s underspending on infrastructure.”  – With Paolo Romero, Sheila Crisostomo