Noy presses sin tax bill passage

MANILA, Philippines - President Aquino urged Congress yesterday to pass the sin tax bill to fund the country’s health care program.

Speaking at the 38th Philippine Business Conference, Aquino said the government continued to invest in the Filipino people.

“We are doing this through the likes of our Pantawid Pamilyang Pilipino Program (4Ps or conditional cash transfer program) and our expanded PhilHealth (Philippine Health Insurance) program,” he said.

Aquino said ultimately, the government would want a capable and empowered citizenry, who could fill job openings and contribute to the agenda of inclusive growth.

“We are also counting on the solidarity of our legislators in the sin tax bill, which can only improve our fiscal situation: with the bulk of tax revenues generated from this proposed measure going to universal healthcare, we will be able to widen access to, and improve health services for all,” he said.

Secretary Ricky Carandang of the Presidential Communications Development and Strategic Planning Office and presidential spokesman Edwin Lacierda said the administration was hoping to get bigger revenues from sin products and Recto’s version fell short.

Finance Secretary Cesar Purisima and Health Secretary Enrique Ona also expressed dismay over Recto’s version.

Lacierda said it would be up to Recto to listen to the various statements given on his version of the bill.

“We have already laid out the reasons why we are pushing for our sin tax measure,” he said.

“We have already laid out that this is a health issue; that the revenues that we’re going to collect will be able to fund sufficiently our universal health care coverage as well as the various health centers that we proposed.

“Insofar as the concerns of the tobacco farmers are concerned, we have also provided safety nets in the sin tax measure.”

Lacierda said the administration’s proposal was based on “statistical experiences” of other Southeast Asian Nations on taxation of sin products.

“Certainly, we were hoping that our administration measure would have – as how we saw it pass through the House – also be the same as what the Senate would have come up with,” he said.

“But anyway, it’s still there. It’s still being deliberated on.”

Boxed item’ Recto-Morris’ report

Health advocates have dubbed Sen. Ralph Recto’s ways and means committee report on the sin tax bill the “Recto-Morris” report.

Speaking to reporters before it was presented at the Senate yesterday, the advocates said the report basically adopted the proposal of tobacco giant Philip Morris-Fortune Tobacco.

The report not only “watered down” the sin-tax bill, but “drowned it,” the advocates added.

The Department of Health (DOH) labeled the report “very disappointing.”

Anthony Leachon, DOH consultant on non-communicable diseases, said the report’s provisions would raise about P15 billion each year in additional revenue.

That was half the P30 billion that could be raised if the bill were passed unaltered, he added.

Leachon said lower excise taxes would result in poorer healthcare for all Filipinos, not just smokers.

“This is actually the betrayal of the Philippine nation,” he said.

“And this will go down in history, but not as a landmark or watershed bill. This will be one of the darkest spots in our legislation. I thought this was a legacy for the Senate president. I was wrong.”

Health Secretary Enrique Ona, who attended the press conference, told reporters the recommendations were very disappointing.

“There’s a process to work through now... the capacity to make sure that our voice must be heard, very strongly,” he said. “To make sure that at the end of the day we get what we need. To make sure that universal healthcare is implemented the way that it should be.”

Recto said the report’s recommendations could generate in the first year between P15 billion and P20 billion.

“To those who would quickly label our proposal as a watered-down version, this isn’t,” he countered. “We just hosed down promises of windfall tax revenues that were based on wrongful assumptions.”

Models showed more drastic tax hikes could lead to a black market and endanger government revenues, Recto said.

However, Jo-Ann Latuja, Action for Economic Reforms senior economist, said the report’s tiered tax system for tobacco products will enable current medium-priced brands like Winston and More to fall under the low-priced category by 2015.

Marlboro and Philip Morris would be able to go from the high-priced category to medium over the same time frame, she added.

Latuja said by 2020, Marlboro would cost only about P50 per pack (P2.50 a stick) and Fortune around P30 per pack (P1.50 a stick).

“Cigarettes will remain cheap, or worse, become cheaper,” she said.

“It totally ignores health objectives. Our cigarettes will remain one of the cheapest in the world. More of our young will be lured into smoking, and more Filipinos will die.”

Advocates have pushed for a unitary system that does not discriminate between cheap and expensive cigarettes.

Antonio Dans of the UP College of Medicine said arguments that significantly hiking taxes could lead to a drop in government revenue were unfounded.

“It (the committee report) is heartbreaking... just to protect an industry that doesn’t deserve protection,” he said. “If there is a ‘sweet spot,’ it is way above these tax rates.”

Excise taxes had been drastically raised in other countries, with a corresponding decrease in consumption but increase in government take, Dans said.

Recto presented before the plenary yesterday the Senate version of the sin tax bill that aims to generate P180-billion in revenues in the next eight years.

New tax regime

The new tax regime on cigarettes could yield between P9.8 billion to P14 billion in additional revenues while alcohol would contribute as much as P5.2 billion to P7 billion in the first year, he added.

Recto said the committee projects the P180-billion revenues from tax on tobacco and alcohol after the series of biennial adjustments until 2020 when there will be two tiers for tobacco taxes and two tiers for fermented liquor.

The Senate version was designed to cushion the possible impact of the tax rates as against smuggling and illicit trade of cigarettes, he added.

Recto said the tax reform bill would mean a 52 percent increase in the tax on tobacco during the first year once the Senate version is approved.

Those in the first tier or low-priced class will absorb an increase of 121 percent from P2.72 to P6 per pack, he added.

Distilled spirits like brandy, whiskey, rum and vodka priced at less than P90 will increase by P20 per proof liter; P90 up to P150 will increase by P80 per proof liter; and those more than P150 to P250 will increase by P160 per proof liter; and more than P250 will increase by P320 per proof liter.

This tax schedule covers newly introduced distilled spirits within the period of March 1, 2013 to Feb. 28, 2015, when the collected excise tax will be in accordance with the suggested net retail price (excluding the excise tax and the value added tax) per bottle of 750 ml.

There are various tax schedules for wines, fermented liquors and other variants.

Levy on cigars packed by machines and those made by hands also have varying taxes.

Recto’s report was considered as a watered down version since it is way below the original DOF proposal, which promised P60 billion in incremental revenues for the first year. The tax formula alone for tobacco is seen to generate anywhere between P10 billion to P15 billion in tobacco taxes in the first year, Recto said.

At the same time, this formula will result in a decrease in smokers by eight percent on the average and possibly more from D and E classes.

For alcohol, the committee concurred with the House version which focuses on the need to temper increases.