Bicam on sin tax set next week

MANILA, Philippines - The Senate and the House of Representatives will begin their bicameral conference committee meeting on the sin tax reform bill next week, Sen. Franklin Drilon said yesterday.

“We’ll start the bicam at the end of the month because I expect to finish the budget under our schedule by Nov. 28,” Drilon, Senate finance committee chairman, said at the weekly Kapihan sa Senado yesterday.

He said the bicameral conference meeting on the sin tax would coincide with the one for the 2013 national budget.

“Anyway, the bicam on the sin tax will be both easy. Well, I don’t say easy but I foresee a substantial agreement and I underscore substantial on the cigarette tax because the cigarette tax, we have projected it at about P23.5 billion as against the House version of P26 billion,” Drilon said.

Drilon said he is confident the bicameral conference meeting on sin tax will proceed smoothly, citing the House leaders’ declaration that they are amenable to following the Senate version, at least with regard to cigarette tax rates.

“It is on the alcohol side which I expect some difficulty because we have assigned about P16 billion for the alcohol excise tax to achieve the 60-40 ratio,” he said.

The House version projects P5-billion additional revenues from alcohol.

For a sin tax reform advocacy group, the bicameral conference committee is a battleground “shrouded in mystery” where surprise amendments can emerge.

“We are fighting three wars. We won in the Lower House and Senate and we have to win in the bicameral conference committee,” Action for Economic Reforms (AER) coordinator Filomeno Sta. Ana III said.

“Any change in the consolidated bill should not deviate from what was already approved and instead, should incorporate the best features in both bills,” he said.

Jo-Ann Latuja, AER senior economist, lauded Drilon for pushing for provisions like the removal of the price classification freeze, imposition of a unitary tax rate for cigarettes of P26 by 2017, annual tax increases of no less than four percent, imposition of higher tax rates for alcohol and earmarking of funds for universal health care, particularly for tobacco farmers and workers.

“Despite the attempts to water down the bill, we are very grateful for Sen. Drilon’s success and being able to pull the tax rates up. Instead of P22 (per pack at a unitary rate), it became P26,” Latuja said.

Sta. Ana said legislators who sided with the tobacco industry should be excluded from the bicameral meeting.

He said Sen. Ralph Recto even copied the Philip Morris proposal for his committee report.

Dr. Antonio Dans of the UP College of Medicine, for his part, said the passage of the sin tax measure is a “major health victory from any point of view.”

“This is not our first sin tax bill, but it is our first substantial sin tax bill,” Dans said.

Ready by January

Malacañang, for its part, said it expects the measure to be ready for implementation by January.

Secretary Manuel Mamba, head of the Presidential Legislative Liaison Office, said the foremost concern of the government in pushing for the immediate passage of the measure is the promotion of public health by making sin products unaffordable, especially to the youth.

He told radio dzRB there are “still provisions to be threshed out” during the bicameral conference committee meeting.

Mamba expressed confidence the P40-billion target revenues of the Senate could be achieved and that the rates would comply with the World Trade Organization (WTO).

He also squelched fears of huge economic cost for tobacco farmers, saying subsidy for them could even reach up to P10 billion and could help them shift to other products or improve tobacco farming.

Mamba further said monopoly in the tobacco industry would be gone because prices will be competitive. “They (farmers) have everything to gain,” he said.

He also allayed fears of possible rampant smuggling or the proliferation of black market cigarettes and alcohol because of more expensive sin products.

“That will be difficult because (our products) will still be the cheapest compared to neighboring countries… I believe that is a question of enforcement,” Mamba said.

In the bicameral meeting, Recto said a disagreement may arise over where to use the revenues raised.

The Department of Finance and the Department of Health said the additional revenues would go to boosting funds for public health insurance and services.

Recto pointed out that while the Senate had clearly stated that the health sector would get more funds, the House did not make any recommendations.

Still hopeful

As lawmakers prepare for their bicameral conference committee meeting on the sin tax bill, Philip Morris Fortune Tobacco Corp. (PMFTC) said it is still seeking a reduction in the tax rate for cigarettes.

“I think that the increase in the first year is still very high and obviously, we have concerns in terms of the impacts, in terms of purchasing tobacco and related impact on the market and so forth,” PMFTC president Chris Nelson told reporters in a chance interview yesterday. “We are hoping it (rate) can still be reduced.”

Earlier this week, Senate Bill 3299 which is seen to generate P40 billion in revenues from higher taxes imposed on alcohol and tobacco, was approved on third and final reading.

Under SB 3299, hand-packed cigarettes shall be subject to an excise tax of P12 per pack effective Jan. 1, 2013.

The excise tax rate shall rise to P15 per pack in 2014, P18 in 2015, P21 in 2016 and P26 per pack in 2017.

The same tax rates shall apply to machine-packed cigarettes with current excise taxes amounting to less than P7.56.

For machine-packed cigarettes currently subject to excise tax rates of between P7.56 and P12, the new tax rate shall be P16 in 2013, P18 in 2014, P22 in 2015, P24 in 2016 and P26 in 2017.

As for machine-packed cigarettes with a current excise tax rate of more than P12, the new tax rate starting next year shall be P20 per pack, increasing to P21 in 2014, P22 in 2015, P24 in 2016 and P26 in 2017.

Nelson declined to specify his desired tax rate reduction but said he is hoping for “further moderation.”

For his part, Trade Undersecretary Adrian Cristobal, Jr. said the approved Senate version appeared to have already shed off discriminatory features of the old law in terms of taxes on distilled spirits.

The Philippines needs to enact reforms in liquor taxes by next March in compliance with the WTO and in response to a WTO case raised by the US and the European Union against the Philippines.

The EU and US claimed the Philippines’ excise tax regime greatly favors local distilled spirits.

“We think it (bill) is compliant with WTO,” Cristobal said.

Protest

Organized labor, meanwhile, condemned yesterday the passage of the sin tax bill, saying it would lead to more financial burden for workers.

The Kilusang Mayo Uno (KMU) said the sin tax measure is part of a package of policies that aims to legitimize hikes in power rates, transport fares, and fees for government services.

“The sin tax bill should not be taken in isolation from other government measures that are increasing the hardships of workers and the poor. It will further reduce the hard-earned incomes of workers and the poor and should be junked,” KMU chair Elmer Labog said.

He said the measure would reduce workers’ real income, adding its real purpose is to generate additional revenues for the government and not to discourage the poor from buying alcohol and tobacco products.

“Judging from the Aquino government’s record, these taxes will not go to improving the country’s health services or other social services. These will go to foreign lending institutions in the form of debt payments and to big bureaucrats in the form of corruption and perks,” he said.

He said the government is using the sin tax bill to cover up its uncaring attitude toward poor people’s health as shown by its plan to privatize public health institutions.

“Scaring people with deadly hospitalization fees so they will lead healthy lives is not the best way to promote the public’s health. The Aquino government cannot claim to be championing the public’s health when it goes full swing in privatizing public hospitals,” he pointed out.

If the government is sincere about improving the health of the poor, it should approve measures that will enable them to buy enough food. With Iris Gonzales, Louella Desiderio, Aurea Calica,Mayen Jaymalin