Drilon confident sin tax reform bill signed before Christmas break

MANILA, Philippines - Proponents of the sin tax reform bill are confident of seeing the measure signed into law before Congress goes on Christmas break on Dec.21.

“We are keeping our fingers crossed that before we adjourn on Dec. 21, we will have the President sign it. The sin tax reform law will be effective, as agreed, by Jan. 1, 2013,” Sen. Franklin Drilon, chairman of the Senate finance committee, said.

The bicameral conference committee is set to finalize a version acceptable to both chambers on Monday, after which the Senate and the House of Representatives will have it ratified by next week.

On Thursday, the bicameral panel agreed to set the burden sharing between tobacco and alcohol products at 69-31 percent.

Revenues from the measure are expected to be P33.96 billion next year, P42.82 billion in 2014, P50.63 billion in 2015, P56.86 billion in 2016, and P64.18 billion in 2017.

For a five-year period, the total incremental revenue for the three products would be P248.49 billion.

The bicameral panel, however, is expected to discuss further some contentious issues on the earmarking of amounts for the government’s health care program.

“We agreed to discuss again the earmarking for the health sector on Monday, we are hopeful that we will be able to finish everything on Monday and submit to both chambers sometime next week,” Drilon said.

“During Thursday’s meeting, the House of Representatives panel had expressed concern over earmarking of the estimated revenues since any act of appropriations must first emanate from the House. The House said this is a revenue measure that we’re talking about, and to put all these earmarking is already appropriation,” Drilon said, adding that “earmarking constitutes an appropriation which is really not a part of the bill, because this is revenue generation.”

“Conceptually, what the sin taxes law is all about is to raise taxes, and therefore, conceptually, in the same law, it should not be appropriated because appropriation is the General Appropriations Act (GAA),” Drilon said.

Drilon said the seven-man Senate panel is keen on presenting its stand on the need to earmark certain portion of the revenues for health care.

As put forward by Sen. Ralph Recto, certain provisions in the Senate version seek to allocate billions of funds from sin tax revenues for selected regional and provincial hospitals, as well as for an educational campaign on the health effects of tobacco and alcohol.

Under the Senate version, the P23.4-billion earmarked revenue shall be included in the unprogrammed fund of the 2013 GAA.

The bicameral panel also has yet to act on a recommendation from Senate President Juan Ponce Enrile for the setting aside of P2 billion for the tax administration program of the government.

Meanwhile, civil society groups said they were happy about the outcome of the meeting on sin taxes last Thursday.

“It’s a big victory. We were able to secure the features of unitary tax in five years at a rate of P30, automatic inflation indexation (for percent as proxy) in perpetuity, removal of the price classification freeze, check on anti-competitive behavior, and significant incremental revenues,” said Filomeno Sta. Ana III of the Action for Economic Reforms.

Sta Ana noted that while the incremental revenue of almost close to P34 billion is short of the “fighting target,” revenue generation “will be but an outcome – in the term of economists, an endogenous variable – of restructuring the system and making the system responsive to health considerations.”

Bu he stressed they would still be keeping a close eye on the next bicameral proceedings.

“The ‘Bantay Bicam’ (campaign) will remain our watchword. We have to fight for the earmarking for universal health care, and make sure that the rigid, arbitrary and inefficient fixed allocations will be removed,” he added.

Sta Ana maintained that health advocates would “resist any attempt by the other side to renegotiate the issues that had already been resolved.”  – Sheila Crisostomo