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The Daily Tribune - Palace, allies ram through 70-30 sin tax ratio; tobacco gets higher tax bite

In The News
8 December 2012

By Angie M. Rosales | The Daily Tribune

Malacañang and its allies are out to ram down the throats of stakeholders in the tobacco industry the matter of the industry assuming 70 percent of the tax yield in the reformed excise taxes on so-called “sin” products beginning next year, even in the absence of any empirical information that could support the Department of Finance (DoF) assumptions on the tens of billions of pesos of projected revenues.

Sen. Ferdinand “Bongbong” Marcos Jr. said the Executive and the House of Representatives refuse to hear of any burden-sharing ratio other than 70-30, even in the face of wiping out the P87 billion tobacco industry in the country, due to very high taxes.
“They came out with only that kind of burden-sharing, whether you accept it or not...that’s what happened,” he said, relaying the discussions that had transpired during Thursday’s bicameral conference committee held at the lower house building in Quezon City.
“I don’t agree on the burden sharing, I don’t agree at all. But they don’t care. And the fact of the matter is that this will be
the burden sharing, I don’t agree at all. But they don’t care. And the fact of the matter is that this will be the burden sharing, with that kind of price. They are surely going to kill the tobacco industry. They will put 2.5 million people out of work. I don’t know if that is their intention but that will be the effect,” Marcos,a member of the Senate contingent said.
The bicameral conference committee deliberating on the final version of the proposed sin tax bill has agreed to the targeting of nearly P250 billion incremental revenues under the reformed money measure, with the initial P35 billion being realized, supposedly in 2013.

Except for the amount on incremental revenues, other matters such as the rate of increase to be imposed on the liquor industry and cigarette products are far from being settled.

“We keep on repeating to clarify to them that which they are doing is no different from punishing the tobacco industry. But they said that this has to be done since they want to reduce the number of smokers. However, they also say that the number of those who drink alcohol should be reduced. Why then do they reduce the tax take on alcohol and increase the ratio only of tobacco?
Marcos shook his head, saying that he does not understand what they (Malacañang and the House) are doing.

He argued that if they say that this is a health measure, then logic dictates that the tax take should be to reduce both the number of smokers and the number of those who take in alcohol.

It appears that this ratio will be maintained and for the next five years, the tax on alcohol remains the same while the tobacco tax will keep on rising. “The bargain sharing then to be shouldered by the tobacco companies will keep on rising,” Marcos stressed.

Proponents of the bill are using wrongful assumptions, which had been already exposed in the Senate during plenary debates on the measure and yet the DoF continues to acknowledge the fact that it has questionable figures, the senator said.
“The trouble is that they keep on changing the numbers. Those they present to the Senate are different by way of assumptions. The same are now assumptions, the same time table, but there are always changes in what will be the incremental revenue, a change in burden sharing,” Marcos lamented, adding that the DoF is supposedly the one backing up the “calculations” being pushed by the lower house.

Sen. Franklin Drilon, acting ways and means chairman and the lead in the upper chamber panel in the bicameral committee, disputed Marcos’ claims especially on the matter of cumulative rate increase on tobacco industry, adding that the target revenues agreed upon by the panel were actually even lower than what was passed by the upper chamber.

“I wish to announce that we have achieved a breakthrough in the bicameral conference committee on the sin taxes. Yesterday we went through seven hours of hard negotiations with the house panel principally on the rates of tobacco, fermented liquor and distilled spirits and also on the earmarking,” he said in a press conference at the Senate.

“We ended up last night discussing the earmarking for the health sector. Sen. Pia Cayetano presented the Senate positions, but in view of the lateness of the hour, 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. 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,” he said.

In the percentages between alcohol and tobacco for 2013 are 69 percent for tobacco and 31 percent for alcohol.

“The House, in its original proposal, had cigarettes at P26.87 billion for 2013 and distilled spirits of about P3.1 billion, or an 87-13 ratio,” the senator said, underscoring that “it was a give and take in the bicam committee conference and we came up with a compromise of approximately of 69-31 percent instead of 60-40 in the Senate and 87-31 on the part of the House.”
“It will not kill the tobacco industry. It is a matter of negotiation with the House. Let me emphasize that the burden, in terms of actual taxes to be paid, the version that we agreed upon is even lower than the Senate version that we approved that would impose P23.55 billion in 2013 for tobacco. What was approved in the bicam is P23.4 billion. If Sen. Bongbong (Marcos) approved this version in the Senate of P23.55 billion, there is no reason for him not to approve P23.4 billion.

He said the version that was presented to the Senate was higher and higher...What came out in the bicam is approximately the same gradual increase every year,” he added.

For the five-year period or from 2013 to 2017, the following will be the total increment: for the tobacco industry, P23.4 billion for the initial year of implementation; P29.56 billion in 2014, P33.52 billion in 2015, P37.09 billion in 2016, and P40.9 billion in 2017 for a total of P164.47 billion.

For fermented liquor or beer, it’s P4.5 B in 2013, P6.99 B in 2014, P9.52 B in 2015, P12.06 B in 2016, and P15.646 B in 2017, or a total of P48.53 B incremental tax in the period of five years.

“For distilled spirits, it is P6.06 B in 2013, P6.31 B in 2014, P7.59 B in 2015, P7.71 B in 2016, and P7.82 B in 2017, and therefore the five-year period would have a total of excise tax for the distilled spirit in the amount of P35.34 billion. On yearly basis, for the three products, the total excise tax collection for 2013 is expected at P33.96 billion, P42.82 billion in 2014, P50.63 billion in 2015, P56.86 billion in 2016, and P64.18 billion in 2017, o for a five-year period, the total incremental revenues for the three products would be P248.49 billion,” he said.

It will be noted, Drilon emphasized, that insofar as the Senate version is concerned, the expected revenues in cigarettes which was approved by the senators is P23.55 billion in 2013.

“What we have agreed upon is lower by about P150 million. We agreed in bicam for tobacco at P23.4 billion. So I would expect that these would meet the approval of the senators who debated extensively on the schedule for excise tobacco in the floor.

“I must remind that this is a bicam and we cannot impose everything on the other panel. We have to negotiate and I think this is a good result because insofar as the cigarette is concerned, it is our version that was carried out and in fact, a little bit lower than what the Senate brought to the bicam,” he said.