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The Philippine Star - Bicam OKs final version of sin tax

In The News
11 December 2012

By Christina Mendez with Jess Diaz, Paolo Romero, Perseus Echeminada | The Philippine Star

Featured-Image-Philippine-StarMANILA, Philippines - The bicameral conference committee approved yesterday a final version of the sin tax measure through which the government hopes to earn P33.96 billion in revenues in its first year of implementation in 2013.

Sen. Franklin Drilon, chairman of the Senate committee on ways and means and head of the Senate panel in the bicameral committee, called the approval a “breakthrough.”

“This is a reform measure that this President has pushed for and which we will have after he signs the bill into law,” Drilon said. The bicameral report is set to be signed today.

“We hope that he (President Aquino) can sign it before Christmas,” Drilon said.

He said the total incremental revenue from cigarette for the first year of implementation is P23.4 billion, while from alcohol taxes the figure is P10.56 billion for a total of P33.96 billion.

As agreed in the bicameral conference, there will be two-tiered excise taxes on tobacco from 2013 to 2016 and eventually a single rate by 2017.

Drilon explained that the rate agreed on in the bicam “is lower than the Senate version of P39.5 billion.”

In terms of financial ratios, Drilon added that cigarette taxes, in 2013, would represent 69 percent of the incremental cost against alcohol’s 31 percent.

“But this will gradually go down so that in 2015, it becomes 66-34 percent ratio, in 2016, it will become 65-35 percent, and in 2017, it will become 64-36 percent,” Drilon said.

“The amendment recognized the continued validity of RAs 7171 and 8240 insofar as the share of tobacco producing provinces in the excise tax,” Drilon added.

RA 7171 is the act promoting the development of farmers in the Virgina tobacco producing provinces, while RA 8240 amends certain sections of the National Internal Revenue Code.

Eighty percent of the remaining balance of the incremental revenue will be allocated for the universal healthcare program under the National Insurance Program.

Twenty percent shall be allocated nationwide based on political and district subdivisions for medical assistance and health enhancement facilities program.

According to Drilon, the bicam panel also approved the provision introduced by Senate President Juan Ponce Enrile seeking a stronger anti-smuggling provision of the law.

“So we had agreed on this with some modification, that it will apply only to cigarette and distilled spirits but not to fermented liquor because that is where the smuggling occurs,” Drilon said.

On the required local content of cigarettes, Drilon said the amended provision stipulates that “any manufacturer of tobacco products must source at least 15 percent of its tobacco leaf raw material supply locally subject to adjustments based on international treaty commitments.”

Davao City Rep. Isidro Ungab, who led House conferees as ways and means committee chairman, also said the committee – which discussed the earmarking of additional revenues to be raised from higher sin taxes – agreed to set aside 15 percent of incremental earnings for affected farmers and workers, and 85 percent for health programs, including upgrading of hospitals.

Drilon said the sin tax bill would generate a total of P248.5 billion in additional revenues over a five-year period up to 2017.

He said the proposed higher sin taxes would take effect on Jan. 1, 2013.

Internal Revenue Commissioner Kim Henares, who attended the bicameral conference, promised lawmakers that her agency would collect the additional revenues from the measure.

Earlier, Speaker Feliciano Belmonte Jr. lamented the fact that previous Congresses failed to increase taxes on the so-called sin products for 16 years.

He said he considered the approval of the sin tax bill a major accomplishment for the House.

Ungab said the additional revenues from the bill have already been included in the revenue projections in the P2-trillion 2013 national budget.

Drilon’s colleagues in the Senate panel were Panfilo Lacson, Alan Peter Cayetano, Pia Cayetano, Sergio Osmeña III, Ferdinand Marcos Jr. and Ralph Recto.

Ungab’s team included Deputy Speaker Arnulfo Fuentebella, Majority Leader Neptali Gonzales II, Janette Garin of Iloilo, and Jocelyn Limkaichong of Negros Oriental.

No rejoicing yet

In Brussels, the European Union (EU) is not yet rejoicing over the expected signing into law of the sin tax bill, which Philippine lawmakers hope would end the country’s tariff dispute with the EU as well as with the United States before the World Trade Organization (WTO).

The EU has accused the country of discriminatory tariffs on distilled spirits before the WTO.

A top trade official of the European Commission (EC) said it would be too early to congratulate the country.