The Philippine Star - BIR willing to settle for P40 B in sin tax revenues

16 November 2012

By Iris Gonzales with Sheila Crisostomo, Mayen Jaymalin, Marvin Sy | The Philippine Star

Featured-Image-Philippine-StarMANILA, Philippines - The Bureau of Internal Revenue (BIR) is willing to settle for at least P40 billion in incremental sin tax revenues and hopes that the new bill would be approved this year.

Commissioner Kim Henares said yesterday government officials and employees from the BIR and the Department of Finance (DOF) have been spending a lot of time working with lawmakers on the bill.

“P40 billion is okay,” she said.

Henares has been attending hearings at the Senate on the sin tax bill.
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“Both the Senate and the House said that it’s a priority measure so I hope it will be passed before the end of the year,” she said.

The DOF and the BIR are counting on Sen. Franklin Drilon to push for the administration-backed sin tax bill after Sen. Ralph Recto approved a “watered-down” version.

Drilon is acting chairman of the Senate ways and means committee after Recto resigned on allegations by sin tax advocates that he received lobby money from tobacco companies.

The Department of Health (DOH) is also pushing for the approval of sin tax reforms at the Senate.

In a gathering yesterday at the UP Manila campus, members of the health community expressed support for the passage of the sin tax bill.

Leaders from more than 12 different medical organizations said that higher sin taxes would help save millions of Filipinos.

Participating organizations included the Philippine Medical Association, the Philippine Heart Association and the UP College of Medicine.

Dr. Tony Leachon, DOH consultant on non-communicable diseases, said under a three-tier tax system, cigarettes would still be accessible to the youth and lead to more deaths due to non-communicable diseases.

The administration has been pushing for a new sin tax bill that would yield at least P40 billion to P60 billion a year.

In June, the House of Representatives approved its version that would raise P31.35 billion in incremental revenues in the first year of implementation.

Marcos debates Drilon

Sen. Ferdinand Marcos Jr. also questioned the assumptions of Drilon on the sin tax bill.

Its impact could result in the displacement of an estimated 18,000 tobacco farmers in the Ilocos region, he added.

Marcos debated Drilon for close to two hours last Wednesday and much of his concern was about the impact of the bill on the tobacco farmers in his bailiwick.

Marcos said Drilon’s version of the bill presented before the plenary would result in huge losses for the tobacco industry, particularly the farmers.

Based on the data Marcos has collated, around 18,000 hectares of tobacco farmland would be lost by 2016 if the bill is approved into law.

Marcos said that this would translate to the loss of livelihood of more or less 18,000 farmers.

“In our calculation, the reduction in the land planted with tobacco is 18,000 hectares,” he said.

“In Ilocos Nor-te the average land holding is 0.7 hectares, in Ilocos Sur it’s almost the same. So if we calculate this at one is to one, we’re talking about 18,000 farmers.”

Under the Drilon-sponsored bill, a total of P26.87 billion in revenue is expected from the hike in excise taxes on tobacco products alone in the first year of the law’s implementation.

Marcos said his own assumptions, collated from various sources including the industry, would generate P20 billion.

“If we use the correct figures it is clear that revenue collections would not reach their desired P26 billion,” he said.

Marcos said the real data, including the elasticity of demand that he has, would result in significant losses for the government after the first year.

Proponents of the bill must also address the real problem of smuggling, which he expects to proliferate once the local supply dwindles because of higher taxes, he added.

The issue of smuggling is somewhat being avoided by the sponsor during the debates, Marcos said.

The period of interpellation on the sin tax bill would resume on Monday, after which the proposed amendments of the senators would be introduced.

Health promotion

Former health secretaries Esperanza Cabral and Jaime Galvez-Tan called yesterday on senators to earmark some P1 billion in revenues from the sin tax reform bill for health promotion.

In a joint statement, the two said it is important to have a provision for health promotion to reduce non-communicable diseases in the country.

“Our leaders must recognize the need for health promotion especially now when non-communicable diseases (NCDs) greatly threaten the health of our nation,” Cabral said.

“If we do not address this now, then we are sure to regret it in the future.”

NCDs pertain to chronic diseases, like cancer, and lung, and heart diseases that account for six of every 10 deaths in the Philippines.

Galvez-Tan said most Filipinos are prone to NCDs due to “poor lifestyle choices,” citing a World Health Organization study that 90 percent of Filipinos have at least one risk factor.

“We need to encourage Filipinos to live healthier in order to lessen their chance of disease,” he said.

The two wanted disease preventive measures to be prioritized in health programs to prevent Filipinos from developing poor health.