Sin tax passes bicam, last battleground

MANILA, Philippines (UPDATED) – The sin tax reform bill overcame its final hurdle after the bicameral conference committee approved the reconciled version of the measure.

Delegates from the Senate and the House of Representatives finished hammering out the final version after a 4-hour meeting at the Sofitel Hotel in Pasay City on Monday, December 10.

Sen Franklin Drilon, the bill’s sponsor and acting chairperson of the Senate Ways and Means committee, hailed the approval.

“This is 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 told reporters Monday afternoon.

The bicameral conference committee will sign the committee report on Tuesday, December 11, and the Senate will ratify the report Tuesday afternoon. Drilon expects President Benigno Aquino III to sign the bill into law before Christmas.

Last week, the bicam agreed to raise an additional P33.96 billion in revenues from tobacco and alcoholic products in 2013 or the first year of implementation. (See the tax rate breakdown here.) 

After the group finalized the rates, the last topic the bicam took up on Monday was the rate of earmarking.

Drilon said the final earmarking is as follows:

• after deductions under Republic Acts 7171 and 8240, 80% of the remaining balance of the incremental revenues shall be allocated for universal health care under the National Health Insurance Program, the attainment of Millennium Development Goals, and health awareness campaigns.
• 20% shall  be allocated nationwide based on political and district subdivisions for medical assistance and health enhancement facilities program, the annual requirements of which shall be determined by the Department of Health.

RA 7171 (An Act to Promote the Development of the Farmers in the Virginia Tobacco-producing Provinces) states that 15% of collections form excise taxes on tobacco products will go to provinces where Virginia tobacco is produced.

RA 8240 (An Act Amending Sections 138, 140 & 142 of the National Internal Revenue Code) provides that 15% of the additional revenue collected from the excise tax on tobacco products be allocated and divided among the burley and native tobacco-producing provinces.

The earmarking in the bicam version is different from the Senate version, which approved specific allocations for the revenues.

Sen Ralph Recto proposed the amendment in the Senate version that P23 billion from the revenues be earmarked to the Philippine Health Insurance Corp (Philhealth), breaking down the amount to district hospitals and regional hospitals.

Drilon explained why the specific allocations were removed in the bicam version.

“There were objections on the House on the very specific allocation for local hospitals because the needs [of the provinces and districts] are not the same so the provision was more general.”

In a statement, Presidential Spokesperson Edwin Lacierda welcomed the bicam’s approval of the bill. 

“The reconciled version adheres closely to the administration sponsored bill as it contains only two-tiers for taxes on cigarettes and reflects current prices instead of 1997 rates.”

“This is a significant reform that raises revenues for government’s healthcare programs which will expand and strengthen social safety nets for millions of Filipinos. It also levels the playing field for the tobacco industry by providing a more equitable taxation regime for all industry players,” added Lacierda.

Lacierda said the President is “gladly looking forward to sign the bill into law.” 

‘Marcos withdrew objection’

Drilon also said that Sen Ferdinand Marcos Jr, a member of the committee and a staunch critic of high sin taxes, backed down when he saw that the bill will be consistent with RA 7171 and 8240. Marcos is from the tobacco-producing province of Ilocos Norte. 

“When he saw this, he withdrew his amendments because the amendment in so far as the earmarking is concerned recognized the continued validity of RA 7171 and 8240 in so far as the share of the tobacco-producing provinces in so far as the excise tax on tobacco is concerned.”

Drilon said the following are the revenues that the bill will generate per year:

• 2013 – P33.96 billion
• 2014 – P42.86 billion
• 2015 – P50.630 billion
• 2016 – P56.86 billion
• 2017 – P64.18 billion

Drilon said the burden-sharing between tobacco and alcohol will be as follows:

• 2013 – 69%-31% (ratio of tobacco to alcohol)
• 2015 – 66%-34%
• 2016 – 65%-35%
• 2017 – 64%-36%

The Senate has approved a 60%-40% ratio, with some senators expressing concern that the bill will be biased against tobacco.

Drilon said, “Let me emphasize that in so far as the financial burden on the cigarette is concerned, we were able to achieve the Senate version …. For the Senate, when we originally had this, the burden for the cigarette was P23.55 billion. What we came out with the bicam is P23.4 billion.”

‘Can stand scrutiny of WTO’

Drilon also said the bicam revised the amendment introduced by Senate President Juan Ponce Enrile requiring tobacco sellers and manufacturers to source at least 15% of tobacco leaf raw materials locally.

Senators have expressed concern that the Enrile amendment will go against the General Agreement on Tariffs and Trade, which prohibits protectionist laws.

Drilon said the bicam added this phrase to the provision: “subject to adjustment based on international treaty commitment.”

“With the phrase, we believe that [it] can stand scrutiny of the World Trade Organization,” Drilon said.

Sin tax advocates called the bicam the final battleground for the passage of the bill. They expressed concern that so-called killer amendments will be introduced at this stage but Drilon said they were able to protect the essence of the bill.

The Senate passed the bill in November while the House approved it in June. The approval was historic, the first time in 15 years a sin tax bill made it out of committee meetings.

Touted as a health and revenue measure, the bill is a priority of the Aquino administration. Aquino certified it urgent to ensure its speedy passage.

The House contingent of the bicam are: Davao City Rep Isidro Ungab, House majority leader Neptali Gonzales II, House minority leader Danilo Suarez, Iloilo Rep Janette Garin, Batanes Rep Henedina Abad, Camarines Sur 4th district Rep Arnulfo Fuentebella, Camarines Sur 3rd district Rep Luis Villafuerte, Negros Oriental RepJocelyn Limkaichong and Ilocos Sur Rep Eric Singson Jr.

Representing the Senate are Senators Panfilo Lacson, Alan Peter Cayetano, Pia Cayetano, Sergio Osmena III, Franklin Drilon, Ferdinand Marcos Jr and Ralph Recto.

‘Most difficult 6 weeks’

Drilon, who shepherded the passage of the sin tax bill along with the budget, said the past weeks were an ordeal. He had to take over the ways and means committee following Recto’s resignation for criticism of his supposedly watered down version.

Drilon is also chairman of the Senate Finance Committee in charge of the budget.

“This is the most difficult 6 weeks of my being a member of the Senate, this is one of the most difficult periods in terms of the very hard bills we tackled, both on the national budget and now the sin tax.” 

“I started working on this when we came back in November so today we have put to bed this bill and we do hope we should be able to serve our country in terms of a better health program.” – Rappler.com