Sin tax in Senate: Recto wants lower rates for tobacco?

MANILA, Philippines – Advocates of the sin tax bill expect the measure to be diluted further when the Senate comes out with its committee report on the bill in October.

Health Secretary Enrique Ona and Finance Secretary Cesar Purisima met with Senate ways and means committee chair Ralph Recto on September 18 in a bid to persuade him about the benefits of the bill, a source, who belongs to an organization working with the Finance and Health departments in pushing for the bill, told Rappler.

But Recto, who earlier expressed misgivings about the “high” taxes that will be imposed especially on tobacco, seemed to be unconvinced.

Recto reportedly wants a 3-tier excise tax system for cigarettes, diluting the 2-tier provided in the bill passed by the House of Representatives in June.

Apart from this, Recto also reportedly wants lower rates imposed on the tiers. The tiers – for low-priced, medium-priced and high-priced cigarettes – will have tax rates of P3.50, P8.50 and P12.50, said the source. The rates are close to what were provided in the bill Representative Victor Ortega of the tobacco-growing province La Union earlier filed in the House.

There is no word, however, on the tax structure for alcohol products.

Authored by Cavite Rep Jun Abaya, approved House Bill 5727 seeks to raise at least P31 billion additional revenues from a 2-tier tax system for tobacco (with tax rates of P22 and P30) and 2 and 3 tiers for fermented liquor and distilled spirits. The bill was a watered-down version of the one originally filed by Abaya that sought to raise P60 billion.

In the Senate, Senator Miriam Defensor-Santiago filed bills, which carry the same provisions as the original Abaya bill in the House.

The additional revenues from the sin tax measure will be used to fund the Aquino government’s universal health care program and assist tobacco farmers in shifting to viable, alternative crops.

The Senate held Thursday, September 20, its fourth and possibly, last public hearing on the measure.

Not convinced

Asked on the sidelines of the hearing what the Senate committee report will contain, Recto said, “we can’t say. We’ll see.”

He said he is still awaiting additional data from finance and budget officials. “We still have to study the data.”

He said what is almost certain is that they may impose specific tax rates but these will “mimic” an ad valorem tax system. An ad valorem tax is based on the price or value of the product, while a specific tax is fixed regardless of price.

“There’s a proposal to return to ad valorem. The committee is studying this. Most probably, there will be specific rates. But if we can mimic ad valorem — if that’s possible — we will try to endeavor to do that because it has to be fair.”

He added, “mine is just a recommendation. Ide-debate pa ‘yan ng committee. Iyan ang kagandahan ng demokrasya. Transparent naman ang debate sa Senado. Titingnan ng mga kasamahan ko kung tama ang ginagawa ko o mali at naniniwala ako ‘di lahat ng gagawin ko ay tama kaya may proseso tayo ng pagamyenda. At kung nagkamali man ang collective wisdom ng Senado, meron pa tayong bicam para magkaroon ng collective wisdom ng Kongreso.”

(The committee will still debate on it. That is just my recommendation. That’s the beauty of democracy. The Senate debates are transparent. My colleagues will closely watch if what I’m doing is right or wrong. I know not everything I do is right, that’s why we have a period for amendments. If the collective wisdom of the Senate is wrong, we still have the bicam (bicameral committee) for the collective wisdom of Congress.)

On whether or not he was convinced by the arguments presented by finance and health officials, he said “no, not hook, line and sinker.”

Watered down

In Thursday’s Senate hearing, Recto pointed out that the dilution in the House bill was due mostly to changes in the taxes for alcohol.

He said the original Abaya bill sought to raise P30 billion from tobacco and another P30 from alcohol. In the approved House version, however, revenues from tobacco were slightly changed to P27 billion, while those from alcohol dropped significantly to just P4 billion, he pointed out.

“We are wondering why is that when in the structure DOF (Finance) presented, it was supposed to be [accounting for] half?”

Talking to the Senator, one of the hearing’s guests, University of the Philippines Economics Professor Solita “Winnie” Monsod quipped, “I think that was a rhetorical question, wasn’t it? You do know why.”

Recto replied, “I have an idea but that is a political issue.”

Monsod then disclosed, “the reason why is because the Nationalist People’s Coalition (NPC) happens to be also part of the San Miguel [group].. I think it should be out in the open.”

Earlier, Abaya told Rappler that votes from the NPC were crucial in passing the sin tax bill in the House. NPC is the political party of businessman Eduardo “Danding” Cojuangco Jr, chairman and former major shareholder of diversified conglomerate and alcohol beverage maker San Miguel. (Read the report: Higher cigarette taxes: A promise compromised?)

Recto admitted “there are many lobbyists here. We have tobacco and alcohol, also the government and civil society groups.”

Among the other issues discussed in the hearing were revenue releases under the existing excise tax laws in the country – Republic Acts 7171, 8240 and 9324.

Recto said the disbursement of additional revenues raised by these laws has been delayed.

“We’re promising additional revenues under a new bill, but what assurance do we have they will be released?”

“I hope when we raise taxes and say we will spend them this way, we’ll keep our promise.”

Target submission

Recto said they are eyeing to submit the committee report for deliberation at the Senate plenary by the week of October 8. The Senate will resume its session that day after a two-week break starting September 22.

“Our target date is October 8, that week, October 8, 9, or 10. So far we’re on track as long as all the submissions take place.”

In the hearing, health advocates again presented to the public the benefits of raising the tax rates on tobacco, including the expected reduction in the economic burden of smoking.

“Can you, the DOF and DOH, provide me with the same data with regard to alcohol? I appreciate your presentation, but can we do the same thing for fermented liquor and distilled spirits?” asked Recto.

Recto said the hearing was “hopefully” the last one. “We hope the technical working group [can start drafting the report]. That’s why they should submit the documents we need for us to be able to make an intelligent decision and recommendation.” – Rappler.com

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