Senate agrees ‘in principle’ on P40-B sin tax revenues

Senators agree in principle to raise P40 billion in revenues from tobacco, alcoholic products

HARDEST PART OVER. Sen Franklin Drilon says the sin tax reform bill hurdled the hardest part, with senators agreeing to raise P40 billion in revenues from tobacco and alcoholic products. Photo by Ayee Macaraig

MANILA, Philippines – Contrary to plans, the Senate has not yet approved the sin tax reform bill but the chamber agreed in principle to raise an additional P40 billion in revenues from sin products. 

The P40 billion target is dubbed as “the crux of the bill.”

With the Reproductive Health (RH) bill taking up most of the Senate’s time on Monday, November 19, senators lacked time to tackle amendments and pass the sin tax bill on second and third reading.

Instead, the lawmakers met in caucus Monday night and later ratified in plenary their agreement that the sin tax bill must generate an additional P40 billion in the first year from tobacco and alcoholic products.

The P40 billion is the figure in the Palace-backed version sponsored by Sen Franklin Drilon. It is closer to the Finance Department’s P60-billion target compared to the P31-billion approved by the House of Representatives in June.

Drilon said the agreement makes it easy for the bill to be approved on Tuesday, November 20. 

“There will be individual amendments but the crucial portion of the bill on how much incremental revenue will be generated from the so-called sin products is already agreed at P40 billion. That is the crux or the meat of the bill,” Drilon told reporters after the session.

“We just have to present the rates that will generate P40 billion,” he added. 

Drilon said another agreement reached in caucus was the 60:40 burden-sharing ratio between tobacco and alcohol.

“In other words, P24 billion for cigarettes and P16 billion for liquor. The 16 billion will be split and shared in accordance with the historical burden-sharing between fermented liquor and distilled spirits,” said Drilon.

The sponsor added that the senators agreed to have a unitary tax rate for cigarettes on the 5th year of the bill’s implementation.

This moves the planned unitary tax rate of P32 per pack of cigarettes from taking effect on January 1, 2016 to January 1, 2017.

The sin tax reform bill has been certified urgent by President Benigno Aquino III. It is a priority of his administration aimed at raising funds for the universal health care program, and improving revenues.

Marcos objection, Enrile proposal

During the session, Sen Ferdinand Marcos Jr pointed out that the agreement on the P40 billion was not unanimous. He manifested that he does not agree with the amount.

“As I showed in my interpellation, P40 billion is a figure that is not realistic and practical even if our colleagues say it is just a target,” Marcos said.

“From my readings, historical sharing is not in fact 60:40, but more high 50s and low 40s,” Marcos said on the burden-sharing.

Marcos has opposed the Drilon version of the sin tax bill, saying it will kill the tobacco industry. He hails from the tobacco-growing province of Ilocos Norte.

Another lawmaker from Northern Luzon, Senate President Juan Ponce Enrile, proposed to require both local and foreign tobacco manufacturers to source at least 20% of their raw materials locally.

Drilon, however, said that Enrile’s proposal is not yet final.

“That proposal of Sen Enrile will be carefully studied because we don’t want to get into trouble with our commitment in the General Agreement on Tariffs and Trade, which can result to some problems in the World Trade Organization,” Drilon said.

“Sen Enrile was open to that so we will study the proposal.”

Bicam discussions to focus on liquor

Before the session started, Drilon refused to say when the schedule for the bicameral conference committee would be. After the Senate approves the bill on third and final reading, it will have to reconcile its version with the House.

“It’s hard to talk about a timetable but we’ll try to have this presented to the President. We have until the end of the year,” he said.

Drilon said he does not expect difficult discussions on the cigarette rates because the House and Senate versions are similar.

“Therefore that is P26 billion. So we’re talking about the difference between the P5 billion total liquor in the House as against our P14 billion so that is where the substantive discussions will be.”

Drilon explained further, “The rates on the liquor are different. Theirs is different, distilled and fermented so that’s it but in so far as the taxes are concerned we’re almost alike.” –


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