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San Miguel-NPC lobby watered down House version of sin tax bill - Monsod

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MANILA, Philippines – (UPDATED 9:56 p.m.) UP economics professor Solita Monsod dropped a bombshell on Thursday at the Senate ways and means panel hearing the pending sin-tax reforms: House Bill 5727 was watered down by San Miguel Corp. through congressmen-members of the Nationalist People's Coalition.

The big disparity between the expected windfall from excise taxes on cigarettes and alcohol, Monsod told committee chair Ralph Recto, was because of SMC, which is chaired by Eduardo "Danding" Cojuangco. He sold his remaining holdings in the diversifying conglomerate to his lieutenant, Ramon Ang, a few months ago.

Cojuangco is also founding chairman of the NPC.

SMC is the biggest beer-maker in the country, controlling almost 95 percent of the market. It also owns Ginebra San Miguel, maker of distilled spirits, which shares the market with Andrew Tan's Emperador Distillers Inc., Lucio Tan's Tanduary Distillers Inc. and Distelleria Limtuaco.

Monsod said it was not the strong alcohol lobby that reined in the deliberations for the final version of HB5727; rather, political affiliations played a big part in the final version of HB 5727.

There are 48 district representatives who are members of NPC out of the total 250 districts. NPC is chaired by Cojuangco.

This was brought out in the open when Recto asked why the Abaya bill or HB 5727 provided that P27 billion of the expected windfall from the hike in excise taxes would come from tobacco products, and only P4 billion will come from the beer and distilled spirits industry.

"I hope that was just a rhetorical question. I think we all know why," Monsod told Recto.

To this, Recto remarked that legislative deliberations and subsequent voting are a political exercise. 

"It's because NPC-Cojuangco-San Miguel, etcetera, that's beer. That's all. I mean, that is the only explanation," she said.

"I just hate these snide remarks so I just brought it out in the open," Monsod later told InterAksyon.com.

Monsod and Recto are both former directors-general of the National Economic and Development Authority (NEDA). Sin-tax reform advocates like Monsod have challenged political leaders to prove they are on the side of the people, "not big tobacco" and pass the bill. But lawmakers like Recto have said they needed to be convinced that Finance officials who did the revenue assumptions have their "math right."  

Former Pangasinan representative Mark Cojuangco, son of the SMC chairman, told InterAksyon.com that NPC did not have a hand in "manipulating" the final version of HB 5727.

"I'm saying this as a personal opinion. Beer and other spirits are not a 'sin' per se as the other sin products. A glass of wine, a bottle of beer does not hurt or have negative health consequences," Cojuangco said.

"May dad, I always hear him say, basta level ang playing field, basta applicable sa lahat sa industriya ang batas, patas, at walang smuggling -- walang problema. Having said that, taxes on beer are already high. Sa retail price, kung isasama mo ang income, excise -- ang binabayad sa gobyerno mas malaki pa sa napupunta sa kumpanya," he said.

If the excise tax on alcoholic products would be jacked up further, then SMC may end up paying up to 75 percent of the retail price to the government. The younger Cojuangco said this may turn off consumers into buying San Miguel Beer or Ginebra gin.

Earmarking

The Departments of Finance and Health had initially pushed for the P60-billion target revenue from the hike in sin taxes, to be divided equally between the tobacco and alcohol players. 

Under this proposal, 15 percent of the revenues would go to support tobacco farmers who may be displaced on the assumption that the increase in excise tax would cut down demand for cigarettes. 

The remaining 85 percent or around P50 billion would go to the Department of Health---around two thirds of this would go to health programs and a third to the Philippine Health Insurance Corp. Currently, Philhealth supports the medical expenses of around 5.4 million indigent families in government hospitals.

The DOH wants to expand the coverage to 10 million families.

However, the resulting HB 5727, which was passed by the Lower House in June, provided only around P30 billion to P33 billion in increased revenues. This would only leave P25 billion for Philhealth and almost nothing for health programs. DOH Secretary Ona said only extra funds from the sin taxes would go to improvement of hospital facilities.

DOF Secretary Purisima said the earmarking of the sin tax revenue changes with the target amount.

Disparity in tax burden

Philip Morris Fortune Tobacco Corp. had been pointing out the disparity in the tax burden between tobacco and alcohol under HB 5727. Representatives of the company said PMFTC, which controls 90 percent of the local cigarette market, is not against the hike in the sin taxes but it wants fairness and parity from lawmakers. 

The Senate is currently trying to consolidate three sin-tax reform measures before it could present to the plenary the final version of the sin tax bill. Aside from the Abaya bill (HB5727), Senators Miriam Santiago and Panfilo Lacson filed similar bills, which sin- tax reform advocates say are close to the original version that DOF and DOH wanted. 

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