Recto reports out Senate version-dominated Sin Tax bill

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MANILA, Philippines – Senator Ralph Recto on Wednesday confirmed what anti-tobacco activists had feared: his ways and means committee report on the Sin Tax bill has adopted a version based largely on the Senate version, which cuts the revenue assumptions in the House version by half. Anti-tobacco groups lobbying for passage of the bill promptly denounced it as a "watered-down" version that caved in to pressures from tobacco groups.

To be presented for plenary debates is a version reflecting revenue assumptions of only between P15 billion and P20 billion on the first year of implementation of a law imposing excise taxes on tobacco and alcohol.

“We will be recommending a Senate version to the plenary which was summarized under an economic equilibrium. The revenue assumption is realistic, responsible and reliable and also in the report are the concerns aired by the health sector,” Recto said.

He said the Committee had only two months to deliberate on and study the original DOF- sponsored bill, House Bill 5727 as passed by the Lower Chamber; and Senate bills filed by Senators Panfilo Lacson and Miriam Defensor-Santiago.

Recto said the Senate version was preferred by his committee’s members over the House version, since the former could yield between P9.8 billion and P14.8 billion in additional revenues from cigarettes, and contribute as much as P5.2 billion to P7 billion in the first year (2013) from Alcohol.

As of this writing, aside from Recto, 10 senators had signed the committee report: Senators Franklin Drilon, Gregorio Honasan II, Ramon “Bong” Revilla Jr., Francis “Chiz’ Escudero, Manuel “Lito” Lapid, Antonio “Sonny” Trillanes IV, Miriam Defensor-Santiago, Joker Arroyo, Jinggoy Estrada and Vicente Sotto II.

The committee is still waiting for the signatures of Francis Pangilinan, Teofisto Guingona III, Sergio Osmena III, Edgardo Angara, Manny Villar, Alan Peter Cayetano and Senate President Juan Ponce Enrile.

Recto said the highlights of the committee report are:

1.     In revamping the tax on tobacco, a 52-percent increase in the tax rates during the first year will be imposed;

2.     Those in the first tier or low-priced class will absorb an increase of 121 percent from P2.72 to P6 per pack;

3.     This tax formula is seen to generate anywhere between P10 billion and P15 billion in tobacco taxes, which is predictable, recurring and fair to all stakeholders;

4.     This bill will result in a decrease in smokers by 8 percent on the average, and possibly more from D and E classes;

5.     The Senate proposal is much lower than the P2.27 to P14 (first year) or the P2.72 to P30 tax hike that DOF wants, which will redound to a loss of P10.3 billion and a gain at best of P2.2 billion as found in the original Palace version;

6.     With respect to alcohol, the committee concurs in the House version as to the need to temper increases which will hike revenues by between P5.2 billion to P7 billion;

7.     For both cigarettes and alcohol, the Committee agrees with the Palace and DOF in removing the price annexes, mandating increase in tax rates and indexing it to inflation, increasing the same every two years and allowing for reclassification and free competition;

8.     After the series of biennial adjustments, the Committee projects that by 2020, there will be two tiers for tobacco taxes and two tiers for fermented liquor;

9.     The Senate version was designed not to promote smuggling and illicit trade, as warned by experts.

Recto said that pursuant to the government priority program to expand healthcare services, the committee proposes to earmark 50 percent of the total proceeds of the law, or roughly about P33 billion, for the health sector.

Of the 50 percent, about 40 percent or P26 billion will go to finance the expansion of the universal health coverage of the Philippine Health Insurance Corporation (Philhealth) benefitting 10.4 million families; while the balance of 10 percent will be divided equally among DOH regional hospitals and district hospitals operated by local government  units.

Under the scheme, each of the 16 regional hospitals will receive P200 million while each of the 618 district hospitals will be entitled to P5.25 million per year.

The committee also allocated the amount of P100 million yearly for a public information and education campaign on the dangers of smoking and drinking, to be administered by DOH.

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