'Sin tax frozen for 17 years'

By Jess Diaz, The Philippine Star

Posted at Oct 20 2012 10:55 AM | Updated as of Oct 21 2012 07:01 AM

MANILA, Philippines - Sin tax rates have remained at “super-unrealistic” levels since 1996 as previous congresses failed to make adjustments, Speaker Feliciano Belmonte Jr. said yesterday.

“The values have been pegged in 1996, and that’s super-unrealistic. These things have been here for 17 years and they were not changed. It’s time we did something about it,” Belmonte told reporters.

Belmonte was responding to criticism of the House version of the bill seeking higher taxes on the so-called sin products like cigarettes and liquor.

Resigned Senate ways and means committee chairman Ralph Recto described the House-approved bill as the “Purisima-San Miguel” version, referring to Finance Secretary Cesar Purisima and beer maker San Miguel Corp.

Recto said the congressmen’s bill, which would bring in P31 billion in additional revenues, was “soft” on beer and “harsh” on tobacco. His version, which critics called the “Recto-Morris” bill referring to cigarette maker Philip Morris, targeted P15 billion in incremental tax take.

Belmonte took pride in his chamber’s approval of the proposal on higher sin taxes.

“It never moved through all of these years simply because the House never approved it, the ways and means committee in the House never approved it,” he said.

He said the Senate did not get to discuss the bill through three administrations “since it has to emanate from the House.”

But because congressmen approved the measure and sent it to the Senate in July, senators are now considering it and the “whole country knows what it’s all about,” he said.

“I think we did something there, something which couldn’t be done for all of these years. We got the issue of sin taxes out of the House and into the scrutiny of the Senate and the public,” he stressed.

The fact that sin taxes have not been adjusted since 1996 is also one of the strongest arguments of proponents of higher cigarette and liquor taxes.

The proponents said previous Congresses have given cigarette and liquor makers 16-17 years to rake in tens of billions of pesos in profits and deprived the government of billions in potential tax income.

Unlike President Aquino, they said previous administrations did not work hard to update sin taxes.

Responding to criticism that the House version was soft on beer producers, Belmonte said, “They are saying that we were easy on the liquor industry. Yeah, but they can compensate for it there. They could have increased the rates, if they wanted to.”

He said the House version was not the “final word because the whole bill is open to scrutiny by the Senate.”

He said if senators approve a different version, “at that point, the two of us will meet together and come up with the final version.”

The Senate and the House are still aiming to approve the bill on higher sin taxes before they go on their Christmas break in mid-December. As drafted, the measure is to take effect in January.

Malacañang is now reportedly amenable to an incremental revenue goal of P40 billion, down from P60 billion.

The revised goal is P10 billion more than the House target, and P25 billion more than Recto’s additional revenue projection.

DOF’s idea

Contrary to Recto’s insinuations, it was officials of the Department of Finance (DOF) and not the House of Representatives who were pushing for lower taxes on alcohol products, transcripts of a hearing of the House committee on ways and means showed.

During the May 9 hearing of the panel, DOF Undersecretary Jeremias Paul made a power point presentation that proposed a tax take of P26.8 billion from tobacco products and only P4.48 billion for alcohol and liquor products for a total projected revenue of P31.28 billion in the proposed sin tax reform bill or House Bill 5727.

The transcripts of the proceedings contradicted the statement of Purisima that his department was not the one responsible for the lower taxes on alcohol products, particularly beer.

It was on the basis of the DOF official’s presentation before the ways and means committee that the panel voted for the passage of HB 5727.

Transcripts of the May 9 proceedings also contradicted claims of Bureau of Internal Revenue (BIR) Commissioner Kim Henares that that it was the “House of Representatives which made amendments to the version advocated by the Executive.”

Under an amended HB 5727, the incremental revenue expected from alcohol products was reduced 85.06 percent while incremental revenue from tobacco products was shaved by only 10 percent, resulting in an 85-15 percent sharing of the tax burden between the two industries.

The approval of the amended HB 5727 last May 9 was opposed by some lawmakers, citing that the agenda for that day explicitly stated that deliberations would focus on “Alcohol Excise Tax Only.”

Even provisions pertaining to excise tax on tobacco products were approved, despite objections raised.

The committee rules provide for a “five-day Notice Requirement” for discussion on new measures. The amended HB 5727 was only presented by the DOF during the May 9 hearing. No advance copies were provided to the members of the panel. – With Paolo Romero