Sin tax bill faces rough sailing at bicameral committee

by RG Cruz, ABS-CBN News

Posted at Nov 21 2012 05:30 PM | Updated as of Nov 22 2012 01:37 AM

MANILA, Philippines (UPDATED) - Senate Minority Leader Alan Peter Cayetano expects arguments on the sin tax bill to remain intense as it goes to the bicameral conference committee for reconciliation with the version earlier passed by the House of Representatives.

Cayetano says the version passed by the House is different from the version approved by the Senate on Tuesday night.

Cayetano said the differences lie in the tax categories as well as the burden sharing between the tobacco and alcohol companies.

Based on a comparison provided by the office of the bill's sponsor Senator Franklin Drilon, the Senate's sin tax bill projects a 2013 income from sin taxes of P39.5 billion as against the P31 billion of the House version.

The Senate's version projects an income of P64.4 billion by 2017 while the House version expects P40.2 billion by 2016.

Both versions stagger the implementation of the new tax rates but the House staggers a full implementation by 2016, while the Senate version envisions it by 2017.

For distilled spirits,  the House proposes a 3-tier excise tax system based on the net retail price per bottle of 750ML while the Senate version proposes a mixed ad valorem and specific tax.

Under the House version, distilled spirits worth less than P90 get a tax of P20 per proof liter, P80 per proof liter for those worth P90 to P150 and for those worth more than P150, P320 per proof liter.

The Senate version wants a P20ST per proof liter + 15% AV of the net retail price per proof liter and a P20 = 20% AV of the NRP per proof liter by 2015.

For fermented liquor, the House version wants a 2 tier system: NRP per liter of volume capacity is P50.50 or less—tax is P13.75 per liter. If more than P50.60, tax is P18.8 per liter.  For fermented liquor sold at microbreweries, pubs and restaurants, tax is at P28 per liter.

The Senate’s 2 tier system, meanwhile, says that if the NRP per liter is less than or equal to P22, the tax is at P20. If the NRP is greater than P22, the tax is at P25.

For wines, the House and Senate versions are the same: Sparkling wine with a net retail price per 750ML bottle worth P500 or less is imposed a P250 tax, while those worth more than P500 gets a tax of P700.

Still wines and carbonated wines with 14% alcohol get a tax of P30. Still wines and carbonated wines with alcohol more than 14% but not more than 25% get a tax of P60 while fortified wines with more than 25% of alcohol shall be taxed as distilled spirits.

The Senate and House versions are also the same for tobacco products: tobacco not for chewing gets a tax of P1.75 per kilogram while tobacco for chewing gets a tax of P1.50 per kilo.

Cigars under the House version get a tax of P150 per cigar but in the Senate version, it is as follows: if NRP is P500 or less: tax is 20% of NRP per cigar. If more than P500 per cigar, tax is 25% of the NRP.

The house wants cigarettes packed by hand to get a P7.56 per pack tax by January 1, 2013 and P12 per pack by 2014. The Senate wants hand-packed cigarettes to get a tax of P12 by January 2013, P15 per pack by 2014, P18 per pack by 2015, P21 per pack by 2016 and P26 per pack by 2017.

Machine packed cigarettes under the House version will be taxed as follows: P12 for those with a NRP of P11.5 and below while P28.30 for those with NRP above P11.5 and above by January 2013. This goes up to P22 and P30 respectively by 2014.

In the Senate version, low-end machine packed cigarettes (with current excise taxes less than P7.56) will start with a P12 tax by January 2013, going up to 15 pesos in 2014, P18 in 2015 and P21 by 2016 and P26 by 2017.

Mid-priced machine packed cigarettes (with current excise taxes between P7.56 to P12) will start at P16 in 2013, up to P18 in 2014, P22 by 2015, P24 by 2016 and P26 by 2017.

High end machine packed cigarettes  (with excise tax over P12) will start at P20 by 2013, P21 by 2014, P22 by 2015 and P24 by 2016 and P26 by 2017.

In the senate version, cigarettes get a unitary tax rate of P26 with a staggered implementation starting next year to 2017. In the house version, the maximum tax could be P30 per pack by 2014.

On Tuesday night, sponsor Senator Franklin Drilon said, "We would have wanted P30.00, but the reality is that it is a collective body and we tried to get the vote of our colleagues and this is the sweet, if you want to call spot that we were able to find P26.00. of course, a higher unitary tax is desirable, but reality is that we have to submit this to the collective wisdom."

After a marathon session, the Senate approved  Senate Bill 3299 in a 15-2 Vote.

The Senate and House have yet to constitute the bicameral conference committee that will reconcile these differences.

For his part, Health Secretary Enrique Ona said, “The passage of this bill is a victory in our campaign to protect our people, especially the young and the poor, from the ill effects of smoking and excessive drinking. At the same time, the additional revenues will be used to fund the expansion of PhilHealth enrollment to the second poorest 20% of our population, upgrade and modernize our hospitals and other health facilities, and expand our existing preventive and promotive programs under Kalusugan Pangkalahatan,”

Ona said most of the incremental revenues will be earmarked for the enrollment of an additional 5.6 million families, considered the Q2 or the second poorest 20% of the population, to PhilHealth, upgrading and modernization of government hospitals and other health facilities, expansion of preventive and promotive programs including tobacco and alcohol control, elimination of public health threats such as filariaisis, malaria, schistosomiasis and rabies, expansion of existing immunization programs, strengthening health policy and regulations and bolstering health human resources through additional hiring and deployment of doctors, nurses and other health care professionals.

Part of the revenues will also be used to for assistance to tobacco farmers and workers for shifting to alternative crops and livelihoods.

The taxes will be shared by the tobacco and alcohol industries, 60% to 40%. It will also earmark 15% of earnings from locally made Virginia tobacco products for beneficiary provinces.

The bill will meantime also require local manufacturers to source 15% of the requirements from local tobacco farmers.