Finance urges Congress to leave Sin Tax Law alone

8 December 2016:

THE Finance department on Thursday  urged lawmakers to leave the Sin Tax Law alone and let it mature next month.

The DoF statement came after the House of Representatives on Wednesday night approved on second reading House Bill 4144 filed by ABS Rep. Eugene De Vera which seeks to revert back to two-tier structure from unitary tax system and increase the tax rate to P32 and P36 per pack beginning next year from the unitary P30 a pack.

Finance Secretary Carlos Dominguez III has urged the congressional oversight committee on the Sin Tax Reform Act to start reviewing the revenue and health impact of the tax rates mandated under this law to determine what measures should be  undertaken  by the Legislature once the statute matures in 2017.

Describing Republic Act No. 10351 or the Sin Tax Reform Act as “a very good law,” Dominguez said it should be fully implemented and allowed to run its course.

RA 10351 mandates that the current two-tiered tax rate merge into a unitary tax rate of P30 per cigarette pack for all brands starting Jan. 1, 2017, and the rate indexed to inflation  by increasing it to four percent annually.

“We consider the Sin Tax Law or RA 10351 to be a very good law,” Dominguez said.  

“Our position,” he said, “is to fully implement the law and let it run its course, including Section 11, which states that ‘starting the third quarter of calendar year 2016, the Committee (referring to the Congressional Oversight Committee) is mandated to review the impact of the tax rates provided under this Act.’”

Dominguez said the DoF expected “this review to occur” as mandated by law and for it to “be done well to inform [us] what we should be doing in the future.”

Finance Undersecretary Bayani Agabin, meanwhile, clarified the figures on the unitary sin tax system that is supposed to be adopted beginning next year as mandated by law were still “very preliminary numbers,” and  that the DoF was still conducting a thorough study on the sin tax rates, taking into account the public health impact of the law and the price elasticities  of  cigarettes.

“When this was asked during the hearing [last Monday] of the House committee on ways and means, I mentioned that the figure is very preliminary and we are still studying the ideal price point considering the price elasticities of the products as well as the intended health effects of the sin tax law,” Agabin said.

Meanwhile, Regional health group South East Asia Tobacco Control Alliance also expressed its opposition to the move of Congress. 

“Disregarding the major public health gains of the tobacco tax reforms enacted in 2012, some Philippine legislators decided to promote tobacco industry interests rather than protect public health,” Seatca said in a statement. 

Seatca said  HB 4144, supported by the Northern Luzon Alliance, sought to retain the current two-tier excise tax structure for cigarettes instead of the unitary tax rate that should come into effect on Jan. 1,  2017 as mandated by the sin tax reform law. 

The Northern Luzon Alliance is led by Majority Floor Leader and Ilocos Norte Rep. Rodolfo Fariñas, Ilocos Sur Rep. Eric Singson, and Quezon City Rep. Bingbong Crisologo.

“The Philippine Sin Tax Law is a shining example for other countries because after its implementation, smoking declined, especially among the youth and the poor, the vulnerable sectors of our society, and the government was able to earmark funds for universal health coverage of poor families,” said Dr. Ulysses Dorotheo, Seatca’s FCTC Program Director. 

“HB 4144 is economically unsound because two tiers will be more difficult for the government to administer than a unitary rate, and tobacco companies will make cheaper cigarettes to avoid paying more taxes. As a result, more people will smoke and die from smoking. Only the tobacco companies will benefit,” added Ms. Sophapan Ratanachena, Seatca’s tobacco tax program manager.

The Sin Tax Law was signed into law in 2012, after being stalled at the committee level in the House of Representatives for more than 15 years.

Local health advocates in the country also slammed lawmakers for the swift passage of the bill in the committee level. 

“The legislators chose to protect the interest of the tobacco industry, a long-standing clique of power in Congress, known to most as the Northern Luzon Alliance. They struck again with decisive force to ram through legislation a proposal that will kill the health and revenue gains of the Sin Tax Law,” said health group advocates in a joint statement. 

“They are trying to beat the Christmas rush and hoping to deliver the goods to their master, in this case, the tobacco companies, as soon as possible. The Christmas aguinaldo for a job well done may be forthcoming for these legislators. Thanks to a bill that will surely bring more profits to the tobacco companies’ coffers as more people die because of smoking-related diseases,” they added. 

The statement was released by health groups belonging to the Primary Care Coalition, Action on Smoking and Health, Framework Convention on Tobacco Control Alliance Philippines, New Vois Association of the Philippines, Health Justice Philippines, Womanhealth Philippines, and Action for Economic Reforms as they opposed the rush to pass House Bill 4144 in the House of Representatives.

HB 4144 was filed on October 19 just before the session went on break on Oct. 21. 

It was referred to the Committee on Ways and Means on Nov. 7 when the session resumed. The first Committee hearing on the bill was held on Nov. 28.