Philippines: ‘Unsound’ Sin Tax House measures

10 December 2016:

A regional health group on Saturday raised alarm over the “economically unsound” proposals in Congress to amend the Sin Tax Law that has yet to mature next year, saying the proposed amendments would only “promote tobacco industry interests” and disregard major public health gains of the tobacco tax reforms in the country.

House Bill 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,” said Sophapan Ratanachena, tobacco tax program manager of the Southeast Asia Tobacco Control Alliance. “As a result, more people will smoke and die from smoking. Only the tobacco companies will benefit.”

SEATCA also accused lawmakers of “disregarding major public health gains” when Congress decided to “railroad” to second reading HB 4144, which sought to discard the unitary tax imposing a 30-peso excise tax on all brands slated for January 2017 and opted for higher tax impositions.

“They are disregarding the major public health gains of the tobacco tax reforms enacted in 2012, [with] some Philippine legislators deciding to promote tobacco industry interests rather than protect public health,” Dr. Ulysses Dorotheo of SEATCA added.

House Bill 4144 was approved on second reading only two days after the House Ways and Means Committee chaired by Rep. Dakila Cua approved it, without considering the alternative House Bill 4575.

Filed by ABS Party-list Rep. Eugene Michael de Vera and supported by the Northern Luzon bloc—a region dependent on tobacco farming—HB 4144 seeks to retain the current two-tier excise tax structure for cigarettes, increasing the tax on cheaper brands to P32 a pack and P36 for high-end brands instead of the unitary tax rate that should come into effect on January 1 as mandated by the Sin Tax Reform Law or Republic Act 10351.

The proposal also includes an annual increase of five percent on these rates as against the current sin tax on tobacco that prescribes an annual four-percent adjustment thereafter.

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.

HB 4575, filed by Albay Rep. Joey Salceda, seeks to protect public health by strengthening the current sin tax law and maintaining the single tax rate on cigarettes at a higher rate of P40 per pack.

The present law imposes a tax of P25 per pack on cheaper brands with a net retail price of P11.50, and a tax of P29 per pack for brands that sell at more than P11.50 a pack.

Mighty, a Chinese-Filipino owned cigarette company that sells cheaper brands, was pushing for the passage of the De Vera bill. Philip Morris, a multinational company that sells the high-end brands worldwide, is opposing it and backs the existing Sin Tax Law that will implement the unitary tax next year.

“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,” Dorotheo adds.

“RA 10351 was signed into law after many long months of congressional debate and public scrutiny, but that struggle was worth it. This success story has been affirmed repeatedly by SEATCA, as well as by the World Health Organization, World Bank, Asian Development Bank, and various international public health organizations.”

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.