House committee OKs sin tax reform bill

Posted at 05/09/12 4:39 PM

MANILA, Philippines - The House Ways and Means Committee on Wednesday approved the Department of Finance-backed sin tax reform bill, which will increase taxes on cigarettes, liquor and other tobacco and alcohol products.

Cavite Rep. Joseph Emilio A. Abaya, author of House Bill 5727 or the sin tax reform bill, said some changesl were included after consultations with stakeholders.

"For instance, the amendment on beer, initially it was supposed to be unitary, but it has been modified for the tiered system. There was also variation as to the tax rate. Likewise for distilled liquor and wine, there have also been changes to accommodate some concerns of stakeholders," he told ANC.

HB 5727 originally proposed a uniform tax rate of P25 per liter for all beer products, regardless whether they are currently classified as low-priced, medium-priced or high-priced.

The bill also aimed to remove the multiple tiers of the existing cigarette tax structure and replace these with a unitary tax. It proposes a P10 tax per cigarette pack this year, and this will increase to P22 in 2013 and P30 in 2014. Cigarettes are currently taxed as low as P12, depending on the brand.

The bill faced stiff opposition from tobacco and alcohol companies, as well as tobacco farmers.

The DOF estimated it can generate P60 billion in additional revenues in the first year of the sin tax reform’s implementation. The bulk of these revenues will be allocated for the government's healthcare program.

However, Abaya said the amendments in HB 5727 may affect the expected revenues that will be generated by the sin tax reform. He did not give details.

"Definitely there would be a reduction on the revenue side... But the real reform measure as to the structure itself, the principle behind it, like doing away with the indexes, which was literally a price freeze since 1996 -- that is a reform measure that is one of the greater accomplishments of the bill," he said.

After the committee level, the bill will be sent to the House plenary for approval. Abaya said he hopes the sin tax reform bill will be approved by the House plenary, which would put pressure on the Senate to approve a similar measure.

"If done, this would be a major accomplishment that the President could discuss in his SONA (State of the Nation Address) and likewise it would put pressure on the Senate that it is now in their court. Hopefully they could get to pass it before our public servants would shift to campaign mode," he said.

Meanwhile, the Palace welcomed the approval of the sin tax bill at the House committee level.

Presidential spokesman Edwin Lacierda said there is no need to certify the bill as urgent, since legislators already know this is one of the President's priority measures.

"The rationale for reform is clear. This measure seeks to help fund public healthcare, which is a key thrust in the administration's drive for inclusive growth. It also seeks to improve the efficiency of tobacco farmers, strengthen the current tax structure, and sustain revenue growth," Lacierda said.

Finance Secretary Cesar Purisima also praised the House Ways and Means Committee for passing HB 5727, which would pave the way for significant restructuring of tobacco and alcohol taxes after more than 15 years.
"These reforms will enable us to increase the cost of tobacco and alcohol addiction while at the same time providing government with additional resources to respond to the public costs of these vices. The restructuring of the tax system will also create a more level playing field in the tobacco market as well as enable us to comply with our WTO commitments," Purisima said, in a statement.
"We look forward to having this bill passed by next month, and enacted into law within the year," he added. - With report from Willard Cheng, ABS-CBN News