Drilon presents new version of sin tax bill

Posted at 11/06/2012 5:30 PM | Updated as of 11/06/2012 10:48 PM

MANILA (2nd UPDATE) - Senator Franklin Drilon on Tuesday presented a new version of the sin tax reform bill, which he branded as a health measure more than anything else.

Drilon, the acting chair of the Senate ways and means committee, announced during Tuesday's session that he is proposing a new version to substitute that of the committee's former chair, Sen. Ralph Recto.

His version projects sin tax revenues to reach between P40 billion and P45 billion. Recto's version, which was widely criticized, had projected revenues of only P15 billion to P20 billion in the first year of the imposition of new taxes.

"Your decision on the proposed sin tax reform legislation is less a vote for new taxes than it is an imprimatur for a healthier Philippines," Drilon said in his sponsorship speech.

Under the substitute bill, the tax rate for hand-packed cigarettes in 2013 is P12 instead of P7.56 in Recto's version. The rate will be P22 the following year, then increase to P28 billion in 2015. By 2016, all cigarettes will have the same tax rate of P32.

All in all, the projected revenue from cigarette excise tax is P26.8 billion.

For distilled spirits like vodka and rum, Drilon's proposed tax rate is P30 plus 30 percent of the product's net retail price. For fermented liquor or beer, products whose net retail prices are below P22 will be taxed by 20, and those priced above P22 will have a P25 tax.

The incremental revenue from alcohol products amounts to P19.5 billion, Drilon said.

Drilon told Senate President Juan Ponce Enrile during interpellations on the bill that the projected revenues take into account the possible impact on the profitability of the cigarette industry and employment levels in the country.

Ultimately, Drilon emphasized the health benefits of a sin tax law. Citing figures from the state-run Philippine General Hospital, he said the government loses at least P155 billion a year from the effects smoking-related illnesses.

Sen. Panfilo Lacson, who filed his own version of the sin tax bill, pointed out that higher taxes may lead to lesser consumption of sin products and therefore lesser revenues.

Drilon explained, however, that the experience of other countries shows that government revenues won't suffer from higher taxes.

"Even assuming so, my position is that we should be willing to take that risk if it will result in less people smoking," he said.