House Bill 5727, or the Sin Tax Bill, aims to restructure the existing taxes imposed on alcohol and tobacco goods. Duties on these products are a potential revenue source that will help fund the Universal Health Care Program of the administration. Likewise, higher taxes—and consequently higher costs—are seen as a deterrent to the consumption of “sin” products, whose adverse effects are mostly borne by the poorer segments of society. Why are we supporting it?
1. To promote health by discouraging vice.
2. To collect more revenue for healthcare.
According to the Department of Health (DOH), the Philippines has an estimated 17.3 million tobacco consumers, the most number of smokers in Southeast Asia. Filipinos on average consume 1, 073 cigarette sticks annually, while the smokers in the region consume less than a thousand sticks yearly. This high consumption rate is seen as a result, among others, of the very low cigarette prices in our country.Smoking is responsible for 71 percent of lung cancer deaths in the world. Consequently, lung cancer is the leading form of cancer in the Philippines. DOH statistics reveal that 10 Filipinos die every hour because of smoking.According to the DOH, a 10 percent increase in tobacco taxes will reduce the number of smokers by two million by 2016. A significant decline in the number of smokers will likewise reduce the number of smoking-related deaths. Revenue
The Department of Finance (DOF) has determined the following flaws in the current system of taxing sin products: * The current system is still under the Price Classification Freeze, wherein old brands are taxed differently from new ones. * The system follows a multi-tiered tax structure that is prone to the downshifting of smokers to cheaper cigarette brands (which does not discourage smoking). For example, based on 1994-2010 statistics provided by the Bureau of Internal Revenue (BIR), it was observed that consumers had downshifted from medium-priced cigarettes (more than 30% consumption in 1994 to less than 20% in 2010) to low-priced cigarettes (less than 40% consumption in 1994 to more than 50% in 2010). This also applied to beers: consumption of low-priced beer ballooned from less than 40% in 1994 to more than 70% in 2010. * The lack of price indexation results to declining tax burdens, as tax is eroded by inflation. In effect, the 2004 effective burden tax price has decreased in 2010 ranging from a 1 percent to 9 percent decrease in tax burden (based on BIR 4th quarter survey). * The taxation of distilled spirits is non-compliant with World Trade Organization (WTO) rules.
The sin tax proposes the following reforms:
* Maintain the specific form of excise taxation (e.g., per piece, per pack, per proof liter) to discourage consumption, have more revenues that are predictable and easier to administer, and devoid of incentives for manufacturers and importers with under-invoice products; * A shift from a multi-tiered tax structure to a single tax structure: (1) For cigarettes, a two-rate structure of P14 and P30 per pack for the 1st two years, and a uniform rate of P30 per pack of cigarettes on the third year. (2) For fermented liquor, immediate implementation of unified rate of P25/liter. (3) For distilled spirits, a two-year transition period to a unified rate of P150 per proof liter on the third year. * Adopt an automatic annual adjustment of tax rates using relevant NSO-established tobacco and alcohol indexes after the third year. * A shift from a raw-material criterion to an alcohol-content criterion in taxing distilled spirits. * Revenues from sin taxes are to augment the funds of the Aquino administration’s universal health care program. * The continued sharing with tobacco farmers of the incremental revenues. Universal Health Care (UHC)
The total cost of universal healthcare (UHC) from 2012 to 2016 will amount to P682.1 billion. The national government’s financing requirement for the next five years amounts to a total of P224.8 billion or a 33 percent share in the UHC cost. Additional revenues to be brought about by the proposed sin tax reform are being viewed as one of the main sources for UHC national government financing. * P92.7 billion will account for the national government covering for a 100 percent subsidy for the premium of 5.2 million or the bottom 20 percent of the poorest families. * P55.3 billion will account for a 50 percent subsidy for the next 5.6 million of poorest families (the other half will be funded by the local government). * P76.8 billion will account for investment subsidies in the health sector.
MANILA, Philippines — The Senate, voting 15-2, finally approved the controversial measure increasing excise taxes for cigarettes and alcohol products after senators intensely debated on the appropriate equal distribution of tax burden among the two so-called sin products. Only two senators, Senators Joker Arroyo and Francis Escudero voted against the bill. Those who cast a “yes” vote were Senate President Juan Ponce Enrile, Senate President Pro Tempore Jinggoy Estrada, Senate Majority Leader Vicente Sotto III, Sen. Franklin Drilon, Gregorio Honasan II, Pia Cayetano, Lito Lapid, Aquilino Pimentel III, Ferdinand Marcos, Jr. Teofisto Guingona, III, Loren Legarda, Ramon Revilla Jr. Manuel Villar, Ralph Recto and Panfilo Lacson. Drilon, sponsor of the bill, and chair of the Ways and Means Committee, said the government stands to generate P40 billion in additional revenues with the passage of the measure.
Of the amount, P24 billion will come from increased taxes on tobacco, while P16 billion will be generated from taxes on fermented liquor and distilled spirits depending on its historical burden sharing. Prior to the approval on third and final reading, Enrile demanded a re-computation of the multi-year tax burdens after seeing what he saw was a “distortion in the computation.” As approved in caucus, the aggregate sin tax collection target was pegged at P40-billion with a 60-40 percent burden sharing scheme which tobacco tax take was set at P24-billion and alcohol tax at P16-billion under the Senate version. “After much negotiation, we have agreed on a three-tier system for taxes of cigarettes,” Drilon said. “We have maintained a 60-40 burden sharing between cigarettes and alcohol. What are the totals that we expect to collect on a per year basis?” Drilon enumerated them:
For 2013, the total increment would be P39.5 billion; in 2014, P45.7 billion; in 2015, P52.3 billion; in 2016, P57.7 billion; and in 2017, P64.4 billion. The rates will be as follows. For the lowest priced, the excise tax for 2013 will be P12.00 per pack; in 2014, P15.00; in 2015, P18.00; in 2016, P21.00; and in 2017, P26.00. On the medium priced cigarettes, the excise tax for 2013 will be P16.00; in 2014, P18.00; in 2015, P22.00; in 2016, P24.00; and in 2017, P26.00. . For the highest priced, the excise tax for 2013 will be P20.00; in 2014, P21.00; in 2015, P22.00; in 2016, P24.00; and in 2017, P26.00. Senate Bill No. 3299 otherwise known as “an Act Restructuring the Excise Tax on Alcohol and Tobacco Products” was adopted with 15 affirmative votes, two negative votes, and zero abstention. “The passage of this bill is monumental in the history of this chamber. Once again, amidst the differences in our views, we have proven that we care more about saving lives than generating revenues; and that we remain true to serving the nation above personal interest,” said Drilon who went through tedious debates on the proposed measure. President Aquino has certified the bill as urgent.