CTA cancels P59.84-M tax assessment vs RCBC Savings Bank
THE Court of Tax Appeals (CTA) ruled against the Bureau of Internal Revenue (BIR) and cancelled the alleged P59.844-million income tax deficiency of RCBC Savings Bank, Inc. (RSB) for the taxable year 2006 due to a void waiver supposedly extending the period to assess the bank.
In a decision penned by Associate Justice Erlinda P. Uy dated Dec. 18, CTA’s Special Second Division ruled that the period to assess tax deficiency of RSB, a subsidiary of Rizal Commercial Banking Corp., has already lapsed.
Despite the issuance of nine waivers agreed upon by the BIR and RSB to extend the period of assessment, the appellate court found that the first waiver issued was already void as it was received by the BIR on April 21, 2010, which was already after the expiration of the three-year assessment period for 2006, which was on April 16, 2010.
“Considering that the First Waiver is void, the eight subsequent waivers are also void because there was no period to extend at the time these were all executed as the period to assess has already expired on April 16, 2010,” the decision read.
“Since the waivers executed by petitioner are void, the deficiency income tax assessment for taxable year 2006 is likewise void for having been issued beyond the three-year prescriptive period mandated by law,” it added.
Section 203 of the National Income Revenue Code (NIRC) states that internal revenue taxes of a taxpayer must be assessed within three years after the last day of filing of income tax returns.
However, Section 222(b) of the NIRC provided that assessment period for the collection of taxes may be extended by both parties through an agreement before the lapse of the prescribed period.
RSB is being assessed for deficiency income tax from disallowed deductions from alleged bad debt write-offs of P87.83-million.
The Final Assessment Notice, on the other hand, was only issued on Jan. 16, 2012 or almost five years since the bank filed its corporate income tax return due to the nine waivers issued for the assessment period extension.
For its part, the BIR said RSB should be barred from assailing the assessment due to the nine waivers executed and the bank has previously filed protests but never raised the issue on the validity of the waivers. It also claimed that the assessment has legal and factual basis.
“Nevertheless, petitioner counters that the First Waiver executed on April 13, 2010 is null and void for being belatedly accepted by respondent on April 21, 2010. As a consequence, the period to assess was not validly extended. We agree with petitioner,” the decision read.
The decision was concurred in by Justices Ramon G. Del Rosario and Cielito N. Mindaro-Grulla. — Vann Marlo M. Villegas
Bill raising minimum age to buy cigarettes hurdles committee
THE House Joint Committee on Health and Trade and Industry approved the bill increasing the minimum age to buy tobacco products to 21 years from the current 18.
“They wanted to raise to 21 years old because the brain is still developing during the teenage years. Smoking negatively affects brain development,” Rep. Xavier Jesus D. Romualdo of Camiguin, Trade and Industry committee vice chair, told BusinessWorld over the phone.
The two House panels consolidated eight House Bills and one Resolution, all seeking to amend provisions of the Tobacco Regulation Act (TRA) of 2003.
The unnumbered Substitute Bill will also impose a total ban on advertising tobacco products and further expand the number of public places where smoking is prohibited.
Under the current TRA, tobacco companies are banned from promoting cigarettes through the mass media, but may advertise at the point of sale.
Mr. Romualdo said the Committees agreed to extend the advertisement ban to the point of sale. He noted that in lieu of displaying ads, establishments will be allowed to put up signs indicating the availability of tobacco products for purchase.
The Philippine Tobacco Institute, Inc. (PTI) said persons aged 18 years are “deemed qualified and responsible for all acts of civil life.”
The PTI also said in its position paper that the existing restriction on tobacco products advertisements is “already sufficient.”
The bill “unreasonably limits tobacco companies’ right to protected commercial speech, by extending the ban on all forms of tobacco advertisement, promotions, and sponsorships.”
The PTI said advertising at the point of sale allows companies to promote tobacco products to their target market, while still preventing exposure to unintended markets.
Health and children’s rights advocates supported the increase in the minimum age to buy cigarettes, in light of the increasing incidence of smoking among young people.
“This has been the trend in various jurisdictions and has been proven effective in preventing the initiation of youth to this deadly addiction,” they said in a joint position paper, signed by health advocacy groups that included Health Justice Philippines, Southeast Asia Tobacco Control Alliance and the Social Watch Philippines among others.
The groups also raised the need to provide a broad definition of “public places” to ensure smoke-free environment for Filipinos.
“Smoke-free places should be considered 100% smoke-free and smoking areas cannot be designated in these places,” they said in the joint position paper. — Charmaine A. Tadalan
More hybrid PPP projects to be implemented next year — NEDA
THE GOVERNMENT will implement more “hybrid” public-private partnership (PPP) projects next year, under which it initiates project construction using its own funds or official development assistance (ODA), the National Economic and Development Authority (NEDA) said.
Such projects are typically bid out to the private sector in the operations and maintenance (O&M) phase, in order to minimize start-up delays.
“It should be next year, in the middle of next year. We have not determined the appropriate financing yet, but I think there will be (more),” Socioeconomic Planning Secretary Ernesto M. Pernia told reporters on Thursday when asked when the government will roll out more hybrid PPP projects.
“So the ‘Build, Build, Build’ will be at a high level in 2019,” he added, noting that economic growth may come in “closer to 7%” next year.
So far, the government has two ongoing hybrid PPP projects since deciding to shift away from the pure PPP structure in the latter half of 2016 as it sought to accelerate project implementation.
It includes the construction of a new passenger terminal at the Clark International Airport through the Bases Conversion and Development Authority. The second project is the New Bohol (Panglao) Airport runway and terminal expansion aided by Japan International Cooperation Agency (JICA).
The P9.36-billion Clark International Airport Expansion Project was awarded to the winning bidder late 2017, with the P5.61-billion O&M phase awarded last week. Japan meanwhile signed a P2.1-billion loan agreement on the New Bohol Airport expansion in October. The government has yet to award the O&M concession.
The government said that a traditional PPP project usually takes an average of 29 months from project conceptualization to the awarding of the contract.
Initially, the government wanted to bid out the project’s construction together with the O&M for better coordination between the builder and the O&M provider, but Mr. Pernia said this structure has not yet been adopted.
“It should be done simultaneously. It has not yet been implemented. In fact, the good thing is that before the completion of Clark [International Airport Expansion], an O&M contract is in place,” Mr. Pernia said.
He added that the new approach will be adopted “for the next project.”
The PPP Center said last week that it is currently drafting guidelines for implementing agencies and private-sector stakeholders on hybrid PPPs, and these guidelines are expected to be issued within the first half of 2019.
They said that some private proponents were concerned that O&M PPP structure effectively reduces their participation in key state projects, but the PPP Center said that the hybrid PPP model can be structured to include information technology components in the O&M.
Nevertheless, the PPP Center said that the shift to a hybrid PPP financing mode is achieving the goal of faster project implementation.
“We definitely see improvements in the fast-tracking,” PPP Center Deputy Executive Director Mia Mary G. Sebastian said in a briefing on Wednesday. — Elijah Joseph C. Tubayan
Conditional cash transfer bill reported out of committee makes it to Senate plenary
THE BILL institutionalizing the government’s conditional cash transfer program has been reported out to the plenary for approval in the Senate.
The Senate committee on social justice, welfare and rural development is recommending the passage of Senate Bill No. 2117 or the proposed Pantawid Pamilyang Pilipino Program (4Ps) Act.
The bill describes 4Ps as “the national poverty reduction strategy program” as well as “a human capital investment program” that will span a maximum period of seven years to improve the health and education of the country’s poorest families.
Under the proposed measure, families are given educational and health cash grants monthly. Educational cash grants are given for a 10-month period yearly, depending on the number of children and their level of educational attainment. The program provides at least P300 monthly per child enrolled in day care and elementary school, at least P500 monthly per child enrolled in junior high school, and P700 monthly per child enrolled in senior high school.
As for the health and nutrition cash grant, at least P750 monthly for a 12-month period is distributed to beneficiaries.
The bill also provides the following conditions that beneficiaries must comply with for continued cash transfers under the program:
• pregnant women must avail of health services during the pregnancy as well as give birth in a health facility attended by a skilled health professional
• children under five years old must receive regular preventive health and nutrition services
• children one to 14 years old must avail of deworming pills at least twice a year
• children three to four years old must maintain an 85% attendance in day care or pre-school classes
• children five to 18 years old must maintain an 85% attendance in elementary or secondary classes
• at least one responsible person in the family must attend family development sessions conducted by the Department of Social Welfare and Development (DSWD) at least once a month
Beneficiaries of the program are also covered in the government’s national health insurance program of the Philippine Health Insurance Corp. (PhilHealth). Funding from their health coverage will be covered by revenue from sin taxes. They can also avail of livelihood and skills training programs of the DSWD and the Department of Labor and Employment (DoLE).
DSWD serves as the central planning agency of the program. It will select the qualified 4Ps beneficiaries using a standardized targeting system.
The amounts granted will be available to beneficiaries during the first three years of the program’s implementation. Adjustments in the rates can be made by the President, upon the recommendation of the National Advisory Council (NAC).
The NAC is composed of representatives from the DSWD, Department of Health (DoH), Department of Education (DepEd), National Anti-Poverty Commission (NAPC), National Commission on Indigenous Peoples (NCIP), Philippine Commission on Women (PCW), Council for the Welfare of Children (CWC), National Nutrition Council (NNC), Population Commission (PopCom), Presidential Commission for the Urban Poor (PCUP), and two representatives from accredited nongovernmental organizations (NGOs).
Advisory Councils are also to be created in the city or municipal, provincial, and regional levels. They are tasked to promote coordination among agencies in the implementation of the program, promulgate a grievance redress system, and review assessment reports regarding the program.
The DSWD is also mandated to provide an annual report of the 4Ps program.
The bill was sponsored to the plenary by Senator Antonio F. Trillanes IV, vice chairperson of the Senate committee on social justice, welfare, and rural development, in place of committee chair Senator Leila M. de Lima who remains in detention.
“The 4Ps Act, if enacted, can be a transformative program that will improve the lives of not only the 4.4 million beneficiaries across the country it currently serves, but the remaining fraction of the poor families we wish to be covered in the coming years,” Mr. Trillanes said in his sponsorship speech.
“The institutionalization of this program through this measure will ensure its sustained implementation and continued insulation from political patronage that can weaken its impact,” he added. — Camille A. Aguinaldo
Malaysian firms keen on landing engineering contracts in PHL
MALAYSIA is hoping to offer the expertise of its engineering companies to the Philippines, which is pursuing an aggressive infrastructure program, a Malaysian embassy official said.
“We are very much interested to bring in our expertise in engineering services, things like building information systems, facility management systems, IBS (industrialized building systems). We have been bringing in companies and have been in contact with DPWH (the Department of Public Works and Highways) where we introduce these services,” according to Siti Azlina Mohd Ali Hanafiah, Trade Commissioner from the Embassy of Malaysia Trade Office (MATRADE)
“We would like to share that technology with the Philippines. We have fostered a group of Malaysian companies who came here in October. We hope we can evolve into collaboration in these areas,” Ms. Siti Azlina told BusinessWorld on the sidelines of the Malaysia Chamber of Commerce and Industries Philippines Inc (MCCI) news conference on Dec. 15.
According to MATRADE data, Malaysian exports to the Philippines rose 9.7% year-on-year in the first nine months of 2018 to $3.101 billion.
Malaysian exports to the Philippines include manufactured goods like electrical and electronic products, chemical products, petroleum products, machinery equipment and parts, processed food, metals, plastics, optical and scientific equipment, wood, and transport equipment with a share of 78.2%, followed by agricultural goods like palm oil and palm oil-based agriculture products, sawn timber and molding, seafood, saw logs, natural rubber, and other vegetable oils with a share of 16.6%, and mining goods like crude petroleum, tin, crude fertilizer at 4.5%.
Ms. Siti Azlina said Malaysia exports more to the Philippines than it imports, and is looking at industries whose products it can tap.
For the agriculture sector, Ms. Siti Azlina said that palm oil and palm oil-based agriculture products remain Malaysia’s top export product to the Philippines.
“We are one of the largest exporters of palm oil in the world, but the rest (of the agricultural sector is) very small,” Ms. Siti Azlina said.
“Our agriculture is very much dominated by palm oil. Currently, Malaysia and Indonesia are two largest exporters of palm oil. At the moment, we sell a lot to India. We have investments here in palm oil as well, in Mindanao,” according to Ms. Siti Azlina.
Edward Ling MCCI president, said in a separate interview that Malaysian companies are looking at more infrastructure and manufacturing projects in the Philippines, including those involving the processing of agricultural goods such as banana and pineapple.
“The ‘Build, Build, Build’ program gives so much to do,” Mr. Ling said.
“There are more companies in Malaysia and MCCI will be looking at what the country needs and the agenda of the country. Tourism is one and the (Philippine) government is very committed to improve tourism so more tourists will visit here,” Mr. Ling said.
Asked about areas of interest for Malaysia, Mr. Ling said the Philippines can contribute workers, citing the number of Overseas Filipino Workers (OFWs) already in that country. — Reicelene Joy N. Ignacio
Underinvestment seen in regions under national minimum wage
EMPLOYERS said a national minimum wage would reduce investment in less urbanized regions and accelerate the trend of workers migrating to cities.
Employers Confederation of the Philippines (ECOP) Acting President Sergio R. Ortiz-Luis, Jr. said in an interview with BusinessWorld last week that a national minimum wage would be bad for competitiveness in many regions.
“Wages should not be the same. Wages (encourage) investment in some regions. If the incentives are the same, people will gravitate to cities,” he said.
He added that businesses will prefer to invest in more developed areas, and this trend will “deprive workers and their employment in other places, especially in provinces.”
The Wage rationalization Act or Republic Act 6727 states that the Regional Tripartite Wages and Productivity Board (RTWPB) representing each region has the responsibility to determine wage orders in their respective areas. As of this year, 16 wage boards have issued wage orders for 2018, setting minimum wages between P256 and P537.
Caraga in Eastern Mindanao has yet to have a new wage order despite the lapse of one year since its last wage order on Dec. 8. It is currently in the process of consultation prior to issuing a wage order.
In May, the Makabayan bloc of the House of Representatives filed House Bill No. 7787 or the National Minimum Wage Act that called for a P750 minimum wage for all regions.
The National Wages and Productivity Commission (NWPC) said it will review the current minimum wage setting starting next year.
In an interview with BusinessWorld last week, NWPC Director Maria Criselda R. Sy said that the commission was asked by Department of Labor and Employment (DoLE) Secretary Silvestre H. Bello III to analyze the wage fixing system.
“The Secretary had instructions to review the minimum wage determination process in the Philippines,” she said.
Ms. Sy added that the commission is also tasked to commission a third-party study on the urgings of legislators.
“There was a suggestion in the budget hearing of the senate for the DoLE to consider a third-party study or analysis of the minimum wage determination process in the Philippines because there’s this clamor for a national minimum wage,” she said.
Ms. Sy added that NWPC and DoLE don’t have the power to amend the current minimum wage setting system since changes require legislation. — Gillian M. Cortez
Bill renewing FBS Radio franchise filed at House
A BILL renewing the broadcast franchise of FBS Radio Network, Inc. for another 25 years has been filed at the House of Representatives.
House Bill 8617, if enacted, will extend the Network’s franchise, granted in 1995 and set to expire in 2020.
“The continued operation of FBS Radio promotes healthy competition amongst the participants in the industry,” Sponsor Rep. Cecilia Leonila V. Chavez of the Butil partylist said in the explanatory note.
The FBS Radio Network carries the branding 94.7 Mellow, formerly 94.7 Mellow Touch, and targets urban professionals.
It covers Metro Manila, Cavite, Bulacan, Rizal Laguna, and Batangas. Its broadcast also reaches Pampanga, Tarlac, Bataan and Nueva Ecija.
The measure will allow FBS Radio to continue “to construct, install, establish, operate and maintain radio and television broadcasting stations in the Philippines.”
The bill requires FBS Radio to provide adequate public service time, and sets a maximum of 10% paid commercial time. It is banned from broadcasting obscenity and indecent language, among others.
The network cannot transfer or sell its franchise to other entities without the approval of Congress.
FBS Radio is required to submit an annual report to Congress as part of the terms of the franchise. — Charmaine A. Tadalan
Oct. debt service bill falls 14% on reduced principal payments
THE GOVERNMENT debt service bill declined 14% year-on-year to P29.18 billion in October, the Bureau of the Treasury (BTr) said.
The October total also fell 24.38% from September.
The bureau said the government’s principal payments fell in October, more than offset the increase in interest expenses.
Of the total debt service bill, 83% or P24.02 billion was for interest payments, which grew 17.55% year-on-year.
Principal payments meanwhile declined 61.81% to P13.52 billion that month.
Overall debt service in the 10 months to October was P649.72 billion, up 5.33% from a year earlier.
This is equivalent to 88.55% of the programmed P733.74 billion debt service budget for the year, based on the latest Budget of Expenditures and Sources of Financing (BESF) document.
Amortization payments accounted for 54.54% of the total, or P354.38 billion, which grew 2% year-on-year. Interest payments meanwhile amounted to P295.34 billion, up 9.63% from a year earlier. — Elijah Joseph C. Tubayan
Philippines looking forward to WTO agreement against fishing subsidies
By Janina C. Lim and Reicelene Joy N. Ignacio
Reporters
THE PHILIPPINES is looking forward to a pending World Trade Organization (WTO) agreement to eliminate fisheries subsidies, saying that such a deal would protect the country’s coastal waters from overfishing.
“As an archipelagic nation, with coastal communities and fisherfolk that rely on marine resources for food and livelihood, it is in the Philippines’ national interest that multilateral disciplines are in place to curtail fisheries subsidies that contribute to IUU fishing, overcapacity, and overfishing,” Ambassador Manuel A.J. Teehankee, Philippine Permanent Representative to the WTO, told BusinessWorld in an e-mail interview.
The WTO’s goal is to meet the United Nations Conference on Trade and Development’s Sustainable Development Goal (SDG) Target 14.6 which calls for a prohibition on certain forms of fisheries subsidies which contribute to overcapacity and overfishing, eliminating subsidies that contribute to illegal, unreported and unregulated (IUU) fishing, and refraining from introducing new such subsidies, by 2020.
Target 14.6 also recognizes that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the WTO fisheries subsidies negotiations.
At a Dec. 14 meeting of the Negotiating Group on Rules, heads of WTO delegations expressed their intent to intensify negotiations on fisheries subsidies in the new year to meet the end-2019 target for an agreement, a multilateral commitment scheduled for the January-July 2019 work programme the Negotiating Group recently agreed upon.
In an interview, Bureau of Fisheries and Aquatic Resources (BFAR) Regional Fisheries Office No. V Officer-in-Charge Ariel Urbano Pioquinto said the agency is against granting fishery subsidies and firm in opposing harmful fishing methods.
Mr. Pioquinto, who is the BFAR-designated Philippine expert at WTO meetings, said the country does not offer subsidies to the fisheries sector.
He said the extent of the government’s intervention is to build fish landing centers where fishermen can directly deposit their catch.
“It is a project of the government that can provide clear value in maximizing the benefits of their fishing efforts,” Mr. Pioquinto said.
“We have several fish landing centers in the Philippines to help small fishermen,” Mr. Pioquinto added.
In November, the BFAR and the Department of Interior and Local Government signed a joint memorandum circular to strengthen the implementation of the ban on bottom trawling within municipal waters, stating that bottom trawl method disturbs the seabed and destroys habitats through direct removal of biological and topographic features.
Violators which include the owner, operator, boat captain and master fishermen of the vessel, the chief executive officer of the corporation or the managing partner of a partnership controlling the boat, face confiscation of the catch and fishing gear and a fine thrice the value of the catch or the following value, whichever is higher:
• P20,000 for municipal fishing, but if the offender fails to pay, he should render community service;
• P50,000 for small-scale commercial fishing;
• P100,000 for medium-scale commercial fishing; and P500,000 for large-scale commercial fishing.
Upon conviction, the violator shall be imprisoned two to six years and fined the equivalent of twice the administrative fine, and confiscation and forfeiture of fishing gear and catch, according to the joint circular.
Meanwhile, WTO members have been urged by Washington-based Pew Charitable Trusts to implement the outcomes of the impending agreement.
“WTO Members will have to ratify a new agreement for it to enter into force. Once the agreement enters into force Members will have to start implementing the commitments undertaken in the disciplines. Disciplines set at the multilateral level in a forum such as the WTO set a starting point for nations to respond to unilaterally,” Isabel Jarrett, manager of Pew’s Reducing Harmful Fisheries Subsidies Project, told BusinessWorld in an e-mail interview.
“If rules are passed at the WTO to reduce harmful subsidies to the fisheries sector, member-countries will need to respond accordingly or face disciplinary action,” Ms. Jarrett added.
Pew has said that overfishing and other destructive fishing practices have severely decreased the world’s fish populations, noting that IUU fishing is estimated to cost the global economy more than $23.5 billion annually.
“Fisheries subsidies are one of the key drivers behind the decline in fish stocks. Around $35 billion in government subsidies flow from countries to their fisheries industries each year. Not all of these subsidies are necessarily harmful; however, the majority — approximately $20 billion — are used to defray costs for fuel, new gear, and vessel construction, allowing fishermen to travel greater distances for longer periods of time, even when the value of their catch would not otherwise support it,” Ms. Jarrett said.
“The greatest risk for WTO members is that they do not reach an agreement by 2020. Subsidies that enable overfishing and other destructive fishing practices will not be curbed, and our oceans — and the people’s livelihoods on which they depend — will continue to be under threat,” according to Ms. Jarrett.
The SDG goal 14.6 has a deadline of 2020.
As such, Pew is engaging all WTO members to assist in the negotiations which include technology transfer.
“In addition to eliminating harmful fisheries subsidies, sustainable management requires strong, science-based governance, greater transparency, and improved enforcement of policies, in the next coming years, Pew will be supporting governments around the world prevent overfishing by embedding precautionary science and requirements for the best available data into decision making, for example through work with regional fisheries management organizations to develop and adopt measures to prevent overfishing for 25 internationally-managed fish stocks,” Ms. Jarrett said.
Senate working on resolving data transmission bill issues
SENATOR Paolo Benigno A. Aquino IV said the open access in data transmission bill still has a chance to be passed in the Senate before the 17th Congress ends if the committee on science and technology addresses the concerns of some senators on the proposed measure.
Committee chair Mr. Aquino said senators have raised queries “ranging from infrastructure to competition issues” on the proposed measure.
He said he will push for a consolidated bill in the next Congress if the Senate fails to pass the measure before 17th Congress adjournment.
“Our offices are currently seeing if the current version can address their concerns. If we come to agreement, this still has a chance to get passed in January,” he said in a text message to BusinessWorld on Friday.
“If not, we will push for a consolidated version come July,” he added.
The bill seeks to lift the barriers to entry in the data transmission industry by removing various requirements, such as the certificate of public convenience and provisional authority from the National Telecommunications Commission (NTC), as well as the congressional franchise, for entering the industry.
It divides the industry into four segments: the international gateway which connects to the Internet using the international submarine cables from various countries; the core or backbone network which distributes the data from international cables to Luzon, Visayas and Mindanao; the middle mile which connects to various provinces; and the last mile which delivers Internet services to end-users.
Mr. Aquino has said the passage of the bill will attract more entrants, which will then help drive prices down and improve the country’s Internet quality.
The bill was awaiting second-reading approval in the Senate while its counterpart measure in the House of Representatives, House Bill No. 6557, was approved on third and final reading on Nov. 21, 2017.
It has been identified by the Legislative Executive Development Council (LEDAC) as a priority measure.
Foreign business groups have been calling for several proposed measures filed in Congress, including the Open Access in Data Transmission bill, that will remove foreign investment limits in the telecommunications industry.
The Joint Foreign Chambers of the Philippines have also urged Congress to prioritize the passage of the bill as well as amendments to the Public Services Act, Foreign Investment Act, and Retail Trade Act before the 17th Congress ends. — Camille A. Aguinaldo
Tobacco industry still sees demand despite rising taxes
THE tobacco industry expects continued growth on sustained domestic and global demand despite plans to raise the excise tax on tobacco products to discourage consumption and fund the health sector.
“While high excise tax rates had a big impact on production figures and livelihood of our tobacco growers, this will not ‘kill’ the industry. As long as there is market demand for quality tobacco, our farmers will still continue to produce tobacco,” Robert L. Seares, Administrator of the National Tobacco Administration (NTA), told BusinessWorld in an e-mail interview on Tuesday.
“In terms of profitability, tobacco production is not yet a sunset industry. While there is still demand for quality tobacco in the global market, the agency is now focused on higher volume of exports due to the quality of tobacco leaves, particularly Burley, that local farmers can produce,” Mr. Seares said.
Increased tobacco taxes are pending approval, under the Comprehensive Tax Reform Package 2 and Senate Bills 1599 and 1605, which intend to fund the public health sector.
The House Ways and Means Committee approved in principle the measure increasing excise taxes on tobacco products by P2.50 annually until it reaches P45 in 2022, and by 4% every year thereafter.
Mr. Seares, despite saying that tobacco is not yet a sunset industry, said higher excise taxes will adversely affect farmers.
“Tobacco leaf production in the Philippines has been reduced to only 48 million kilos in 2017 from 65 million kilos five years earlier. Our five-year data (2013-2017) shows that the number of tobacco farmers and area planted to tobacco plunged by 40% to 34,465, and 43% to 22,704 hectares, respectively,” Mr. Seares said.
“Take note that excise tax rate has been going up since the passage of the Sin Tax Reform Law in 2012, diminishing tobacco production figures. With another more to increase tobacco sin tax, our tobacco growers are now faced with a more serious threat of losing their primary source of income,” he added.
Demand for cigarettes has declined since the increase in tobacco taxes, according to a study by Professor Myrna S. Austria and lecturer Jesson A. Pagaduan of De La Salle University (DLSU).
The study, “Assessing the Impact of the Philippine Sin Tax Reform Law on the Demand for Cigarettes” found that “the decline in cigarette consumption by smokers contributed more to the total effect of a cigarette price increase on demand than the decline in the number of smokers.”
The study said demand for tobacco has decreased due to the increasing sin tax as well as the existence of alternatives such as electronic cigarettes.
It also found that the current tobacco tax system is easier to administer and effective for the reduction of tax evasion as it imposes a uniform tax rate, and manufacturers cannot misclassify brands or under-declare their products to reduce taxes.
The tax system used to be four-tier in 1997-2012, then became two-tier in 2013, and unitary in 2017, and now will have a 4% annual increase effective 2018.
“To guarantee that cigarettes will continue to be less affordable, the policy goal is to ensure that the relative increase in price due to an increase in excise tax should be higher than the increase in per capita income,” the authors said in their conclusion.
“At the very least, the increase in excise tax should be either 4% as mandated by the law or indexed to the current inflation rate, whichever is higher,” it added.
NTA’s Mr. Seares said that raising tobacco excise tax is one of the most effective and cost-effective measures to reduce consumption, and that it favors the health sector as 80% of the incremental revenue will go to fund universal health care.
“Increasing tobacco excise taxes is a government measure to curb cigarette smoking for health reasons. The purpose really is to lower sales of the product, by decreasing cigarette consumption by increasing the price, and lowering demand for it,” Mr. Seares said.
“[W]e will continue to regulate the tobacco industry to promote a healthful environment for the benefit of the population, but we also have to ensure that the interests and welfare of the tobacco farmers are not adversely compromised,” Mr. Seares added.
Ariel T. Cayanan, Undersecretary of the Department of Agriculture, said that for as long as tobacco remains legal in the country, farmers cannot be stopped from planting it.
“I think the name of the game, not just in agriculture, is your capability to earn. The moment you lose, you can only survive for some time. The tobacco industry has been around for a long time,” Mr. Cayanan said in an interview on Wednesday.
“[Tobacco companies] say they are incurring losses, but who wants to continue operating with losses?” Mr. Cayanan said. — Reicelene Joy N. Ignacio