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Tobacco tax hike measure gains ground in Senate body, mining bill struggles

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By Camille A. Aguinaldo
Reporter

PROPOSALS to increase the excise tax on tobacco products gained ground as the Senate ways and means committee on Monday concluded public hearings on the measures.

The committee on Monday also tackled bills reforming the fiscal regime for mining, with industry representatives saying they were amenable to the tax hike proposed in the version of the House of Representatives if only to lift a moratorium on new permits that has dragged for more than six years, while the Department of Finance (DoF) preferred the Senate version.

Finance Undersecretary Karl Kendrick T. Chua said Malacañang was sure to certify the additional tobacco tax hike as an urgent measure.

Lawmakers of the 17th Congress are about to take a Feb. 9-May 19 break and will have only May 20-June 7 to approve any bill. Measures that do not make it out of the legislative mill — via ratification — by then will have to start from scratch in the 18th Congress that begins in late July.

“Once we have the committee report number, it will be (certified as an urgent measure), because they’re waiting for the committee report,” Mr. Chua when asked on the tobacco tax measure.

Senator Juan Edgardo M. Angara, chairman of the Senate Ways and Means committee, last week said he aimed to submit the measure for plenary approval on Wednesday, Feb. 6. “We’ll do our best to do the committee report this week,” he said during the hearing.

House Bill No. 8677, which bagged third-reading approval last Dec. 3, provided a tobacco tax rate increase to P37.50 per pack from the present P35. Meanwhile, Senate Bill No. 1599 proposes a P60 tax rate, Senate Bill No. 2177 proposes a P70 tax, while Senate Bill No. 1605 sets it at P90.

In Monday’s hearing, Federation of Philippine Industries chairman Jesus L. Arranza warned that further raising the excise tax on tobacco products may be counterproductive since “[i]f we increase the tax, we are giving incentives to smugglers and small factories to do scams instead of paying taxes in our country.”

In response, Mr. Chua said the Bureau of Customs intensified operations last year against smugglers, while its supervising department, DoF, added security features to cigarette tax stamps.

Asked on the bill giving the government a bigger share in mining revenues, Mr. Angara said in a mobile phone message that it was still “hard to tell” if the measure will be approved before the 17th Congress ends.

For his part, committee vice-chairman Senator Joel J. Villanueva said committee members remain optimistic that Congress still has enough time in May to approve the mining measure.

“However, the ultimate challenge is to agree on the framework for taxing mining: Do we want to incentivize the industry to attract additional investments or to regulate it and ensure the government gets the fair share from the extraction of resources? Agreeing on this will decide on whether we will have a new law or not,” Mr. Villanueva said in a text message.

During the hearing, Chamber of Mines of the Philippines (CoMP) Chairman Gerard H. Brimo questioned the imposition of more taxes on mining, but said his group prefers House Bill No. 8400 if only to pave the way for the lifting of the moratorium on new mining permits.

“If it is necessary for the industry to pay additional taxes… you would come to the conclusion that there’s really no need, but because we’re stuck with this problem of a moratorium on mining permits until a new tax structure is legislated under EO (Executive Order) 79, HB 8400 is a lot more reasonable and is workable than the other pending structures,”Mr. Brimo said.

HB 8400, which bagged third-reading approval last Nov. 12, reduces the royalty imposed on large-scale mining within mineral reservations to three percent from five percent currently based on gross output. It will also levy a 1-5% margin-based royalty on all large-scale mining outside mineral reserves.

Meanwhile, small-scale mining will be levied a royalty equivalent to one-tenth of one percent of gross output, whether or not the contractor is operating within or outside mineral reservations, under the House bill.

Meanwhile, Senate Bill No. 1979, introduced by Senate President Vicente C. Sotto III, sets the royalty fee a five percent based on gross output, whether large-scale or small-scale mining within mineral reservations. The bill also imposes an initial three percent royalty based on gross output on mining outside mineral reservations for the first three years of implementation, which will increase to four percent in the fourth year and to five percent in the fifth year.

Holcim Mining and Development Corp. President Renato A. Baja said the additional taxes on nonmetallic mining will push the cement producer to raise prices on aggregates and other construction materials, which he said might affect the government’s “Build, Build, Build” infrastructure program. He also noted that their prices have already soared due to the suspension of new mining activities.

“This is not healthy business already. If we’re going to survive, we need to pass this on to this on to consumers,” he said.

Finance Assistant Secretary Teresa S. Habitan said the department opposed the House version and that the Senate bill, which was similar to the DoF proposal, was “superior.”

Asked by Mr. Angara if the tax structure proposed by all the bills were better than the current regime, Ms. Habitan replied: “Not the House bill.”

She also noted that DoF estimates that construction prices following the new mining tax structure will have minimal increase.

“We estimate that the proposed royalty on nonmetallic mining could raise construction prices by about 0.4% and we believe that this is quite minimal compared to rapid economic growth and rising property prices,” she said.