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Tobacco tax measure makes it out of Congress

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By Charmaine A. Tadalan
Reporter

THE CONTENTIOUS proposal to further increase excise tax rates for tobacco products barely made it out of the 17th Congress after the Senate scrambled to revise the version it approved Monday night in order to make it acceptable to the House of Representatives.

The House adopted the Senate version, in effect, doing away with a bicameral conference committee that would otherwise have been needed in order to harmonize conflicting provisions, as well as ratification.

Tuesday marked the last session day of the 17th Congress. Any bill that failed to secure both chambers’ final approval by yesterday will have to be filed and go through public hearings and plenary debates anew in the 18th Congress that opens on July 22.

The Senate, voting 21-0, approved anew on Tuesday Senate Bill No. 2233 after amending revenue sharing at the local level in the face of opposition of some House lawmakers representing tobacco-producing provinces.

The approved proposal increases the excise tax on tobacco products to P45 in 2020 and by P5 every year until reaches P60 per pack in 2023, then by five percent annually thereafter.




Senate Majority Leader Juan Miguel F. Zubiri said members of the House, representing tobacco-producing provinces, threatened to vote against the adoption of the bill if the 50-50 revenue share between provinces and municipalities was not amended.

At present, 15% of tobacco excise tax collections are earmarked for provinces producing burley and native tobacco, of which 70% goes to cities and municipalities, while the remaining 30% goes to the provincial government.

Sabi ni Speaker GMA, pinuntahan daw sya ng northern bloc congressmen (Speaker Gloria M. Arroyo said northern bloc congressmen approached her and), they threatened not to approve the ‘sin’ tax measure if this were not addressed,” Mr. Zubiri told reporters earlier on Tuesday.

As a compromise, the Senate reconsidered the bill it approved on final reading on Monday and retained the 70-30 distribution in favor of cities and municipalities.

Mr. Zubiri told reporters before the plenary session that the Senate “will have a reconsideration of the approval of the ‘sin’ tax measure, open the period of amendments… Pasa na namin (We will approve it anew) on second and third reading this afternoon, tapos i-adopt na ng (to be adopted by the) House.”

Hindi na kami papayag pa ng bicam, wala na kaming panahon para sa bicam (We will not go for a bicameral conference committee, we have no more time for bicameral conference committee meetings),” he said, adding that the measure will be transmitted to Malacañan Palace “by next week” for signing into law.

House Deputy Majority Leader Wilter W. Palma II of the first district of Zamboanga Sibugay motioned to adopt the measure in Tuesday’s session. “I move that we adopt Senate Bill 2233 as an amendment to House Bill 8677,” he said, followed by approval by the chamber.

The bill had been certified as urgent by President Rodrigo R. Duterte, which allowed the Senate to disregard the legislative rule that second- and third-reading approvals have to take place at least three days apart, hence, allowing same-day approvals.

The additional “sin” tax collections on tobacco and alcohol products are supposed to help finance implementation of Republic Act No. 11223, or the Universal Health Care Act (UHC), which is expected to have a P63-billion funding gap in its first year of implementation.

DoF’s proposals for both “sin” taxes were estimated to yield P30 billion and P32 billion from tobacco and alcohol products, respectively. The Senate’s approved version, however, is estimated to generate just P15 billion in its first year of implementation.

The same measure also levies a P10 excise tax per pack of heated tobacco products beginning 2020 and annual increase of five percent thereafter.

It will also impose a P10 excise tax on 0-10 milliliters vapor products, P20 on 10.01-20 ml, P30 on 20.01 ml-30 ml; P40 on 30.01 ml-40 ml, P50 on 40.01 ml-50 ml; and P50 with P10 increase for every additional 10 ml on products with more than 50 ml.

Heated tobacco and vapor products are currently not taxed.

Cigarettes are currently levied P35 per pack, after RA 10963 increased it to P32.50 from P30 in January 2018 and to P35 beginning July 2018. It is scheduled to go up to P37.50 in January 2020.

The Phillip Morris Fortune Tobacco Corp. Inc. (PMFTC) said that while it supports funding for UHC programs, the tax hike could worsen smuggling.

“This will be the eighth cigarette tax increase since 2012 and the higher rate raises some concerns over unintended consequences,” PMFTC said in a statement on Tuesday.

“We call on the government to exercise vigilance to curb the illicit cigarette trade which may worsen as a result of this excise tax increase, and undermine government efforts to raise funds for the UHC,” the company added.

“We are also counting on the government to provide the appropriate safety nets for farmers, workers and retailers whose livelihood would be impacted by this new round of tax increase.”