[Intl-tobacco] Philippines: tobacco tax, some benefits for PM

[robert weissman]

Congress approves 'sin tax' measure

Updated 01:20am (Mla time) Dec 16, 2004
By Christine Avendano, Michael Lim Ubac
Inquirer News Service


Editor's Note: Published on page A1 of the Dec. 16, 2004 issue of the
Philippine Daily Inquirer

THE BICAMERAL conference committee approved last night higher excise
taxes on tobacco and alcohol, which are expected to generate P17.5
billion in revenues every year.

The "sin tax" bill is the centerpiece of eight tax measures sought by
President Gloria Macapagal-Arroyo to enable the government to avoid a
debt default in three years.

Ms Arroyo estimates that the government will need about P80 billion in
additional revenues every year to avoid a debt default.

Senator Juan Ponce Enrile, a member of the bicameral committee, said
that low-end cigarettes would be slapped a tax of P2 per pack;
medium-end, P6.35 per pack; high-end, P10.35 per pack; and premium, P25
per pack.

Enrile said the rate would be adjusted every two years until 2011. The
adjustment has been set at 3.6 percent of the existing rate plus 16
centavos.

He said the bicameral committee adopted the proposal of the Senate on
distilled spirits, wines and other tobacco products. Excise taxes on
alcohol-fermented
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liquor, distilled spirits and wines-range from 30 percent to 50 percent,
depending on product classification.

The committee met for more than six hours at the Westin Philippine Plaza
Hotel in Pasay City to reconcile Senate Bill No. 1815 and House Bill No.
3174.

Senators Ralph Recto, Joker Arroyo, Manuel Villar, Ramon Revilla Jr. and
Lito Lapid represented the majority bloc in the bicameral conference,
while Senators Enrile, Edgardo Angara and Jinggoy Estrada represented
the minority.

On Tuesday night, the Senate approved its own version that sought to
generate P18 billion in revenues or more than double the amount targeted
by the bill that the House of Representatives earlier approved.

President: =91Breakthrough=92

Senate President Franklin Drilon said the revenue target of the
Senate-approved bill was double the P9 billion in projected revenue on
sin taxes "as found in the medium-term development plan of the executive
department."

Ms Arroyo sounded more relieved than elated after getting word that the
Senate had finally approved its version of the sin tax bill more than a
month after the House passed its version.

"I thank the Senate in behalf of our people for passing the tax on
cigarette and alcohol. This is a great breakthrough in our political
unity and solidarity behind fiscal reform," said the President in a
speech at the Presidential Anti-Graft Commission workshop in Malaca=F1ang
yesterday.

Analysts said investors at the stock market mildly cheered the Senate's
move to pass a version of the sin tax bill, saying this is a step to get
Congress moving toward passing a revenue measure before Christmas.

"I hope that the bicameral talks will seal it. We are confident
statesmanship will rule at the highest level of debates," said Ms
Arroyo, who was well aware that the passage of the first of her eight
tax measures before her self-imposed deadline of the end of this year
was not yet in the bag.

Four revenues

She had boasted last month that her allies who dominate Congress have
pledged to approve up to four revenue measures from her tax agenda
before the end of this year.

But less than a week before Congress breaks up for its holiday recess,
the President's allies have so far come short of their promise. The
President did not say if she still expected the sin tax bill approved
before the end of this year.

"We do not expect that there will be difficulties (during the bicameral
conference committee meeting) and we are confident that we will have the
sin taxes signed," Drilon said.

High rates for low-end cigarettes

Two senators decried the passage of the sin tax bill, which sought
higher rates for low-priced brands of cigarettes.

They noted that although the total tax take of the sin taxes for next
year alone could reach P18 billion as projected by Senator Ralph Recto,
chair of the Senate ways and means committee, the burden would fall on
the low-tier brands usually consumed by poor smokers.

The Senate version, which seeks higher tax revenues, imposed a heavy
burden on tobacco products.

The senators, who asked not to be named, told the Inquirer that they
were taken for a ride by fellow members of the upper chamber who
approved the sin taxes Tuesday night without taking into account the
welfare of those consuming locally manufactured cigarettes.

"We were made to believe that we would be given ample time to
interpellate the sponsor of the measure even during the period of
individual amendments," said one senator.

"That's why we had agreed early on to dispense with interpellations to
speed up the floor debates," he said, adding that "but, of course,
without sacrificing the quality of legislation."

Done deal

The second senator then said that the moral of the story was: "Don't
rush tax measures."

Both senators admitted that they felt cheated by more senior senators
after learning that even before the chamber could finish floor
deliberations on the sin taxes, the final form of the bill was already a
done deal.

The Senate version more than doubled the excise tax on low-tier brands
of cigarettes such as Fortune and Champion (manufactured by Fortune
Tobacco Corp.), but it imposed moderate increases on the other four
tiers: native, medium, high and premium.

Appeasing Philip Morris

The two senators admitted that the Senate compromised version would
appease Philip Morris Philippines Manufacturing Inc., which controls 36
percent of the market (P18 billion in gross sales).

Fortune Tobacco, owned by business taipan Lucio Tan, controls 54 percent
of the market (P27 billion in gross sales) while La Suerte retains 6
percent (P3 billion in gross sales). With reports from Gil Cabacunagn
Jr. and Elizabeth Sanchez