Phillipines: Campaign Promises in 2016

Source from:  Philstar Global 01/04/2016

Smokers and drinkers are groaning as they now pay higher excise taxes on cigarettes, beer, liquor and other tobacco and alcohol products they consume. This is by virtue of Republic Act No. 10351, otherwise known as the "sin" tax reform law. For the fourth consecutive year, levies on the so-called sin products have increased effective January 1 this year.

Under this law, the excise tax on cigarettes packed by machine went up by P4 from P21 in 2015 to P25 per pack this year, if their net retail price (excluding the excise tax and value added tax) is P11.50 and below per pack. If the retail price is above P11.50, the tax is P29 per pack, up from P28.

Most cigarettes are packed by machine.

For cigars that are packed by hand, the specific tax is to be increased by four percent through a revenue regulation the Secretary of Finance is mandated to issue. Aside from the specific tax, there is an ad valorem tax of 20 percent on the cigar's net retail price.

For fermented liquors, the tax goes up to P21 per liter from P19, if the net retail price does not exceed P50.60 per liter. The levy is P23, up by P1, if the retail price is above P50.60. Fermented liquors include beer, lager, ale, port and similar products, except local concoctions like tuba, basi and tapuy and distilled spirits and wines.

Since RA 10351 took effect, tobacco and alcohol producers advance their production and deliveries to avoid paying the higher tax rates. Hence, this should explain the hefty increase of "sin" tax collections from January to November this year.

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The Bureau of Internal Revenue (BIR) earlier reported their excise tax collections from tobacco and alcohol notably rose due to higher production by companies that frontloaded their supplies in anticipation of the scheduled hike. Per BIR report, the so-called "sin" taxes went up 39.58 percent, higher by P16.298 billion. The 11-month total collection from "sin" taxes amounting to P123.641 billion went up 25.96 percent compared to the same period a year ago.

The bulk of the revenues came from cigarettes and other tobacco products (P86.338 billion), followed by fermented liquors (P25.246 billion), distilled spirits (P12.029 billion) and wines (P28 million).

BIR Commissioner Kim Jacinto-Henares, however, refused to attribute the increase in "sin"tax collections to higher consumption nor as a result of supply frontloading by the cigarette and liquor industries. Henares described the increase in collection from "sin" taxes as a "natural phenomenon" or expected reaction.

"For as long as the rate keeps on increasing annually, companies will always frontload," Henares pointed out. She further explained the increase in "sin" tax rate as mandated by the law will compensate for the slowdown, if any, in increase of volume of production.

Based on the same BIR report, volume of production of cigarettes rose by 25.22 percent in November and more than a tenth for the first 11 months. Factory supply and imports of fermented liquors and wines also increased 0.96 percent and 58.62 percent in November, respectively. They were up 1.33 percent and 33.9 percent so far this year.

Himself a cigarette-smoker, President Benigno "Noy" Aquino III signed RA 10351 in December, 2012. It increased excise levies on tobacco and alcohol products in what the Aquino administration billed as a health measure meant to deter smoking and excessive drinking.

While volume of production in tobacco and liquor still increased despite the increasing "sin"tax rates, the BIR chief stressed this should not be considered as any indication that the "sin" tax law is not achieving its intention." We have always maintained that we can have a higher tax rate, which will result in slower consumption without hurting revenue collection," the BIR chief reiterated.

Under the law, 15 percent of incremental collections will go to tobacco-producing provinces. The money is to be spent for the benefit of tobacco farmers. The bulk of the remaining collections will go to the government's universal health care program, which provides Philippine Health (PhilHealth) as insurance coverage to millions of poor families.

As provided by the lawmakers themselves when they crafted this "sin" tax reform law, part of the incremental increase in the collections shall be apportioned among congressional districts for medical assistance and health facilities.

But I certainly agree with the proposal aired by Department of Health (DOH) Secretary Janet Garin who echoed plans of using "sin" tax incremental revenues to buy the world's first anti-dengue vaccines recently approved by the Food and Drug Administration (FDA). In a television interview on ANC late last year, Garin - who is a medical doctor - disclosed she formally proposed the DOH could be allowed to avail itself of the anti-dengue vaccine Dengvaxia, manufactured by Sanofi Pasteur of France.

Giving some amounts from the incremental increase in the "sin" tax collection to DOH procurement of this life-saving vaccine will certainly benefit, especially the poor people in the dengue-prone areas in the country. It will boost the DOH's public health campaign if the dengue vaccine is included in its Expanded Program on Immunization.

A complementary law passed by the Congress and signed into law by P-Noy is also set to take effect later this year. Actually, the DOH re-set a new deadline for the "Graphic Health Warning" (GHW) law to take effect on March 3, 2016. Its enforcement has long been delayed due to, among other things, amendments in the required templates of the GHW that the tobacco industry must use in the packages of their respective cigarette products.

The "sin" tax reform was the first and last tax hike law ever signed by P-Noy now on his last 179 days in office as of today. He promised no new taxes during the presidential campaign in 2010. Who would make the same promise as the 2016 presidential campaign starts? Enditem