By Charmaine A. Tadalan, May 24 2019; Business World

Image Credit to Business World

THE SENATE is pushing a bigger increase in excise tax on tobacco products, proposing a hike to P45-60 per pack by 2023 from P35 currently, against the House of Representatives’ proposed P37.50-45/pack rates by 2022.

The measure will be submitted for plenary action on Monday, in an attempt to ratify the bill in time for the June 7 adjournment of the 17th Congress. “We told (Finance) Sec. (Carlos G.) Dominguez (III), we will try with our best effort,” Senate President Vicente C. Sotto III said in a mobile phone message on Thursday.

Members of the Senate’s majority bloc met with Mr. Dominguez on Wednesday to discuss prospects for approval of this particular “sin” tax, whose collections are intended to help fund implementation of the Universal Health Care Act.

The 17th Congress has six session days left to tackle the measure at the bicameral conference committee and ratify it for President Rodrigo R. Duterte’s signature. Otherwise, the measure will have to be refiled in the 18th Congress, which opens July 22.

In its draft committee report, the Senate Committee on Way and Means proposed to increase the tobacco excise tax to P45 from P37.50 in January 2020, to P50 in January 2021, P55 in Jan. 2022; and to P60 in Jan. 2023, and then by five percent yearly thereafter.

The Senate version has higher rates than those under House Bill No. 8677, which proposed to increase excise tax on cigarettes by P2.50 annually until it reaches P45 per pack in 2022, and then by four percent annually thereafter. HB 8677 provided that excise tax on cigarettes will increase to P37.50 from P35 in July 2019, P40 in July 2022, to P42.50 in July 2021 and to P45 in July 2022.

Senator Sherwin T. Gatchalian said the Senate version is an improvement of the proposal of the House of Representatives, whose ultimate proposed rate is lower than the P60 increase proposed by the Department of Finance.

Malaki ang suporta sa ‘sin’ tax eh. Majority acceptable ’yung (P)60 because that is a large improvement from the lower house… doble ito sa lower house. acceptable naman ‘yung (P)60. But some of us, including myself, gusto natin na mas mataas pa (There is much support for the sin tax hike. P60 is acceptable to majority of senators because that is a large improvement from the lower house version… double that of the lower House. But some of us, including myself, want an even bigger increase),” Mr. Gatchalian told reporters in a briefing, Thursday.

Mr. Gatchalian authored Senate Bill No. 2177, one of the three bills consolidated, which proposed to increase the tax to P70. The other two were Senate Bill Nos. 1599 and 1605, which proposed to raise it to P60 and P90, respectively.

“I really support the ‘sin’ tax. Our version is P70. I will lobby to increase it from P60 to P70 dahil ang pinaka mahalaga dito ay mabawasan ang naninigarilyo at ’yung mga batang nag babalak na manigarilyo (because what is important here is to reduce the ranks of smokers and the youth who are thinking of taking up smoking),” Mr. Gatchalian said.

Republic Act No. 10963, the first of up to five planned tax reform packages, increased the cigarette excise tax to P32.50 from P30 in January 2018 and then further raised it to P35 beginning July 2018. It is scheduled to go up to P37.50 in January 2020.

The Philippine Tobacco Institute, Inc., (PTI) in the November 2018 position paper it submitted to the Senate, argued that over the years the increase in tobacco taxes resulted in a decline in demand, mass termination of workers and worsened smuggling.

“These high tax increases led to the proliferation of illicit cigarettes in the country. In a 2016 report, Oxford Economics estimated that illicit cigarette consumption in 2012 (prior to RA 10351) was at 6.4 billion cigarettes. One year later, Oxford Economics found that illicit consumption in 2013 jumped to a staggering 19.1 billion cigarettes,” the PTI said in its paper.

“The high tax increases have not only caused the industry to significantly contract but has also enabled illicit trade of tobacco products to flourish,” it added.

“In cooperation with the Department of Finance and law enforcement agencies, we have made progress in 2018 in our fight against illicit cigarette trade. Imposing significant and prohibitive taxes again will further exacerbate the situation.”