Health dep’t pushing for Santiago’s ‘sin tax’ bill

Senator Miriam Defensor-Santiago. FILE PHOTO/SENATE POOL

MANILA, Philippines—The Department of Health is pushing for the passage of one of Senator Miriam Defensor-Santiago’s two versions of a sin tax reform bill, preferring it also to three other versions pending in the Senate committee on ways and means.

Santiago’s favored measure, Senate Bill No. 3249, best supports the goal of deterring Filipinos from smoking tobacco and drinking alcohol, and finances a universal health care program besides, said Health Secretary Enrique Ona in a position paper he submitted to the Senate committee.

The four other pending bills include Santiago’s other version (SB No. 2998), two versions by Sen. Panfilo Lacson (SB Nos. 2763 and 2764) and House Bill No. 5727, whose main sponsor was Cavite Representative Joseph Abaya and which had been approved in the House of Representatives.

Ona told the Senate panel that SB No. 3249 “upholds the essential features of the original Abaya bill of a unitary tax for all cigarette and liquor products, automatic indexation and the removal of the price classification freeze on cigarettes.”

Three-tier system

The health secretary was referring to the current system where cigarette brands are classified into three tiers–low, medium and high–based on a net retail price survey done in 1996.

Critics of the multitier classification said the system favored the continued dominance of the cigarette market leaders and discriminated against new entrants.

They are called sin taxes because they rely on cigarette and alcohol sales.

But Ona said SB No. 3249 bested the other pending measures due to four factors.

GDP basis

Firstly, SB No. 3249 adopts the nominal GDP [gross domestic product] as the basis for the excise tax rate–instead of inflation–“thereby keeping the tax rates real and ensuring that tobacco and alcohol products will not become more affordable as incomes increase over time.”

Secondly, Santiago’s bill provides for a review of tax rates every five years to achieve the health and revenue objectives of the government, as well as comply with binding commitments to the World Health Organization Framework Convention on Tobacco Control.

Thirdly, the bill earmarks 15 percent of the excise tax revenue on tobacco products for programs that will help tobacco farmers shift to alternate crops and other livelihood. The bill also provides for measures against job loss and help for those who do lose their jobs because of sin tax reform.

P154B in 4 years

Finally, Ona said, SB No. 3249 sets aside additional excise tax revenue for expanding the National Health Insurance Program, upgrading health-care facilities and funding public health programs toward achieving the UN Millennium Development Goals.

The Bureau of Internal Revenue expects to collect P154.6 billion in additional excise tax revenue within four years if the sin tax reform bill is implemented as proposed.

According to the Department of Finance, 86 percent of that amount, or P133.2 billion, would come from cigarettes alone.