From ‘Recto-Morris’ to ‘Purisima-San Mig’

Finance Secretary Cesar Purisima. AFP

Still smarting from what he believed was an abandonment by Palace allies, Senator Ralph Recto on Wednesday lashed out at the Department of Finance (DOF), saying the version of the sin tax bill passed by the House of Representatives could be the product of a “Purisima-San Miguel” alliance that allowed lower taxes for fermented liquor such as beer.

Recto was referring to Finance Secretary Cesar Purisima and San Miguel Corp., producer of the world-famous San Miguel beer, whose former chairman is an uncle of President Aquino.

“If (DOF officials) claim that they had a compromise in the House that’s why they came at P30 billion, that means they gave in to alcohol,” Recto said in an interview with the Inquirer.

“That’s how it went and then they’ll blame me? Is that a Purisima-San Miguel alliance? … What does that mean? I don’t know,” he said.

Recto noted that Malacañang preferred the House version that was expected to raise an additional P30 billion in revenue from tobacco and alcohol products.

A ways and means committee report that Recto presented last week would result in only P15 billion in additional revenue from sin products.

Recto drew brickbats for proposing lower tax rates, with a Palace legislative liaison officer hinting that the committee report reflected lobby money that the senator may have received from a major cigarette firm.

Recto’s critics voiced their preference for the sin tax bill filed by Senator Miriam Defensor-Santiago that adhered to the sin tax scheme originally proposed by the DOF. The scheme sought to raise an additional P60 billion annually from tobacco and alcohol products.

Recto resigned as chairman of the Senate ways and means committee on Monday and alluded to Purisima, Health Secretary Enrique Ona and Internal Revenue Commissioner Kim Henares as the executive officials who refused to support his efforts.

Not believable

Reacting to Recto’s allegations, Purisima said: “I don’t think that’s believable. Our original bill is P60 billion, but this goes through a process, and in Congress they only agreed to P33 billion with a big reduction on alcohol.”

“It’s still in the Senate, and we will continue to work with the Senate on this. We will still push for P60 billion and we would try to get the best deal that they could give us, hopefully an amount that would allow us to fund public healthcare and discourage the consumption of sin products,” Purisima said.

“If there is a minimum that would enable us to accomplish the objectives of the (administration) bill, that would be P40 billion. Of course, the bigger the better,” he added. “We also do not support name calling. This is not a productive way of discussing very important bills, especially taxes.”

For her part, Henares said Malacañang had consistently been pushing for reforms in the excise tax regime for alcohol and tobacco products.

“We submitted our proposal to the House, which provided for incremental revenue of P60 billion—P30 billion each for tobacco and alcohol. The House made amendments to the version advocated by the executive, especially on the portions related to alcohol. We are not members of the House; our role is to provide technical support and assistance to our legislative champions,” she said.

Henares said that during the Senate hearings, the DOF pushed for improvements in the provisions of the House version related to alcohol.

“As transcripts from the Senate hearings would attest, we have urged the Senate to increase revenue collected from alcohol and, at the same time, maintain the revenue from tobacco provided for in the House version so that the incremental increase in revenue would be greater than the P30 billion to be raised by the House version and closer to the P60 billion advocated by the DOF,” she said.

She said the DOF would be at the forefront of measures to increase revenue to fund the government’s priorities.

What burden sharing?

Before last night’s caucus, Recto held an impromptu news conference in his Senate office where he noted that the DOF proposal detailed a balanced “burden sharing” of revenue collections between cigarettes and alcohol products.

What happened eventually in the House version was that the P30 billion supposed to be collected from both distilled spirits and fermented liquor was reduced to P5.2 billion, Recto said.

The House sin tax version also trimmed down sin taxes on tobacco from P30 billion to P27 billion, he added.

“Under the House version, they reduced to the minimum (sin taxes) on alcohol. Is that now the position of the Palace?” Recto asked.

“The original (DOF sin tax) version was P30 billion (in additional revenue from) tobacco and P30 billion from alcohol. Have (DOF officials) reached a deal with alcohol companies?” he added.

Recto said his report trimmed down the additional revenue from tobacco from P30 billion in the original proposal to P10 billion.

“Under the House version, for every additional P1 tax on alcohol, P5 to P6 would be collected from tobacco. In my report, for every P1 additional from alcohol, the government collects P2 from cigarettes. That was the burden-sharing I was looking at since some insist cigarettes are more lethal,” Recto explained.

“If you sum it up, they would be paying virtually the same rates. I am not favoring anyone,” he said.

Recto said Sen. Franklin Drilon, acting chairman of the ways and means committee, should not use his report because it was already shot down by the DOF and the Department of Health.

Report can’t be used

Recto’s statement came after Drilon announced that he was mulling two options: either let the Recto report remain as the basis for future debates and amendments or recommit it to the ways and means committee.

Drilon and other members of the committee were supposed to meet on Wednesday to discuss what to do with the Recto report. However, previous commitments prevented them from doing so.

“As of now, the report is still on the floor and remains in the calendar for special orders because it has already been sponsored by Senator Recto,” Drilon told the Inquirer.

“It remains there and unless the committee moves to recommit it, it stays there,” he added.

Recto, however, rejected proposals to continue discussions on his report.

“Why would they want to plagiarize my report unless they are confident it can raise the P60 billion they wanted in the first place? Why not use (the House) or the Miriam version as template,” he said.

The senator warned of “severe displacement” of workers in sin industries if the government immediately imposed high additional tax rates.

Originally posted at 07:09 pm | Wednesday, October 17, 2012