Senators OK sin tax target of P40B

Sen. Franklin Drilon, acting chairman of the ways and means committee

Senators on Monday agreed to adopt the compromise P40-billion revenue target of the sin tax bill, with tobacco products shouldering 60 percent of the incremental revenue and alcoholic drinks contributing 40 percent.

Sen. Franklin Drilon, acting chairman of the ways and means committee, said the compromise was reached during a 45-minute caucus in the Senate following a three-hour debate on the reproductive health (RH) bill that threatened to throw off the sin tax measure from its targeted approval date.

The P40-billion revenue goal in the first year of implementation of the sin tax has been touted as the middle ground between Sen. Ralph Recto’s target of P20 billion per year and the maximum P60 billion earlier sought by Finance Secretary Cesar Purisima and Bureau of Internal Revenue Commissioner Kim Henares.

Senators decided to hold a caucus after Senate President Juan Ponce Enrile held back the sin tax debates by nearly four hours after insisting on taking up his amendments to the reproductive health bill.

The caucus allowed the senators to shorten the debate and reach a consensus much quicker than on the floor.

“This agreement was ratified at the plenary. And therefore, tomorrow, we will present and vote on second and third reading a revised version that will reflect those aggregates that we described on record,” Drilon said.

“We will present a formula that will arrive at P40 billion,” he added.

Drilon said there would be individual amendments “but the critical portion of the bill on how much incremental revenue must be generated from the so-called sin products is already agreed upon. That is the crux and the meat of the sin tax bill.”

Drilon explained that the 60 percent of the total target, or  P24 billion in annual revenue contribution from cigarettes, would be divided among tobacco classes, while the 40 percent, or P16 billion from alcoholic drinks, would be shared between fermented liquor and distilled spirits.

The senators also agreed to adopt a unitary tax starting in the fifth year of implementation of the new sin tax rates. The original target was to implement the unitary tax in the fourth year.

Enrile’s proposal to compel cigarette manufacturers to use at least 20 percent of local Virginia tobacco blend was also adopted.

This was seen as a small victory for local farmers who were bracing themselves for a 1,000-percent tax hike in locally manufactured cigarette brands.

Drilon, however, said that senators should study Enrile’s proposal carefully as favoring local manufacturers could run against the Philippines’ commitment to the World Trade Organization, which frowned on giving subsidies or preference to local over foreign manufacturers.

Recto said he would abide by the decision of the Senate.

“What is important to me is where will we spend the money,” Recto said. But Drilon said  determining how to spend was easier than agreeing on a fixed number for sin taxes.

Drilon expressed confidence that the sin tax would be ratified on second and third reading soon in time for the budget deliberations.

But he said he could not say the same for the RH bill as the senators did not reach a consensus to take it up after approving the sin tax.