Aquino junks protectionist provision in sin tax bill

President Benigno Aquino III has vetoed the provision in the sin tax reform law mandating manufacturers and sellers of tobacco products to buy at least 15 percent of their raw materials from local sources.

Sen. Franklin Drilon confirmed the veto to the Inquirer on Thursday.

Senate President Juan Ponce Enrile proposed the provision to protect the local tobacco industry from increases in the price of cigarettes due to the sin tax rate increases.

“That is correct. It was vetoed,” Drilon said when asked about a report that Mr. Aquino had vetoed the protectionist provision in the sin tax measure he signed into law on Friday.

Enrile, during the period of amendments of the sin tax measure in the Senate, proposed that 20 percent of tobacco raw materials of cigarette manufacturers and sellers be bought from local sources. The amount was lowered to 15 percent after the bicameral conference committee reconciled the provisions of the Senate and House versions.

“I am constrained to veto under Section 5 of the enrolled bill a paragraph that requires manufacturers and/or sellers of tobacco products to source at least 15 percent of their tobacco requirements from locally grown sources,” Mr. Aquino said in his message to the Senate on his signing of what is now Republic Act No. 10351.

The President said the provision would go against the requirements of Article 3 of the National Treatment on Internal Taxation and Regulation of the General Agreement on Tariffs and Trade (GATT) 1994.

Sen. Miriam Defensor-Santiago opposed the provision during the Senate deliberations because it would violate the GATT.

Santiago proposed that the clause “subject to amendments based on international treaty commitments” be interpreted to mean “subject to international obligations.”

Mr. Aquino also vetoed provisions directing the National Statistics Office (NSO) to determine which major supermarkets have the highest annual gross sales in Metro Manila from which the net retail price of alcoholic drinks and cigarettes shall be determined for purposes of the law.

“The paragraphs cannot be implemented as the NSO cannot, by law, determine and provide the Bureau of Internal Revenue with the list of major supermarkets with the highest annual gross sales in Metro Manila,” Mr. Aquino said.

He said the NSO was prohibited from doing so under Section 4 of the Commonwealth Act that mandates the confidentiality of information furnished to the NSO.