Drilon cites safety nets in sin tax bill

Senator Franklin Drilon

The controversial sin tax bill has enough safety nets to ensure that tobacco farmers will not be disadvantaged by higher taxes to be imposed on cigarettes and alcoholic products, Sen. Franklin Drilon said Sunday.

Drilon, acting chairman of the Senate ways and means committee, gave this assurance as he appealed to colleagues to pass the measure by the end of the week so the chamber could begin discussions on the proposed 2013 budget.

He noted in a radio interview that the substitute sin tax measure he proposed in place of the committee report presented by Sen. Ralph Recto last month had allotted P6 billion for tobacco farmers.

This would be on top of the P4 billion in safety net features the farmers currently receive “under the old (sin tax) law,” he said.

“After the passage of the measure, the (benefits for tobacco farmers) would be P10 billion (in the Senate version),” Drilon added.

Last week, Recto warned of the possibility that tobacco farmers would bear the brunt of higher sin taxes since the industry’s profitability would be drastically affected.

Recto wanted to increase taxes on tobacco and alcohol products by only between P15 billion and P19 billion so as not to unnecessarily burden either industry.

Malacañang, however, initially wanted additional taxes of P60 billion but later reduced the amount to P40 billion.

Drilon said his substitute bill, which would raise an additional P40 billion to P45 billion, adhered closely to the version already passed by the House of Representatives.

Gradual increases

In the radio interview, Drilon said “gradual increases” in taxes on tobacco products would make a pack of low-priced cigarettes cost P14 more and a higher-end brand, P28 more once the sin tax bill was signed into law.

On the average, this would mean a stick of cigarette that currently sells for P1.00 to P1.25 would sell for P2.25, he said.

In two to three years, the Senate bill aims to impose a unitary tax rate of P32 per pack for low- and high-end cigarettes.

“If the tax on a high-end cigarette brand is too high, the tendency would be to simply switch to the lower-priced brand. So we don’t achieve the health objective of making smokers stop the habit,” Drilon said.

Deaths, costs

Some 87,600 Filipinos die every year from diseases caused by smoking, according to advocates of higher sin tax rates.

The cost of treating smoking-related diseases, such as lung cancer, stroke and heart attack amounts to P188.8 billion every year, higher than the P103.8 billion in annual gross revenue from cigarette sales, according to Sen. Miriam Defensor-Santiago.

Drilon gave a different estimate of the cost of smoking. Citing a computation made by doctors in Philippine General Hospital, he placed at P155 billion the “total cost to society” of tobacco use through premature deaths and preempted individual productivity.

Drilon said a uniform rate would make tax administration easier.

He wanted his version of the sin tax bill approved by Nov. 19 so that the Senate could begin debates on the P2-trillion budget for 2013 before legislators get distracted by the midterm elections in May.

Discourage smoking

Drilon said the Senate sin tax version sought to discourage smoking, especially among teenagers.

He pointed out that lower-priced tobacco products accounted for 60 percent of the industry’s total production.

Supporters of higher sin taxes maintained that collections would be used to fund the PhilHealth premium of 5.2 million families who belonged to the second-lowest quintile of the population.

Members of the lowest quintile have been enrolled in the government’s PhilHealth program, according to Drilon. A paying member shells out P2,400 in monthly premium for inclusion in the health care program.

Additional sin tax revenues would also fund repairs in the government’s regional and provincial hospitals that cater to mostly poor patients.

Other points

Drilon raised other points to douse anxiety from higher tobacco taxes.

According to him, local cigarette manufacturers buy only 15 percent of their production requirements from Filipino farmers as 85 percent of their requirements are imported and are not directly affected by the sin tax bill.

“Unless these manufacturers buy more from local farmers, the sin tax bill has no effect on them,” he said.

Local Virginia tobacco also costs only P74 a kilo while imported tobacco sells for P134 a kilo, according to Drilon.

Filipino farmers also export tobacco leaf. Since not all their output is for local consumption, they cannot claim that they would be drastically affected by higher sin taxes, he said.

“For those reasons, I can say local farmers would not be negatively affected by increasing taxes on tobacco,” Drilon said. “The issue just needs to be explained clearly.”

Growers’ threat

A group of local tobacco growers has warned six reelectionist senators not to vote for the sin tax bill or its members will campaign against them in the 2013 senatorial elections.

In an e-mailed statement, the PhilTobacco Growers Association named specifically Senators Loren Legarda, Francis Escudero, Gregorio Honasan, Antonio Trillanes IV, Aquilino Pimentel III and Alan Peter Cayetano.

Saturnino Distor, president of PhilTobacco Growers Association, said tobacco farmers, workers, their families and “allies in related industries would join forces to ensure that incumbent senators seeking fresh terms in the 2013 elections would get zero votes” in tobacco-producing regions if they ignored the sector’s demand for “moderate and reasonable excise tax increases on cigarettes.”

Still, Distor said his group planned to hold dialogues with the reelectionist senators whom he warned “stand to lose around 4.5 million votes from the major tobacco-producing provinces of Pangasinan, La Union, Ilocos Sur, Ilocos Norte, Abra, Cagayan, Isabela and Mindoro.”

He noted that other provinces also were producing tobacco, such as Mountain Province, Ifugao, Nueva Vizcaya, Quirino, Tarlac, Nueva Ecija, Capiz, Iloilo, Leyte, Cebu, Misamis Oriental, Bukidnon, Davao, Zamboanga del Sur, Maguindanao, Cotabato and Sarangani.