Tobacco-alcohol tax burden ratio is 69-31

Senator Franklin Drilon. FILE PHOTO

Senators and House members have agreed on a first-year incremental revenue target from higher tax rates for cigarettes and alcoholic products amounting to P33.96 billion for 2013, Sen. Franklin Drilon told reporters in a news conference on Friday afternoon.

Drilon, chairman of the Senate committee on ways and means, made the remark a day after the bicameral conference committee on the so-called sin taxes slashed billions from the Senate-approved target  of P39.5 billion and increased by a smaller amount the House’s P31-billion target.

The sharing of the tax burden between the tobacco industry and the alcoholic drinks industry is now at 69-31, said Drilon.  He said this was a compromise between the Senate version’s 60-40 ratio and the House’s 87-13 formula.

“I wish to announce that we have achieved a breakthrough in the bicameral conference committee on the sin taxes. [On Thursday] we went through seven hours of hard negotiation with the House panel principally on the rates for tobacco, fermented liquor and distilled spirits, and also on the earmarking,” Drilon said.

Drilon’s enthusiasm was not shared by Sen. Ferdinand Marcos Jr., who warned that the burden-sharing would kill the tobacco industry.

Industry killer

Marcos comes from the tobacco-producing province of Ilocos Norte.

“It’s 70-30 in 2013, but as time goes by, every following year, the burden of the tobacco industry would increase while that of the alcohol industry would remain the same,” Marcos told reporters after the bicameral meeting held at the House of Representatives on Thursday.

“I don’t agree at all.  But they don’t care.  And the fact of the matter is that in that kind of burden-sharing, in that kind of pricing, they will kill the industry.  They will put 2.5 million people out of work.  I don’t know if that is their intention but that will be the effect,” the Ilocano representative added.

According to Drilon, the incremental revenues from tobacco as agreed upon in the bicameral panel would be P23.4 billion in 2013, P29.56 billion in 2014, P33.52 billion in 2015, P37.09 billion in 2016 and P40.9 billion in 2017.

The total additional revenues from tobacco would be P164.47 billion for five years.

“It will be noted that insofar as the Senate version is concerned, the expected revenue which was approved by the senators is P23.55 billion in 2013. What we finally agreed upon is lower by 100 to 150 million pesos,” Drilon said.

No killer

Drilon said that while what the bicameral panel-approved revenue targets for 2014 through 2017 are higher than those passed by the Senate, the bicameral figures are “not significantly higher.”

Contrary to Marcos’ statements, Drilon said the tax rates on tobacco won’t kill the industry.

He said that the tobacco industry’s burden in terms of actual taxes to be paid was even lower than the Senate version.

“If Senator Bongbong approved this version in the Senate of P23.55 billion there’s no reason for him to disapprove P23.4 billion,” Drilon said.

Earmarkings for the proceeds of the revenues, Drilon said, would be discussed on Monday.

He, nonetheless, said there was a move by the House members to do away with the earmarkings as making allocations was the function of Congress’ budget process.