‘Let the law run its course’

Mighty Corp., an aggressive player in the local tobacco market holding a 24-percent market share, is headed for a big fight after successfully masterminding the swift passage of House Bill 4144 at the Lower House seeking to amend the Sin Tax Reform Law.

It took less than 10 days for the bill to pass, which included only two meetings by the ways and means committee plus two plenary sessions. The bill, filed late last year by ABS party-list representative Eugene Michael B. De Vera, sought to “strike a balance” with the need to discourage cigarette smoking, raise government revenue, and look after the welfare of the tobacco industry.

Specifically, HB 4144 seeks to keep a two-tier taxation system for tobacco products, thus changing the unitary tax system that was implemented at the start of the year under the provisions of the approved 2012 Sin Tax Law.

HB 4144 specifically offers to raise the excise tax on retail tobacco products, but under two schemes: (1) P32 for cigarette packs with a net retail price of P11.50 and below, and (2) P36 for cigarette packs with a net retail price of more than P11.50. The existing law slaps a uniform P30 tax on all tobacco products that was put into effect only last Jan. 1.

HB 4144 further calls for a yearly rate increase of five percent on excise taxes in 2018 on cigarettes packed by machine; the current sin tax law stipulates a four percent increase every year starting Jan. 1, 2018 for all types tobacco products.

Just how the small, but amazing Mighty was able to pull through with its successful lobby under stealth, at least at the House of Representatives level, is still being talked about, this despite the fact that HB 4144 is not even a priority measure of the current administration.

Acid test

The real test, however, will be at the Senate level, especially now that the discussion of the measure has reached the ears of almost every stakeholder concerned.

To be expected, among the first to file a protest over the Lower House’s railroading of HB 4144 was the coalition of health care advocates, who incidentally played a crucial role in the passage of the current Sin Tax Law.

In a statement, health groups belonging to the Primary Care Coalition, Action on Smoking and Health (ASH), Framework Convention on Tobacco Control Alliance Philippines (FCAP), New Vois Association of the Philippines, Health Justice Philippines, Womanhealth Philippines, and Action for Economic Reforms protested that the bill would kill all the health and revenue gains of the Sin Tax Law since 2012, and would only ensure the continued profitability of tobacco manufacturing companies.

They also singled the so-called Northern Luzon Alliance in Congress led by Majority Floor Leader Rep. Rodolfo Fariñas and with Ilocos Sur Rep. Eric Singson, Quezon City Rep. Bingbong Crisologo, and ways and means chairman Rep. Dakila Cua as legislative officials who blocked the protests of other key leaders in the House of Representatives.

Another group, this time the Federation of Philippine Industries, came up with a position saying that HB 4144 would be against the Anti-Competition Law. It threatened to file a complaint with the Philippine Competitiveness Council should the bill progress in Congress.

FPI cited reports from the Bureau of Internal Revenue and the Department of Health that government was achieving the objectives of the Sin Tax Law, and added in its position statement that the law would be even more effective under a single tax rate structure.

Accordingly, tax collections would further increase because there would be less room to avoid paying taxes. On the other hand, the health benefit would be the higher probability since the number of smokers will go down further. Eight million Filipinos had supposedly already quit smoking since the Sin Tax Law was implemented.

Drawn lines

Meanwhile, now that the Senate has started a review of the proposed amendment to the law, things have gotten, well, more interesting – this, despite the reported position of the other players in the tobacco manufacturing industry – including Philip Morris Fortune Tobacco Corp. which holds a dominant 71-percent share of the market – to just “wait-and-see.”

Among our lawmakers, and at the executive level of government, the lines of support on the issue’s merits are slowly emerging. For HB 4144, a Senate panel had been constituted with Senators Francis Pangilinan, Risa Hontiveros, Joel Villanueva and Senate Minority Leader Ralph Recto as members.

Now that the debate is more public, there seems to be no railroading or secrecy in the process of reviewing the Sin Tax Law – yet. Sen. Juan Edgardo Angara, who heads the Senate Congressional Oversight Committee on the Comprehensive Tax Reform Program (COCCTRP) and the Senate ways and means committee, has already requested for pertinent information from several key government agencies.

The Department of Finance, the Bureau of Internal Revenue, the Bureau of Customs, the Department of Labor and Employment, the Department of Health, the Department of Budget and Management, the Department of Agriculture, the Philippine Statistics Authority, the National Tobacco Administration, and the Technical Education and Skills Development Authority have already responded.

The DOF, in particular, had earlier expressed its view to just let the law run its course before any review is initiated. This was also, in essence, what the DA wanted after the Tobacco Growers Association of the Philippines days before said that it was more inclined to support the unitary tax system.

Supporters of HB 4144 in Congress, it seems, will not be quelled. Already, Deputy Speaker and Ilocos Sur Rep. Eric Singson (yes, a member of the Northern Luzon Alliance in Congress) singled out the plight of thousands of tobacco farmers supposedly wallowing further in poverty.

The one-tier system, according to the lawmaker, only favors the business interest of international firms selling premium brand cigarettes. He then adds that this threatens the lives of local tobacco farmers since their produce is not patronized by the foreign brands.

House senior Deputy Minority Leader and Buhay Hayaang Yumabong (Buhay) party-list Rep. Lito Atienza has also joined in the discussion by urging the Senate to act swiftly on the passage of HB 4144 and thus protect the country’s local tobacco industry.

If it’s any consolation for those against the re-institution of the two-tiered taxation system, Sen. Panfilo Lacson has come out in public with his opinion: let the present law run its course, he said. Interesting battle looming indeed. Abangan.

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