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House panel's rush to amend sin tax law draws flak from health advocates

File photo of a tobacco leaf vendor. INTERAKSYON.COM FILE
The online news portal of TV5

MANILA  – In a rush to have an amended sin tax law before the end of the year, the House of Representatives approved on second reading the bill that would keep the two-tier tax system for tobacco products.

House Bill 4144 authored by Buhay Rep. Eugene De Vera proposed that effective January 1, 2017, a tax of P32 per pack be imposed on tobacco products with the net retail price (excluding the excise tax and the value added tax) of P11.50 and below; and a tax of P36 per pack on those with net retail price of more than P11.50.

The measure seeks to amend the Sin Tax Reform Law, specifically the tobacco taxation for next year.  The law was supposed to impose a unitary tax of P30 per cigarette pack starting January 1, 2017, and the deviation from this track has drawn howls of protest from anti-tobacco and health advocates.

“Moving toward a unitary tax in 2017 is aimed to further the level playing field in the cigarette industry and promote competition, but concerns have been raised that when the unitary excise tax rate is imposed next year, as this would displace more local tobacco farmers, especially those situated in Northern Luzon,” the bill said.

The bill explained that with the uniform tax rate, consumers would prefer to buy high-priced cigarettes because the price disparity between the high-priced and low-priced cigarettes would be minimal.

“Imbued by competition, cigarette manufacturers may also opt to import the tobacco leaves instead of purchasing the locally-grown tobacco leaves considering that tobacco leaves grown abroad are of better quality,” it added.

The bill's approval on second reading followed just two hearings at the Committee on Ways and Means chaired by Quirino Rep. Dakila Cua, prompting lawmakers opposed to it to air accusations of railroading.

“We are really rushing this because come January, the new system would kick in,” Majority Leader Rodolfo Fariñas said.

'Health aspects sacrificed'

Albay Rep. Edcel Lagman and Deputy Speaker Pia Cayetano said retaining the two-tier system will make the product more accessible, especially to the vulnerable sector of society, who are the youth.  They said that the health aspect of the issue was disregarded in favor of revenues.

In a statement, the Action for Economic Reforms (AER), slammed the quick approval of the measure.

“The legislators chose to protect the interest of tobacco industry, a long-standing clique of power in Congress, known to most as the Northern Luzon Alliance. They struck again with decisive force to ram through legislation a proposal that will kill the health and revenue gains of the Sin Tax Law,” it said.

The group said the House should have considered another bill filed by Albay Rep. Joey Salceda.

In the explanatory note of House Bill 4575, it said that a two-tiered tax is a bad policy because the poorest 1% of Filipinos use 4.7% of their income for tobacco.

Salceda argued that imposing a lower tax on low-priced cigarette products that the poor consume will encourage them to smoke further.

“We rally behind Rep. Salceda’s proposal because it builds on the intent of the Sin Tax Law.  HB 4575 will be effective in encouraging more smokers to quit and discourage vulnerable sectors, such as the youth and the poor, from smoking,” Antonio Dans, Academician of the National Academy of Science and Technology.

Dans estimates that at least 10% of smokers would simply switch to low-priced cigarettes if HB 4144 is adopted. He said instead of quitting, smokers could end up consuming up to 50 percent more of the cheap cigarettes.

AER president Cristina Morales-Alikpala warned that a two-tier tax system would make it easy for tobacco manufacturers to produce cheap brands to avoid higher taxes.

“A higher unitary tax rate will protect and save more lives, and significantly reduce downshifting to cheaper brands. HB 4144 will be bad for both health and revenues while HB 4575 will further strengthen the Sin Tax Law; HB 4575 is estimated to generate P20 billion more revenues compared to HB 4144,” Alikpala said.