Why revise the Sin Tax Law in haste?

All is not lost, it seems, for tobacco companies that had, in 2012, been subjected by the last administration to give up a grossly unfair two-tiered tax system that gave preferential treatment to local cigarettes over foreign brands.

Republic Act 10351, or the Sin Tax Law, was signed towards the closing days of 2012 by former president Benigno Aquino III, and ended a strong 15-year lobby by cigarette manufacturers to keep the tax structure on alcohol and cigarettes complicated and weak.

The old tax system favored abnormally low tax collections for the national government, and also encouraged corruption among revenue agents who took advantage of the vagueness in the law to divert part of the tax proceeds to their own pockets.

Furthermore, collections from the old sin taxes fell short of the estimated cost of health issues arising from abuse in the use of alcohol and cigarettes, not to mention the loss in productivity of people who fell ill because of tobacco- and liquor-related diseases.

Back to the old system?

A little over a hundred days into the President Duterte’s incumbency, the infamous so-called Northern Luzon Alliance in Congress moved to amend the 2012 Sin Tax Law by introducing HB 4144 that brings back two classifications in assessing taxes on cigarettes.

Instead of a uniform tax on every pack of cigarette regardless of whether the tobacco used is local or imported, the bill proposed to introduce once again the old classification of low-priced (local) cigarettes and high-priced (imported) brands, while further amending the tax rate on each.

This is clearly a revision of the 2012 Sin Tax Law which aimed to raise the correct amount of taxes on liquor and tobacco to pay for the estimated cost of treatments in the public health system incurred by Filipinos falling sick because of tobacco and liquor use.

Ever since HB 4144 was filed in the House of Representatives, it has breezed through the various levels of law-making at a pace ridicules the long hours the previous administration had spent to pass the Sin Tax Law.

Were it not for the eagle eye of the lawmakers who supported (and continue to support) the Sin Tax Law, especially its health objectives, HB 4144 would have been approved in record time. Albay Rep. Joey Salceda, as a counter measure, filed HB 4575 on Dec. 5 to maintain the single tax rate on cigarettes.

DOF not concerned about lower tax collections?

We have yet to hear from the Department of Finance, which will ultimately have to make a stand on whether it can afford to lose tax collections, not just from the downgrading of tax charges, but also from the possibility of leakages with the return of a two-tiered system.

On its third year of implementation, the government collected close to P150 billion with the implementation of the Sin Tax Law, with over P100 billion coming from tobacco. Tobacco firms had argued before the law was signed that higher taxes on cigarettes would dampen sales to a point where the government would end up collecting less.

So far, collections from sin products have been growing at double digit with the new law, even as consumption has been tempered. The increased tax take has given the public health care system a big boost in terms of new funds for medicines and equipment.

The Sin Tax Law, dubbed as “the single most important health policy legislation of the past decade” in the Philippines, has contributed to bringing health care to more than 80 percent of the roughly 100 million people living in the Philippines.

Today, the Department of Health’s budget is significantly higher at about P123 billion, boosted by revenues from sin taxes. The higher collection from cigarette consumption has also channeled substantial funds to help local tobacco farmers and workers find livelihood alternatives. More on reader’s comments on MM traffic

We continue with the letter of Raymond Tumao, one of our readers, that was started in the previous column last week. Here goes.

“2. The MMDA started during the Marcos regime. It was tainted with so much questionable advocacies, failures, and a few window-dressed successes and yet, after several changes of regimes, it is still going strong.

“Can anyone show us how they pay their traffic enforcers and where do they get their salaries from? If a traffic enforcer’s income relies on traffic violations and apprehensions, what happens if the traffic is solved?

“3. In order to enjoy the BOI incentive of preferential tariff rate of one percent, the car manufacturer should be building cars in the Philippines from scratch. But why is it that each time I fix my local Japanese brand car, the parts show a tag “Made in Thailand”?

“And when I look at the parts of my China-made car, I do not see anything locally made too, but the price of my car bought brand new is cheaper than the ones made in Thailand?

“I heard the taxes paid for each China-made vehicle comes up to a total of 42 percent of its value from the manufacturer.

“4. Other countries do not allow non-Euro III compliant trucks to run on their roads, while today we still see auctioneers delivering to customers refurbished and reconfigured non-Euro compliant old trucks.

“Maybe to be safe, trucks with plate numbers starting with the letters R,C, G, Y and B should have a MOT test before they are given an extension of one year.

“5. Building a resort type cable car system is faster and easier than building a Light Rail Transit. What if the Chinoys of Paranaque invest in this system using their own funds, how will the government react?

“6. I wonder if JICA and JETRO would allow Chinese businessmen to use their research studies for the improvement of traffic in Metro Manila?

“7. The arterial, radial or circumferential road networks in Metro Manila are expected to expand but urban planners should be careful to avoid real estate moguls taking advantage of advance knowledge of where new roads are to be built.

“Otherwise, it could fill up a certain area of residents who will need transport facilities and in turn cause more traffic, not to mention blocking rights of way and forcing landowners to sell.

“C6 is ideal for transporting goods to the eastern side of Metro Manila with the widening of roads and the use of the river.”

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.