Drilon: Single sin tax rate acceptable to Philip Morris

Senator Franklin M. Drilon today said he was disturbed by what appears to be a "flip-flopping stand" by Philip Morris on the government's proposal for a unitary or single tax rate for all brands of cigarettes as proposed under the Sin Tax bill.

"The government's proposal for a unitary or single excise tax rate for all brands of cigarettes under the Sin Tax bill was even lobbied for by Philip Morris, but, in a twist of fate, the tobacco firm is now pulling back on the proposed scheme," explained Drilon, who also said he was bothered by the flip-flopping on the issue by some of his colleagues in Congress who used to support the proposed measure during previous Congresses.

"Philip Morris is opposing the administration's proposed measure, citing the unitary tax as among the objectionable features. Yet, a letter of Philip Morris (PM) dated February 5, 2003, through Managing Director George Farah, revealed that PM supported a uniform specific tax for cigarettes," stressed Drilon.

"In that hearing, I asked a series of questions that led Philip Morris to admit that a unitary tax rate is acceptable," said Drilon.

Philip Morris wrote a letter to then-President Arroyo on the proposal for a one rate tax system. The corporation actually also supported a 'level playing field' for all manufacturers, among other things, revealed Drilon.

Quoting from the letter of PM to Arroyo, Drilon said the PM recommended to Arroyo the change to a single tier specific system from four tier specific system.

The letter said in part:

"In brief, our proposal is that the current four (4) tier specific system should be changed to a single tier specific system over a period of 3 years. In the first year, two specific tax tiers should replace the current four (4) tier system, with a reduction in the gap between the two tax tiers in the second year. In the third (3) year, the two specific tax tiers should be merged into a single specific rate applied equally on all cigarettes.

This proposal should increase estimated excise tax collection on cigarettes by Php8.5 billion or 43.8% above 2001 actual collection. Over 3 years, this proposal is estimated to increase tax collection by 91.8% compared with 2001..."

Drilon also informed the committee that the Philip Morris letter even enumerated the advantages of a one rate excise tax on cigarettes:

"A single specific tax should result in an increased excise tax collection.

Tax administration for the Bureau of Internal Revenue will be easier with a single specific tax rate on all cigarettes since only the volume sold, and not the price at which they are tax classified, shall be the sole determinant of tax revenues to government.

A single specific tax rate for all cigarettes is used in several Asian countries including Singapore, Malaysia and Hong Kong, and its adoption by the Philippine Government will align local tax policies with those of its neighbors.

A single tax rate will promote a level playing field for all manufacturers."

The PM representative in the hearing acknowledged the veracity of the letter and conceded the merits of the unitary tax and that then and now, PM can accept the single tax rate for all brands, recalled Drilon.

"PM agrees to a uniform or one rate excise tax for all brands; there is no more reason for multiple rates for different brands," he said.

"Now that PM has conceded the unitary or single tax, the question that the committee must ask is what is the most effective rate for the sin tax to serve its primary health goal, or what my colleague Senator Ralph Recto describes as the sweet spot that will not only generate revenues for government but will dramatically curb smoking and binge drinking, and thus reduce the economics costs in terms of health care, productivity losses, and pre-mature death losses."

Moreover, Drilon reiterated the need to pass the bill saying it would not only raise funds for government's health care program but would also help improve the health of ordinary Filipinos.

Drilon also said that poor people suffer more from smoking than the wealthy because they are unable to afford health care when beset with smoking-related diseases. Since they cannot afford proper health care, it becomes the burden of the government to provide adequate care for them.

He noted that local cigarette prices now are among the cheapest in Asia and raising the prices would not kill the tobacco industry as some opponents of the bill have claimed.

"I want to spare our people from the tragedy of losing a loved one. This is why we should discourage people from smoking, and one of the ways to do that is to raise the price of cigarettes and make it less accessible to more people," ended Drilon.