Press Release
December 7, 2012

Transcript of Press Conference of Senator Franklin M. Drilon
On the Sin Tax Bill

I wish to announce that we have achieved a breakthrough in the bicameral conference committee on the sin taxes. Yesterday, we went through seven hours of hard negotiation with the house panel. Principally, on the rates for tobacco, fermented liquor and distilled spirit and also on the earmarking. On the rate of excise tax, we have agreed on the following and I will give you the totals for the five-year period from 2013 to 2017.

For tobacco, the total increment for 2013 is P23.4 billion; P29.56 billion in 2014, P33.52 billion in 2015, P37.09 billion in 2016, and P40.9 billion in 2017 for a total of P164.47 billion. For fermented liquors or beer, it's P4.5 B in 2013, P6.99 B in 2014, P9.52 B in 2015, P12.06 B in 2016, and P15.646 B in 2017, or a total of P48.53 B incremental tax in the period of five years.

For distilled spirits, it is P6.06 B in 2013, P6.31 B in 2014, P7.59 B in 2015, P7.71 B in 2016, and P7.82 B in 2017, and therefore the five-year period would have a total of excise tax for the distilled spirit in the amount of P35.34 billion. On yearly basis, for the three products, the total excise tax collection for 2013 is expected at P33.96 billion, P42.82 billion in 2014, P50.63 billion in 2015, P56.86 billion in 2016, and P64.18 billion in 2017, o for a five-year period, the total incremental revenues for the three products would be P248.49 billion.

It will be noted that insofar as the senate version is concerned, the expected revenues in cigarettes which was approved by the senators is P23.55 billion in 2013. What we have agreed upon is lower by about P150 million. We agreed in bicam for tobacco at P23.4 billion. So I would expect that these would meet the approval of the senators who debated extensively on the schedule for excise tobacco in the floor.

The percentages between alcohol and tobacco, in this particular case for 2013, are 69 percent for tobacco and 31 percent for alcohol. The House, in its original proposal, had cigarettes at P26.87 billion for 2013 and distilled spirits of about P3.1 billion, or an 87-13 ratio. It was a give and take in the bicam committee conference and we came up with a compromise of approximately of 69-31 percent instead of 60-40 in the Senate and 87-31 on the part of the House. We ended up last night discussing the earmarking for the health sector. Senator Pia Cayetano presented the Senate positions, but in view of the lateness of the hour, we agreed to discuss again the earmarking for the health sector on Monday, we are hopeful that we will be able to finish everything on Monday and submit to both chambers sometime next week. We are keeping our fingers cross that before we adjourn on December 21, we will have the President signed it. The sin tax reform law will be effective, as agreed, by January 1, 2013.

It's around that vicinity, but I think, it goes down as the years progress.

There is no sunset provision. The 4-percent increase in the rates will take place in January of 2017 or 2018. The so-called sunset provision, I think is found in the House version, not in the Senate. The House version said that in 2016 or 2017, the 4-percent increase will no longer be effective. That is why it is called sunset. The Senate version did not carry that sunset version. We did not agree to the version of the House, and finally, the House agreed to our version that there is no sunset provision insofar as the 4-percent provision is concerned. In other words, until Congress changes it, there will be 4-percent increase every year based on the expected inflationary rate.

(Q: Will all local hospital be covered?) There was a certain amount per hospital, per district. Identified naman iyon.

(Q: Will it be the congressmen the beneficiary hospital?) No. It must be existing. We covered existing hospitals.

(Q: Additional pork barrel?) It is an assistance to the hospital and the congressmen have no participation in the identification of the hospital. Lahat naman iyon bibigyan.

For enrolment, the funds would be used for benefit payment. Sa mga hospital, earmarking talaga how much taxes we will be able to collect. Part iyon ng Health Enhancement Facilities Fund, infrastructure for the health sector.

Lahat ng local hospitals sinasabi lahat dapat isama. This is the situation. With the devolution of health services, many LGUs would not have adequate resources to run and maintain these hospitals. They need assistance and this will be the source of the assistance. So, the sin taxes would go through the entire country through these hospitals.

In the course of the discussion last night, I think the proposal of Senate panel was to have a uniform grant for each hospital. Congresswoman Garin of the House pointed out that not all hospitals would have the same needs, so the uniform grant may not be a valid formula. Therefore, she was proposing that this assistance to the hospital be in a lumpsum released to the DOH and there would be a criteria how much these hospitals would get. We have not come to an agreement yet. But on the assistance, yes, there will be assistance.

(Q: Re safety net for displaced workers and P2 billion proposal of SJPE for anti-smuggling activities) Nandoon lahat iyon sa earmarking subject to negotiation. The House received our proposals.

(Q: Yung Hose version walang ganon?) The House version was saying is what we have before us. The House said this is a revenue measure that we're talking about and tom put all these earmarking is already appropriation. The House made a comment that earmarking constitutes an appropriation which is really not a part of the bill because this is a revenue generation. That was on record, but we, nevertheless, submitted our proposal

Conceptually, what the sin taxes law is all about is to raise taxes, and therefore, conceptually, in the same law, it should not be appropriated because appropriation is the General Appropriations Act.

(Q: You did not agree?) We submitted our earmarking. We argued that there is nothing to prevent us from doings. That will be part of the debate.

Ang sinasabi ng Chairman, ordinarily, earmarking which is actually Appropriation, will go to the House Appropriations Committee, while revenue generation is reviewed by the House Ways and Means. Congressman Ungab said putting this earmarking should have been discussed in the Appropriations Committee, but they realized that it is our version. Therefore, we have submitted it to them.

It will not kill the tobacco industry. It is a matter of negotiation with the House. Let me emphasize that the burden, in terms of actual taxes to be paid, the version that we agreed upon is even lower than the Senate version that we approved that would impose P23.55 billion in 2013 for tobacco. What was approved in the bicam is P23.4 billion. If Senator Bongbong approved this version in the Senate of P23.55 billion, there is no reason for him not to approve P23.4 billion.

Yung version po na prinisinta nila sa Senado pataas din nang pataas. In fact, the original proposal that Senator Bongbong had had a P5 billion increase every year for tobacco. What we came out in the Senate is something P4 billion increase every year. What came out in the bicam is approximately the same gradual increase every year.

I must remind that this is a bicam and we cannot impose everything on the other panel. We have to negotiate and I think this is a good result because insofar as the cigarette is concerned, it is our version that was carried out and in fact, a little bit lower that what the Senate brought to the bicam.

  2013 2014 2015 2016 2017 2013-2017
 Tobacco 23.4 29.56 33.52 37.09 40.9 164.47
Fermented Liquor 4.5 6.99 9.52 12.06 15.46 48.53
Spirits  6.06 6.31 7.59 7.71 7.82 35.49
 Total 33.96 42.86  50.63 56.86  64.18  248.49
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