The Senate ways and means committee hearing on a proposed measure to restructure excise taxes on "sin" products is about to start.
Outside the Senate, tobacco farmers gather to protest the planned increase in the taxes, saying it will affect demand for cigarettes, their livelihood.
The hearing starts. Senators Ralph Recto, Juan Ponce Enrile and Franklin Drilon are in attendance. Representatives from the tobacco industry and health advocacy groups, as well as finance officials are also here.
Winston Uy, president of tobacco manufacturer Universal Leaf Phils, asks for a two-tier tax system for cigarettes.
Universal Leaf is engaged in tobacco growing and processing. It employs "28,000 farmers directly."
Uy: If we increase the tax very high, there will be an effect on demand for our crop.
Former DOF Usec Milwilda “Nene” Guevara: Imposing a single rate can remove all the tax complexities. I would still vouch for a single rate, indexation to inflation...
Dr. Antonio Dans of the UP College of Medicine gives a presentation on noncommunicable diseases, says smoking is one of top causes
Dans: The sin tax bill is an "environmental measure aimed at fighting a societal disease. NCD is not a disease of the individual, but the society."
Dans: People will not stop smoking if smoking remains the cheapest form of leisure available to them.
The sin tax bill aims to increase prices of cigarettes to discourage the poor from smoking and raise revenues for the government's healthcare program.
Dans: 20-23% of lung cancer cases in the country caused by smoking. Noncommunicable death rates in the world's poorest countries are almost twice the rates in rich countries.
Recto asks: If we put at risk what we are already collecting from sin products today, forget the incremental revenues from the new bill, will there be another revenue measure to compensate?
Recto seems to be pointing to the tobacco industry's argument that higher prices, lower consumption translate to lower tax revenues for government.
Enrile: What we want to find out is the best level of tax burden we can impose to preserve the objectives of everyone - consumers, producers, government
Enrile: There's no question there should be an increase (in taxes). But how much? If we increase, it's uncertain whether there will be impact on prevention of diseases. For sure, the revenue target of government will have to be considered very carefully.
He adds: In my opinion, we will suffer if we impose a very burdensome rate.
Drilon, for his part, proposes a "moderate, gradual and not abrupt" increase in the tax rates
Former National Treasurer Leonor Briones says it's about time to increase sin taxes. "Collections from cigarette and spirit taxes in other countries are so much higher than those in the Philippines - whether you're comparing Laos, United Kingdom or Germany."
Briones: The govt needs much more funds than what is able to generate at this time for health. It must give priority to health because our health problems are increasing.
Philippine College of Chest Physicians President Dr. Encarnita Limpin discusses the effects of tobacco and alcohol on a person's health.
Limpin: Health care costs due to smoking and alcohol-related diseases (P188 billion), mas malaki kaysa sa makukuhang tax revenues sa companies
Limpin: Fears that the tobacco industry will die and tobacco farmers will lose their livelihood will not happen if we raise the taxes. The reduction in consumption will be gradual, not abrupt.
Limpin says demand for cigarettes will be inelastic because of their addictive nature.
Limpin: Ang gusto natin pigilan sa pagtaas ng presyo ay 'yong mga kabataan at mahihirap.
Limpin shows graphic photos of the effects of tobacco use on the human body.
Philippine Tobacco Growers Association President Saturnino Distor: Dapat ipanatili ang kasalukyang batas sa excise tax. (We should maintain the current excise tax system.)
On revenue allocation for tobacco farmers under the sin tax bill, Distor says: Ayaw po naming maglimos sa gobyerno. Alam naman natin ang tulong mula sa gobyerno ay kadalasan mabagal at hindi sapat. (We don't beg. We know that aid from government is often slow and inadequate.)
Distor: Alam namin na ang sigarilyo ay nakaka-adik at nakamamatay. Pero malayang pumapasok ang mga tao sa bisyong ito. 'Wag pong isisi sa amin ang pagkakasakit. (We know that cigarette is addictive and it kills. But no one's forcing people to use it. Don't blame us for the diseases smoking causes.)
Dr. Cid Terosa of the University of Asia and the Pacific says gross sales of tobacco industry stands at P166.7-B in 2010, based on the audited financial statements of 6 cigarette firms.
Recto says this is much higher than government data. Data submitted to the committee, he says, place gross sales of the entire "sin" industry - tobacco and alcohol - at P200 billion to P210 billion, accounting for 2% of gross domestic product.
Terosa says increase in prices will lead to higher inflation rate. He says a 58% increase in cigarette prices will result in a 0.62 percentage point increase in the inflation rate; a 106% hike will result in 1.12 percentage point increase in inflation.
Irene Reyes of non-government organization Health Justice claims the Philippines has the cheapest cigarette prices and the highest number of consumers.
Reyes: We need to reform the sin tax. Studies show that increasing cigarette prices will prompt smokers to reduce consumption. The youth and the poor are price sensitive. It will be difficult for them to buy cigarettes when prices increase.
Recto asks BIR Commissioner Kim Henares to provide data as to what brands will provide the incremental P30 billion to P60 billion revenues that government wants to raise with a new sin tax bill.
Henares: I cannot give that kind of detailed data. The law itself says I can't disclose those information.
Recto tells her: Can you provide if the President allows it? We are requesting (him to allow it) through you. You make the request.
Recto: I'm willing to work with you, all of you. Let's do the coding and come up with something (tax rate) that's realistic.
Henares concludes: The P75-B taxes we collect from tobacco and alcohol products does not cover the true costs of what govt and the country have to shoulder
She says health costs due to smoking diseases now at P188-B. She adds, if people cannot earn money because they're sick, "we cannot earn taxes."
On that note, Recto adjourned the committee hearing. The next hearing will be next week or the week after. Recto says after the fourth and final hearing, he will draft the committee report on the sin tax bill.
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