Sponsorship Speech by Senator Franklin Drilon
HIGHLIGHTS OF THE BICAMERAL REPORT ON HBN 5727/SBN 3299 OR THE SIN TAX BILL:

MR. PRESIDENT, ON BEHALF OF THE SENATE PANEL TO THE BICAMERAL CONFERENCE MEETING ON THE DISAGREEING PROVISIONS ON HOUSE BILL NO. 5727 AND SENATE BILL NO. 3299, RESTRUCTURING THE EXCISE TAXES ON ALCOHOL AND TOBACCO PRODUCTS, I HAVE THE HONOR TO REPORT TO THIS AUGUST CHAMBER THE BICAMERAL REPORT ON THE RECONCILED BILL.

THIS REPORT HAS BEEN THE PRODUCT OF THE HARDWORK AND DEDICATION OF ALL MEMBERS OF THE PANEL FROM BOTH HOUSES OF CONGRESS AS WELL AS THE VALUABLE ASSISTANCE FROM OUR TECHNICAL STAFF. AFTER CONDUCTING THREE SEPARATE BICAMERAL MEETINGS, YOUR BICAMERAL CONFERENCE COMMITTEE HAS COME UP WITH A RECONCILED VERSION, THAT IN OUR OPINION, BEST EXEMPLIFIES THE DIVERSE INTERESTS INVOLVED IN THIS MEASURE WHILE RECOGNIZING OUR COMMON GOAL OF LOOKING AFTER THE WELFARE OF OUR COUNTRY.

LET THE JOINT EXPLANATORY STATEMENT OF THIS BICAMERAL REPORT, CONSISTING OF 23 PAGES, BE READ INTO THE RECORD OF TODAY'S PLENARY AND ALLOW ME TO JUST PRESENT THE HIGHLIGHTS OF THE RECONCILED BILL AS ENDORSED BY THE BICAMERAL CONFERENCE COMMITTEE.

FIRST, ALLOW ME TO PROVIDE YOU WITH THE SUMMARY OF THE APPROVED RATES FOR THE DIFFERENT ALCHOL AND TOBACCO PRODUCTS COVERED BY THIS MEASURE.

ON DISTILLED SPIRITS, THE SENATE VERSION WAS ADOPTED IN THE RECONCILED VERSION BUT WITH SOME REFINEMENTS:

1. EFFECTIVE ON JANUARY 1, 2013 - AN AD VALOREM TAX OF 15% OF THE NET RETAIL PRICE PER PROOF PLUS A SPECIFIC TAX OF P20.00 PER PROOF LITER;

2. EFFECTIVE ON JANUARY 1, 2015 - 20% OF THE NET RETAIL PRICE PER PROOF PLUS P20.00 PER PROOF LITER; AND

3. FINALLY, THE SPECIFIC RATE OF P20.00 SHALL BE INCREASED BY 4% EVERY YEAR THEREAFTER STARTING ON JANUARY 1, 2016.

ON WINES, BOTH THE HOUSE AND SENATE VERSIONS PROPOSED THE SAME RATES, AND THESE WERE ADOPTED IN THE BICAM REPORT:

1. FOR SPARKLING WINES/CHAMPAGNES -

a. NET RETAIL PRICE IS P500.00 OR LESS - P250.00
b. NET RETAIL PRICE IS MORE THAN P500.00 - P 700.00

2. FOR STILL WINES AND CARBONATED WINES -

a. WITH 14% ALCOHOL OR LESS - P30.00
b. MORE THAN 14% BUT NOT MORE THAN 25% ALCOHOL BY VOLUME - P60.00

3. FOR FORTIFIED WINES - THESE PRODUCTS SHALL BE TAXED AS DISTILLED SPIRITS (15% OF THE NET RETAIL PRICE PLUS P20 PER PROOF LITER)

ON FERMENTED LIQUOR, THE NET RETAIL PRICE CUT-OFFS AS PROVIDED UNDER THE HOUSE VERSION WAS ADOPTED IN THE RECONCILED VERSION BUT THE APPROVED RATES ARE AS FOLLOWS:

1. EFFECTIVE ON JANUARY 1, 2013

a. NET RETAIL PRICE IS P50.60 OR LESS - P15 PER LITER;
b. NET RETAIL PRICE IS MORE THAN P50.60 - P20 PER LITER

2. EFFECTIVE ON JANUARY 1, 2014

a. NET RETAIL PRICE IS P50.60 OR LESS - P17 PER LITER;
b. NET RETAIL PRICE IS MORE THAN P50.60 - P21 PER LITER

3. EFFECTIVE ON JANUARY 1, 2015

a. NET RETAIL PRICE IS P50.60 OR LESS - P19 PER LITER;
b. NET RETAIL PRICE IS MORE THAN P50.60 - P22 PER LITER

4. EFFECTIVE ON JANUARY 1, 2016

a. NET RETAIL PRICE IS P50.60 OR LESS - P21 PER LITER;
b. NET RETAIL PRICE IS MORE THAN P50.60 - P23 PER LITER

5. THEN BY JANUARY 1, 2017, THERE WILL BE A UNITARY RATE FOR ALL FERMENTED LIQUORS AT P23.50 PER LITER

6. WITH RESPECT TO FERMENTED LIQUORS BREWED AND SOLD AT MICRO-BREWERIES OR SMALL ESTABLISHMENTS, THE TAX SHALL BE P28.00 PER LITER

ON TOBACCO PRODUCTS, BOTH THE HOUSE AND SENATE VERSIONS PROPOSED THE RATE OF P1.75 PER KILOGRAM AND THE SAME RATE WAS ADOPTED IN THE RECONCILED VERSION. WITH RESPECT TO TOBACCO SPECIALLY PREPARED FOR CHEWING, THE RATE OF P1.50 WAS ADOPTED IN THE BICAM REPORT.

ON CIGARS, THE APPROVED RATES IN THE RECONCILED VERSION ARE AS FOLLOWS:

1. EFFECTIVE ON JANUARY 1, 2013 - AN AD VALOREM TAX OF 20% OF THE NET RETAIL PRICE PER CIGAR PLUS A SPECIFIC TAX OF P5.00 PER CIGAR; AND

2. AFTERWARDS, THE SPECIFIC RATE OF P5.00 SHALL BE INCREASED BY 4% EVERY YEAR THEREAFTER BEGINNING JANUARY 1, 2014.

ON CIGARETTES PACKED BY HAND, THE PROPOSED RATES IN THE SENATE VERSION WERE ADOPTED IN THE RECONCILED VERSION:

1. EFFECTIVE ON JANUARY 1, 2013 - P12.00 PER PACK;

2. EFFECTIVE ON JANUARY 1, 2014 - P15.00 PER PACK;

3. EFECTIVE ON JANUARY 1, 2015 - P18.00 PER PACK;

4. EFFECTIVE ON JANUARY 1, 2016 - P21.00 PER PACK; AND

5. EFFECTIVE ON JANUARY 1, 2017 - P30.00 PER PACK

ON CIGARETTES PACKED BY MACHINE, THE NET RETAIL PRICE CUT-OFFS UNDER THE HOUSE VERSION WERE ADOPTED IN THE RECONCILED VERSION WITH THE FOLLOWING RATES:

1. EFFECTIVE ON JANUARY 1, 2013

a. NET RETAIL PRICE IS P11.50 AND BELOW - P12 PER PACK
b. NET RETAIL PRICE IS MORE THAN P11.50 - P25 PER PACK

2. EFFECTIVE ON JANUARY 1, 2014

a. NET RETAIL PRICE IS P11.50 AND BELOW - P17 PER PACK
b. NET RETAIL PRICE IS MORE THAN P11.50 - P27 PER PACK

3. EFECTIVE ON JANUARY 1, 2015

a. NET RETAIL PRICE IS P11.50 AND BELOW - P21 PER PACK
b. NET RETAIL PRICE IS MORE THAN P11.50 - P28 PER PACK

4. EFFECTIVE ON JANUARY 1, 2016

a. NET RETAIL PRICE IS P11.50 AND BELOW - P25 PER PACK
b. NET RETAIL PRICE IS MORE THAN P11.50 - P29 PER PACK

5. EFFECTIVE ON JANUARY 1, 2017, A UNITARY RATE OF P30 PER PACK SHALL BE IMPOSED ON ALL CIGARETTES PACKED BY MACHINE.

SECOND, THE PROVISION IN THE SENATE VERSION REGARDING THE 4% ANNUAL INCREASE OF THE RATES PROPOSED IN THIS MEASURE FOR THE DIFFERENT ALCOHOL AND TOBACCO PRODUCTS WAS ADOPTED IN THE RECONCILED VERSION.

THIRD, BASED ON THE APPROVED RATES ABOVE, THE RESULTING INCREMENTAL REVENUES FROM THIS MEASURE ARE AS FOLLOWS;

1. FOR 2013, THE TOTAL INCREMENTAL REVENUE THAT WILL BE GENERATED IS P33.96 BILLION WITH P23.4 BILLION FROM TOBACCO, P4.5 BILLION FROM FERMENTED LIQUOR, AND P6.06 BILLION FROM DISTILLED SPIRITS.

2. FOR 2014, THE TOTAL INCREMENTAL REVENUE IS P42.86 BILLION, BROKEN DOWN AS FOLLOWS: P29.56 BILLION FROM TOBACCO, P6.99 BILLION FROM FERMENTED LIQUOR, AND P6.31 BILLION FROM DISTILLED SPIRITS;

3. FOR 2015, THE TOTAL INCREMENTAL REVENUE IS P50.63 BILLION, WHERE P33.52 BILLION WILL COME FROM TOBACCO, P9.52 BILLION FROM FERMENTED LIQUOR, AND P7.59 FROM DISTILLED SPIRITS.

4. THEN FOR 2016, THE TOTAL INCREMENTAL REVENUES WILL BE P56.86 BILLION, WITH P37.09 BILLION FROM TOBACCO, P12.06 BILLION FROM FERMENTED LIQUOR, AND P7.71 BILLION FROM DISTILLED SPIRITS.

5. AND FOR 2017, THE INCREMENTAL REVENUE WILL BE P64.18 BILLION, BROKEN DOWN AS FOLLOWS - P40.9 BILLION FROM TOBACCO, P15.46 BILLION FROM FERMENTED LIQUOR, AND P7.82 BILLION FROM DISTILLED SPIRITS.

6. FINALLY, MR. PRESIDENT, MY DEAR COLLEAGUES, THE TOTAL INCREMENTAL REVENUES PROJECTED TO BE COLLECTED FROM THIS MEASURE FOR THE FISCAL YEARS 2013 TO 2017 IS P248.49 BILLION.

FINALLY, AS THE SIN TAX BILL IS FIRST AND FOREMOST A HEALTH MEASURE, THIS REPRESENTATION IS PLEASED TO REPORT THAT THE BICAMERAL COMMITTEE ACCEPTED AND ADOPTED THE PROVISIONS ON EARMARKING PROPOSED BY SENATOR PIA CAYETANO AND CONGRESSWOMAN JANETTE GARIN, SUBJECT TO SOME MODIFICATIONS. GIVEN THE PROJECTED INCREMENTAL REVENUE FOR 2013 OF P23.5 BILLION, AFTER DEDUCTING THE ALLOCATIONS UNDER REPUBLIC ACT NOS. 7171 AND 8240, 80% OF THE BALANCE THEREOF SHALL BE USED TO FINANCE THE UNIVERSAL HEALTH CARE PROGRAM OF THE PHILHEALTH, FOR THE ATTAINMENT OF THE MILLENIUM DEVELOPMENT GOALS, AND FOR HEALTH AWARENESS PROGRAMS. THE REMAINING 20% OF THIS FUND SHALL BE ALLOCATED NATIONWIDE, BASED ON POLITICAL AND DISTRICT SUBDIVISIONS, FOR MEDICAL ASSISTANCE, AND FOR THE HEALTH FACILITIES ENHANCEMENT PROGRAM OF THE DEPARTMENT OF HEALTH.

FURTHERMORE, TO ADDRESS THE CONCERN OF THIS CHAMBER ON THE POSSIBILITY OF AN INCREASE IN SMUGGLING, THE SENATE VERSION AMENDING SECTION 8 OF THE NIRC, BY REQUIRING UNIQUE, SECURE AND NON-REMOVABLE IDENTIFICATION MARKINGS WAS ADOPTED IN THE RECONCILED BILL.

LIKEWISE, THE PROVISION ON THE SENATE VERSION ON LOCAL COMPONENT REQUIREMENT WAS ADOPTED WITH CERTAIN MODIFICATIONS, TO READS AS FOLLOWS:

"OF THE TOTAL VOLUME OF CIGARETTES SOLD IN THE COUNTRY, ANY MANUFACTURER AND/OR SELLER OF TOBACCO PRODUCTS MUST PROCURE AT LEAST FIFTEEN PERCENT (15%) OF ITS TOBACCO LEAF RAW MATERIAL REQUIREMENTS FROM LOCALLY GROWN SOURCES, SUBJECT TO ADJUSTMENTS BASED ON INTERNATIONAL TREATY COMMITMENTS."

ON A FINAL NOTE, MR. PRESIDENT, GIVEN THE NOTABLE CONCERNS OF SOME OF THE MEMBERS OF THE BICAM PANEL, A TRANSITORY PROVISION WAS INCLUDED IN THE RECONCILED VERSION THAT PROVIDES FOR A SPECIAL FINANCIAL SUPPORT FOR WORKERS IN THE ALCOHOL AND TOBACCO INDUSTRY.

MR. PRESIDENT, THIS REPRESENTATION FIRMLY BELIEVES THAT DESPITE THE DIFFERENT OPINIONS EXPRESSED IN THIS CHAMBER REGARDING THE SIN TAX BILL, IT IS MY HOPE THAT THE SENATE CAN COME TOGETHER AS ONE BODY AND SUPPORT THIS MEASURE.

WITH THAT, MR. PRESIDENT, I MOVE FOR THE ADOPTION OF THE BICAMERAL CONFERENCE REPORT ON THE DISAGREEING PROVISIONS OF HOUSE BILL NO. 5727 AND SENATE BILL NO. 3299.