Manila (Philippine Daily Inquirer/ANN) - The sin tax bill being debated in the Philippine Congress tends to favour imported cigarettes as it appears the proposed tax increases on tobacco products do not cover foreign brands, Senate President Juan Ponce Enrile said yesterday.
According to Enrile, the problem is a question of equity. "My impression is that the bill tends to favour the entry of foreign manufactured tobacco products to the detriment of local products that use material grown in the country," he said.
Enrile cited a statement made Sen. Franklin Drilon, the acting chairman of the ways and means committee, during the plenary debate on the bill.
"We are not certain at this point whether a higher tax rate for imported cigarettes would be in compliance and consistent with (the country's) obligations under GATT (the General Agreement on Tariffs and Trade)," he quoted Drilon as saying.
Under GATT, the international trade agreement that the Philippines signed in 1994, all signatories automatically became members of the World Trade Organisation (WTO) and are required to adhere to provisions that some of its critics claim are unfavourable to Philippine agriculture.
Drilon said the members of the ways and means committee "[had] not studied" whether the WTO provisions allowed higher taxes to be imposed on tobacco products imported into the country.
WTO rules require members to allow more liberalised trading arrangements among fellow members.
Sen. Edgardo Angara was the first to warn about this scenario even before the start of Senate debates on the sin tax bill. Angara was the Senate President when the chamber ratified the GATT.
Enrile clarified that he is "in favour of enforcing [an] additional tax" on sin products if the aim is to provide funds for the government's health-care programme.
However, he observed that it was unclear whether imported cigarettes would be covered once the unitary scheme of P32 additional tax per pack of cigarettes takes effect.
As it is, the entry of imported cigarettes cannot be stopped because "we have to comply with the WTO," he said.
"What would be the rate of increase, if any, for imported cigarettes to be marketed in the country when we put in place unitary rate?" he asked.
Drilon earlier explained that "gradual increases" in taxes on tobacco products would make a pack of low-priced cigarettes cost 14 pesos (US$0.33) more while a higher-end brand would cost 28 pesos more if the sin tax bill is approved.
In two to three years, the bill provides that the Bureau of Internal Revenue impose a unitary rate of 32 pesos per pack for low- and high-end cigarettes.
The Aquino administration is aiming for a 60-per cent increase in taxes of sin products once Congress passes the measure aimed at curbing alcohol and cigarette addiction among Filipinos and, at the same time, increasing revenue.
The Senate is racing against time to pass the measure, with Drilon reminding his colleagues that they have until November 19 to approve it.
Meanwhile, the Palace yesterday disputed an advertisement by local tobacco growers that claimed the sin tax bill could increase taxes on popular cigarette brands by more than 1,000 per cent.
"The appearance of that ad would imply that upon the passing of the sin tax bill into law the increase will be immediately 1,000 per cent. That is incorrect," said presidential spokesperson Edwin Lacierda.
"The rate right now is 2.72 pesos (per pack of cigarette). Next year, it will be 12 pesos. That's hardly 1,000 (per cent). After that, 22 pesos, until it reaches in 2016 to 32 pesos," said Lacierda, without specifying any particular brand.
Even with the passage of the law, cigarettes in the country will still have the lowest price in Asia, he said.
A pack of the lowest-priced brand in Thailand is sold at 72 pesos, 26 pesos in Vietnam, and 48.50 pesos in Indonesia, Lacierda claimed.
With reports from Michael Lim Ubac