New 'sin' tax for cigarettes not enough to fund universal healthcare – DOF

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Metro Manila (CNN Philippines, May 29) — The Department of Finance (DOF) wants the Senate to approve higher taxes on alcoholic drinks to raise more funding, now that the additional duties proposed for cigarettes turned out lower than expected.

Finance Undersecretary Karl Kendrick Chua said Senate Bill 2233, or the new bill that will further raise the excise taxes on tobacco products, will only generate ₱15 billion once implemented.

The DOF has endorsed higher taxes on cigarettes to deter smoking and to fund a projected ₱62-billion funding gap as the government rolls out the Universal Healthcare Act.

"The Senate tobacco (bill) can contribute ₱15 billion. May mga ₱40+ billion pa na natitira, kaya iniisip namin na sana 'yung alchool, maisama din. Kasi kung hindi, we have either less quality (of services) or we have to get money from other projects," Chua said during the Kapihan sa Manila Bay forum on Wednesday.

Senate Bill 2233 now pending second reading will jack up the excise tax on cigarette packs from ₱45 by Jan. 1, 2020 to ₱60 by 2023. The DOF backed the original bill filed by Senator Manny Pacquiao that will bring excise taxes to P60 per cigarette pack in the first year of implementation, plus a nine percent increase per year thereafter. This would have raised ₱30.1 billion, or double the tax take of the new measure.

Time is running out for the Senate to pass the watered-down bill as Congress is down to its last three plenary session days, with June 5 declared as a holiday for Eid'l Fitr. The 17th Congress closes next Friday, which will leave all pending bills back to zero.

Bill sponsor Senator Sonny Angara said he is not yet sure about how lawmakers will vote on the measure as of Tuesday, but its chances could be boosted by Malacañang's intervention.

READ: 'Sin' tax bill for cigarettes certified urgent a week before Congress closes

House Majority Leader Fredenil Castro told CNN Philippines that their chamber is open to adopt the Senate's version just to make it to the deadline, doing away with the need for a bicameral session to harmonize the two tax bills.

The UHC is seen to cost ₱257 billion for the first year, with ₱195 billion provided for in the national budget. It will cost about ₱1.44 trillion over the next five years, Chua said.

Israel Pargas, senior vice preident of the Philippine Health Insurance Corp., said the expansion of services mandated under the UHC will depend on the available funding.

"Sana they can include as amendment the alcohol (taxes). Puwede naman, or sa bicam," Chua added. The Senate bill for higher alcohol duties is seen to generate around ₱32.3 billion.

[Translation: Hopefully they can incude the higher alcohol taxes as an amendment (to the cigarette bill.) That's possible, or it can be done during the bicam.]

The House has passed its version of higher sin taxes on liquor.

The DOF is also studying if they can slap excise taxes on e-cigarettes for additional revenues.

Charade Mercado-Grande, assistant secretary at the Department of Health, added that they will issue an order that puts these e-cigarettes and vapes under the watch of the Food and Drug Administration "anytime soon."

"Depending on the risk, then we will determine the rate. As of now, I don't know," Chua said. "I will take the cue from DOH, WHO (World Health Organization) and health experts and then we'll collectively propose the appropriate tax."

READ: Study finds e-cigarette flavors can damage cardiovascular cells

Chua said that e-cigarettes are a "relatively new" product, and they will need the help of the DOH and the Department of Trade and Industry once they decide to tax these goods. Currently, these are subject to the 12 percent value-added tax.