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President Benigno S. Aquino III signed into law Republic Act 10351 (An Act Restructuring the Excise Tax on Alcohol and Tobacco) otherwise known as the Sin Tax Reform 2012 in ceremonies in Malacañang Palace on Thursday.
The signing ceremony was witnessed by representatives from the Senate, Congress, Department of Health, Department of Finance, Department of Budget and Management, Department of the Interior and Local Government, Department of Transportation and Communications, other government agencies, health professionals, medical societies, patients’ groups, academe, and other health advocates from the civil society.
The Sin Tax Reform 2012 is considered as the only tax reform on alcohol and tabacco products that favor both the government and the Filipino people.
The Republic Act 10351 is a consolidation of House Bill 5727 as amended and Senate Bill 3299 as amended.
The House Bill 5727 as amended was passed by the House of Representatives last June 6, 2012, while Senate Bill 3299 as amended was passed by the Senate last November 20, 2012.
The bicameral conference committee report reconciling the two bills was ratified by both Houses of Congress last December 11, 2012. The measure, a priority of the Aquino administration, was certified urgent by the President of the Philippines to ensure its speedy passage.
The enactment of the law is a victory in the government’s campaign to protect the people, especially the young and the poor, from the ill effects of smoking and excessive drinking. The reform aims to reduce tobacco and alcohol consumption among the Filipinos that leads to better health outcomes.
The law aims to generate government’s revenues to fund the Universal Health Care.
After deducting the allocations for assistance to tobacco farmers under existing laws R.A. 7171 and R.A. 8240, eighty percent (80%) of the remaining balance of the incremental revenue will be earmarked for the universal health care under the National Health Insurance Program and twenty percent (20%) will be allocated nationwide for medical assistance and health enhancement facilities program.
The law provides additional funding for tobacco farmers’ livelihood program.
The Sin Tax Reform law paves the way for the removal of the price/brand classification freeze. The proper tax classification of alcohol and tobacco products will be determined every two (2) years.
With the crafting of the law, there will be gradual shift to a unitary taxation in order to simplify the current multi-tiered structure.
To prevent the excise taxes to be eroded by inflation, the excise tax rates will be increased by 4% every year effective 2016 for distilled spirits, and 2018 for cigarettes and beer.
The sin tax reform conforms to the World Trade Organization’s ruling on distilled spirits and World Health Organization- Framework Convention on Tobacco Control’ commitment on cigarettes. The excise tax incidence for cigarettes, which is the ratio of excise tax to price, will increase from the current 29.1% to 52.5% in 2013 and 63% by 2017.
The law also aims to generate more revenues for the government. On the first year of implementation, the government is expected to raise additional revenues worth P33.96 billion, of which, P23.4 billion is from cigarrettes, P6.06 billion from distilled spirits and P4.5 billion from fermented liquors.
Also in attendance were Senate President Juan Ponce Enrile, House Speaker Feliciano Belmonte Jr. Senator Franklin Drilon; Executive Secretary Paquito Ochoa Jr. Finance Secretary Cesar Purisima, Health Secretary Enrique Ona, Bureau of Internal Revenue Commissioner Kim Henares, Deputy Speaker Maria Isabel Climaco, Senior Deputy Majority Leader Janette Garin Representative Isidro Ungab, Chair of the House Committee on Ways and Means, Representative Henedina Abad, among others.
Representatives from the World Health Organization, the United States Agency for International Development and the World Bank and industry and business sectors also attended the event.