The passage of the House Bill on sin taxes (part 2)

That one’s cause is just is no guarantee of securing victory. Ho Chi Minh, Vo Nguyen Giap, and their people’s army defeated the United States in the Vietnam War because they were smart and they had the political and military weaponry to outfox a superpower. To be sure, the justness of their cause was the basis to obtain immeasurable political support at home and abroad, which in turn secured the resources to fight a combination of guerilla and conventional war. Still, without the political as well as military skills, the war would have exacted incalculable costs to everyone, especially the Vietnamese people.

Boosting firepower and having a sophisticated strategy go together. A smart strategy creates firepower, and the additional firepower means having more instruments to flexibly choose a wide range of tactics.

In the case of the war for the sin tax reform, the cause is indubitably just. The weak sin tax law translates into very cheap and very affordable sin products, resulting in millions of Filipinos, either getting sick or dying. The injustice of the law is also expressed in government losses in terms of a) billions of pesos in foregone revenues resulting from the law’s provisions that protect vested interests and b) soaring health costs arising from diseases related to smoking and excessive drinking.

Yet the justness of this cause does not automatically spell victory. The struggle was mainly defensive in the initial stage, and a long period it was.

Consider that the vested interests are highly organized and consolidated. The vested interests are not going to give up their monopoly, threatened by the reforms. And they have the financial resources and the political infrastructure to mount a fierce offensive. On the other hand, at the Lower House, the allies of the administration were scattered. And given the competing demands faced by legislators, only a few could focus on the sin tax reform. This is a classic example of the collective action problem.

Hence even though the sin tax reform was an administration bill (HB 5727), its passage at the ways and means committee was uncertain.

In fact, a few days before the ways and means committee was scheduled to vote on HB 5727, the champions still had to muster the minimum necessary number to have it passed.

The task of the representatives of the vested interests was easier—just delay the whole process and prevent the Abaya bill from being submitted to the plenary session for second reading. By stalling the bill, they reckoned that the bill would be rendered dead in the water since Congress was to adjourn soon. Enacting the bill becomes all the more difficult when Congress starts session in July 2012, because of the lost momentum, the limited time, and the distraction of next year’s congressional elections.

In this difficult situation, what did the sin tax reformers do right? What firepower and strategy did they use?

Arguably, a most decisive factor was the unequivocal support of the President. As some have said in public, the political leadership and political will of PNoy turned the tide. The President publicly stated several times that the sin tax reform is his priority. Moreover he went out of his way to talk to the House leadership as well as to the opponents of the reform bill.

Speaker Sonny Belmonte echoed the statement of the President, and in crucial moments reiterated his support for the administration bill, thus signaling to the House membership to cooperate towards passage of the bill.

The President’s Cabinet, especially the heads and senior officials of the Department of Health, Department of Finance, Department of Agriculture, Department of Budget, Bureau of Internal Revenue, and Bureau of Customs, came out in full force to defend and promote the bill.

Led by Health Secretary Ike Ona, Bureau of Internal Revenue Commissioner Kim Henares, and Finance Undersecretary Jun Paul, they explained convincingly that the reform bill is first and foremost a health measure towards reducing smoking prevalence and excessive drinking, which at the same time will generate significant incremental revenue for universal health care. Agriculture Secretary Procy Alcala assured the legislators that the bill not hurt farmers and on the contrary even benefit them because of the earmarking of a portion of the incremental revenues for safety nets and alternative livelihood programs. Kim Henares and Bureau of Customs Commissioner Ruffy Biazon emphasized that smuggling is not a severe constraint and that the revenue-collection agencies have put in place the administrative reforms to address this problem.

The arguments used by the tobacco lobby—the loss of revenues because of the high tax rates, the welfare of tobacco farmers, the rise of smuggling—were all demolished. And the vested interests have no effective answer to the health benefits of the reform bill.

And for all this, credit is due the champions in the Lower House, especially Rep. Ungab, the chair of the ways and means committee, Rep. Abaya, the main sponsor of the bill and other co-sponsors like Rep. Abad and Rep. Limkaichong.

They did their homework. They studied the issues well. And with competent technical and analytical support from a composite team from Finance, Internal Revenue, Health, and civil society (in turn composed of economists, doctors of medicine, and other health advocates), the House champions were very thorough and convincing in having the Abaya bill passed at the ways and means committee and at the plenary session for the second reading.

(To be continued.)

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