RESILIENCE AND HEART

YELLOW PAD

By Karla Michelle Yu

This entire story about a series of tobacco tax increases was triggered by House Bill (HB) 4144, which the pro-tobacco House leadership hastily approved in late 2016. This bill wanted to increase the then unitary rate of PHP 30 per pack to a dual-tier rate of PHP 32 and PHP 36, respectively. The reformers from both inside and outside government opposed it because the proposed rates were low and the two-tier system reverses the previous reform of having a single tax for all brands regardless of prices, thereby resulting in less revenues and allowing smokers who cannot afford the higher price to shift to the lower-taxed cigarettes.

To counter the bad proposal, Congressman Joey Sarte Salceda filed HB 4575; his bill increases the unitary rate to PHP 45 followed by an increase of PHP 5 each year until the rate reaches PHP 60. Unfortunately, this superior proposal was not taken into consideration by the Lower House, which passed HB 4144 without public scrutiny.

In 2017, the battle shifted to the Senate. But the Senate was not keen on tackling the issue because it was in the midst of deliberating other tax reforms, packaged as the Tax Reform for Acceleration and Inclusion or the TRAIN law.

Through persistence, the advocates finally found a champion in Senator Manny Pacquiao in October 2017. Aiming for one million less smokers by 2022, he filed Senate Bill (SB) 1599, which increases the rate to PHP 60 per pack in the first year followed by a nine percent increase annually. A boxing champion proved to be a fitting champion against tobacco.

Two weeks later, Senator JV Ejercito, then chair of the Committee on Health, filed his own PHP 90 cigarette tax proposal. His main intention was to generate funding for the Universal Health Care (UHC), which he sponsored.

Despite this, Committee on Ways and Means Chairperson, Senator Sonny Angara, chose not to table the tax bills for discussion. Senators Pacquiao and Ejercito, together with Senators Risa Hontiveros and Bam Aquino, manifested to include the tobacco tax in TRAIN, but it did not happen.

It then came as a surprise that the bicameral conference committee bill on TRAIN in December 2017 included a hike in the tobacco tax of PHP 5 per pack in the first year, followed by incremental increases of PHP 2.50 until having a rate of PHP 40 by 2022.

As a whole, this was a weak tobacco tax provision. Although the 17-percent increase in the first year was significant, the succeeding rates were very low to prevent an increase in the number of smokers. It sure felt like the quest for higher tobacco taxes was to end there.

The year 2018 brought with it much political noise in the face of the higher-than-expected inflation that was wrongly attributed to TRAIN. Despite the fact that the surge in inflation was mainly a result of the rise of the Dubai crude oil price and the mismanagement of rice policy, the politicians were especially sensitive to tax measures that would increase prices.

Politicians all the more became sensitive to taxes because this was the year before the midterm elections. Legislators, especially those running for re-election, did not want to take risks by being associated with increasing taxes.

However, 2018 was also a year of opportunity, for the Universal Health Care (UHC) bill was overwhelmingly supported by the public and the politicians. Everyone wanted the UHC bill to be fully funded; thus, the campaign to increase tobacco taxes found its way at the top of the 17thCongress’ legislative agenda.

Following the ratification of the UHC bill, the Lower House, led by House Speaker Gloria Macapagal-Arroyo and Ways and Means Committee Chairperson Estrellita Suansing, passed HB 8677, which proposed to increase the tobacco tax rate by PHP 2.50 per year until the rate would settle at PHP 45. The rationale: fill the UHC funding gap of around PHP 62 billion for the UHC’s first year.

At this point, the Department of Finance (DOF), the Department of Health (DOH), the medical profession, and civil society joined forces to campaign for the passage of a much higher tax on tobacco.

In early 2019, Senator Angara, despite being a candidate in the midterm elections, continued the discussions on the proposed tobacco tax bills of Senators Pacquiao and Ejercito. Around this time too, Senator Win Gatchalian joined the Senate champions when he filed his bill of increasing the tobacco tax to PHP 70 per pack.

The advocates hoped that the Senate would approve a good tobacco tax measure before its adjournment to give way to the midterm elections. But they were left hanging with Senator Angara’s commitment to submit a Committee Report upon the resumption of Congress.

Last month, when the Senate resumed session after the midterm elections, advocates only had a sliver of hope for there were only eight session days to pass the tobacco tax bill. The number of days was short, but the process was long: interpellation, amendment, third reading, bicameral conference, and ratification. Senators themselves expressed their reservations in passing a tax measure at the tail-end of the 17th Congress.

But the outpour of support from the public as well as the coordinated efforts of the DOF and DOH proved the age-old adage to be true, “Kapag gusto, maraming paraan; kapag ayaw, maraming dahilan”. Despite the naysayers and strong opposition from the tobacco industry, the ultimate goal of safeguarding the health of the Filipino people shone through.

With the bill certified as urgent and the House Speaker’s commitment to adopt the Senate version, the measure made it out just in the nick of time to be ratified by both Houses before the sine die adjournment. The approved bill increases the tobacco tax rate from the current PHP 35 to PHP 45 in the first year, followed by successive PHP 5 increases until the rate reaches PHP 60 in 2023. An annual tax adjustment of five percent replaces the current four percent. Taxes on e-cigarettes and vapes have also been introduced though at low rates.

Ultimately, the tobacco tax is a victory for health. The bill is estimated to raise about PHP 15 billion in the first year and reduce the number of smokers by 200,000 by 2023.

Among many lessons, two stand out as keys to the reform’s success: resilience and heart.

Many thought that having the reform passed seemed like an impossible task. The people supportive of it, however, were not paid lobbyists who only sought to profit from the outcomes. They were true blue advocates who were steadfast in their hope to uplift the lives of Filipinos. Hence, no matter how many times it felt like a dead end, the pursuit of higher tobacco taxes never wavered.

Crucial reforms can still be won in spite of challenging and less-than-ideal circumstances. No matter how tempting it might be to surrender and declare defeat, take heart. All is not lost.

Karla Michelle Yu is a coalition builder and campaigner for Action for Economic Reforms.