On President Duterte’s certification of CITIRA (SBN 1357) as urgent

Statement of Senator Pia S. Cayetano

Chairperson, Senate Committee on Ways and Means (March 11, 2020)

I welcome President Rodrigo Duterte’s certification as urgent the Senate’s version of the Corporate Income Tax and Incentives Rationalization Act (CITIRA).

This Presidential directive underscores the urgency to forge a more fair, efficient, and accountable tax system – one that should foster a stronger economy amid the many challenges our country is facing.

The certification also affirms the position earlier taken by our top economic managers, finance experts, and various business organizations fully backing SBN 1357.

The Senate version of CITIRA is a result of the successive discussions our committee conducted with investors to address their concerns. And what we repeatedly heard from various stakeholders is that we need to pass this measure.

Like the President, I am hopeful that passing CITIRA will end all uncertainty, assure investors of a more level playing field in terms of doing business in the country, and lead to a brighter and more sustainable future for all Filipinos. #

Senate Ways & Means Chair Pia S. Cayetano holds a press conference in the Senate on February 19, following her sponsorship speech on Senate Bill 1357 (CITIRA bill). She was joined by leaders from government, academe, and business organizations who expressed their full support for the measure.

CITIRA:  A fair deal for business, a winning deal for Filipinos

Sponsorship speech of Senator Pia S. Cayetano

Chairperson, Committee on Ways and Means

February 19, 2020

 

Mr. President, distinguished colleagues, today, I rise to sponsor and seek your support for Senate Bill No. 1357, per Committee Report No. 50, also known as the CITIRA bill, which has 2 main objectives:

 

(1) lowering the corporate income tax rate; and (2) modernizing the tax incentive system, making it more fair, efficient, and accountable.

Mr. President, from the onset let me clarify a major issue. A major source of resistance to this bill is the fear that incentives will be removed once this measure is enacted. This will not be the case, Mr. President. In truth, what we intend to do is to continue a sound incentives scheme, the details of which this representation will explain as we go along.

 

Having said that, allow me to start with a bit of history. 

I am sure that both Senate President Sotto and Senate Minority Leader Drilon, the leaders of both sides of this chamber, would also know from their experience that ever since a bill on rationalizing tax incentives was first proposed in 1995, the Department of Finance and the Department of Trade and Industry have urged Congress to finally make this crucial reform happen.

But even further down memory lane, when I was a college student in the school of Economics of the University of the Philippines, my father, the late Senator Rene Cayetano, was a member of the Batasan and was appointed as the Deputy Minister for Trade and Industry Administrator of the Export Processing Zone Authority otherwise known as EPZA. I had the opportunity to visit the export processing zones in Bataan, Baguio, and Cebu. In fact, my thesis was on fiscal incentives. This was in 1985.

And here we are today in the year 2020. 

Mr. President, in the series of hearings and meetings we conducted, we gave members of the business community, civil society, the academe, government, and business associations the opportunity to share their views in depth. The DOF and the DTI also held their own briefings with key stakeholders. The bill before us is a new and fairer deal between businesses and the Filipino people.

So where are we now and what are we doing? 

We are cognizant that Philippine enterprises are the backbone of the economy and that they contribute to national development by supplying much-needed employment and livelihood. And yet, companies doing business in the Philippines are slapped with a 30 percent corporate income tax rate, the highest in the region.

To address this, we will bring down the Corporate Income Tax rate from 30% to 20% over the next ten years. This should result in some 1.5 million more jobs, a feat I am certain we can accomplish, inso far as we have already provided millions of jobs to the economy. We believe that the reduction of 1% per year, is the pace that does not compromise the country’s vital fiscal resources.

However, Mr. President, we cannot talk about the corporate tax regime without earnestly discussing the tax regime for companies that have received unreviewed, and almost unconditional special tax treatment for decades.

 

From 2015 to 2017, the Philippine government granted more than one trillion pesos in tax incentives in the form of exemptions and tax discounts to various companies. In 2017 alone, the government granted billions of pesos to a select group of some 3,150 businesses. These companies pay an effective rate of 6 to 13 percent of Corporate Income Tax as opposed to other enterprises that pay the regular 30 percent Corporate Income Tax.

Let me make this clear again, I mention the amount of incentives, Mr. President, not to say that we will scrap them. All we want to do is rationalize them.

Incentives should not be given out to any corporation without the proper conditions. They should be performance-based and targeted, and granted in such a way that would benefit the public – by way of providing employment, boosting needed industries, and promoting the growth of less-developed areas in the country.

When we give out incentives on behalf of the people, then we are duty-bound to ascertain that we get what is rightly due to them. That is the essence of this bill: a fair deal for all, and the best deal for Filipinos.

My point, Mr. President, is that true incentives yield results, like the situation with our neighbors, Singapore and Malaysia. If a tax perk is given, without a clear set of conditions, without a time limit, and without adequate oversight, it’s not an incentive. It is a giveaway, and this country cannot afford corporate giveaways.

 

The billions of incentives we granted are equivalent to more than 10 percent of our 2020 national government budget, around 80 percent of DEPED budget, and more than four times the amount allocated to the Department of Health.

 

So let’s discuss tax incentive principles 

With billions of pesos on the line, we need to ensure that the incentives which the government provides are in accordance with the following principles based on international good practices:

 

  1. Performance-based: There should be clear attainment of actual investment, job creation, export, country-side development, and research and development commitments, else incentives will only be wasted. Parang scholarship grant, dapat may resulta, pasado sa exam at maka-graduate.
  2. Targeted: To minimize leakage and to avoid spreading our scarce resources too thinly, tax incentives should be given to activities with significant positive contribution to the economy, or those that really matter for the future, as specified in a strategic investment priority plan (SIPP), to be determined by the Board of Investments (BOI).
  3. Time-bound: There should be a reasonable timeframe for the enjoyment of incentives, and an extension period for companies that perform and contribute to the economy. Parang allowance na binibigay ng magulang sa anak, hindi pwedeng habang-buhay; and
  4. Transparent: Monitoring and evaluation of tax incentives should be institutionalized and reported by the government to the public. Yung pinaghirapang buwis ng ordinaryong taxpayer ang ginagamit nating pampondo sa incentives, kaya nararapat lamang na alam ng taumbayan kung saan napupunta ang buwis niya.

 

And let me add another principle: the incentive system should also be governed well. Currently, there are 13 different investment promotion agencies, or IPAs, each with its own charter and mandate, that offer different menus of incentives to various industries, sometimes not in line with national priorities, and often without the DOF or DTI knowing. As a result, there is no one simple set of incentives that the country may promote to potential investors. This can be very confusing and definitely not investor-friendly.

 

Another concern is that the number of industries that could potentially get incentives from these IPAs, which is some two-thirds of the economy, also makes our incentive system indiscriminately open to just any activity, and thus open to abuse.

 

This representation thus proposes that there be: (1) a set of incentives for different projects or activities, depending on the location and industry, and (2) incentives that shall be based on the Strategic Investment Priority Plan (SIPP), which will be determined by the BOI, in coordination with the Fiscal Incentives Review Board, IPAs, government agencies administering tax incentives, and the private sector. We also propose to expand the functions of the Fiscal Incentives Review Board, a body that currently grants incentives to government-owned or controlled corporations, to also approve all incentives given to private companies, as recommended by the IPAs. We also recommend this board to oversee the IPAs. This much-needed governance reform is at the heart of the CITIRA bill.

Before I proceed with more details of the proposed bill, allow me to acknowledge the work of some of our predecessors such as Senator Recto, who filed the first Fiscal Incentives Review Board expansion bill in 2001 and Senator Drilon, who authored the Tax Incentives Management and Transparency Act, or the TIMTA Law, passed in 2015. The law mandates companies to provide the government with data to estimate the tax incentives they receive, which is now being used to objectively assess our tax incentives. Both senators, along with Senators Lacson and Villar, have also filed in previous congresses bills on fiscal incentives rationalization. We are now building on their ideas to move the reform forward.

 

I would also like to put on record that our team painstakingly took the time to ease the transition period for investors and minimize the drastic changes the new incentive scheme could bring to their businesses.

 

Let me now discuss the salient points of the reform as proposed by this representation.

 

Reduction in the corporate income tax rate 

As mentioned earlier, the corporate income tax rate shall be lowered gradually by one percent every year, from the current 30 to 20 percent by 2029.

We have made the reduction of corporate income tax automatic in our version for the first five years to ensure predictability. By 2025, the reduction can be suspended by the President upon recommendation of the Secretary of Finance, if the projected deficit target as a percent of GDP exceeds the programmed deficit.

 

Modernization of the fiscal incentive system 

The centerpiece of the country’s current tax incentives regime is the income tax holiday or ITH for 4 to 6 years, and the special 5 percent tax on gross income earned, or GIE, in lieu of all taxes, both national and local.

 

The 5 percent tax on GIE is granted forever without conditions, even if the firm does not contribute to the economy in terms of jobs and exports at a level commensurate to the amount of incentives given. Colleagues, no other country gives incentives forever.

 

Dear colleagues, it is time to end a regime that distributes costs to many, and concentrates benefits to a few.

 

Sunset provisions 

After listening to the concerns and apprehensions of existing investor groups that will be affected by this bill, we came up with terms that address their request for a smoother transition period. This addresses our objective, which is to keep companies and investors here in the country while rationalizing the incentives that we give them.

 

For those granted ITH only 

Existing registered activities granted the income tax holiday shall be allowed to complete the remainder of their ITH period.

For those granted 5% GIE but not yet enjoyed

These are the firms with unfinished ITH and a succeeding Gross Income Earned (GIE) of 5%. In their case, their ITH will be allowed to expire on schedule and will be followed by a 5% GIE, with a maximum of 5 years. If the firm has no ITH but is about to go into 5% GIE, they will also enjoy 5% GIE, for a maximum of 5 years.

Granted and currently enjoying 5% GIE forever 

Existing registered activities that were granted the 5 percent tax on GIE, in lieu of all taxes, will be allowed 2 to 7 more years as a transition period, while paying the same rate of 5 percent GIE. The duration of the proposed transition period is as follows:

  • 2 years for those who have been receiving the GIE incentive for more than 10 years;
  • 3 years for those who have been receiving the GIE incentive for between 5 and 10 years;
  • 5 years for those who have been receiving the GIE incentive for below 5 years, and
  • A special 7 years for those that meet any of the following conditions:
  1. Exporting 100 percent of their goods and services, b. Employing at least 10,000 Filipino workers, or c. Engaging in highly footloose activities. And in addition Mr. President, after the sunset period, they will still be allowed to apply under the new incentive package where they will be assessed by virtue of the new package of this bill.

 

What is the new incentives package? 

Under our version of CITIRA, a registered activity may be granted an income tax holiday of 2 to 4 years, followed by a Special Corporate Income Tax (SCIT) rate, that is based on Gross Income Earned (GIE). The Special Corporate Income Tax Rate will be equivalent to 8% GIE for 2020, 9% for 2021, and 10% for 2022 and onwards.

 

Like the current system, this shall be in lieu of all other taxes, and can be availed for 3 to 4 years, depending on the location and activity. This provision preserves the one-stop shop nature of present incentives. We hear the concerns of investors that they do not want to deal with many government agencies when paying taxes. This is why we retained the “in lieu of” provision and one-stop-shop. Based on my discussion with the firms, this particular provision already addresses 90 percent of their concerns.

 

The initial availment of tax incentives, which includes Income Tax Holiday plus the Special Corporate Income Tax Rate is from 5 to 8 years, depending on the category of the registered activity as indicated on the screen. There are three categories: basic, enhanced, and advance. This is our response to the need to make incentives more targeted to locations that need them and industries that we want to promote.

Duration of income tax holiday (ITH) and Special Corporate Income Tax (SCIT), per category 


There is more good news in our version. The availment of Special Corporate Income Tax may be extended by 3 to 4 years at a time or more than once, up to a maximum of 12 years, depending on the category, so long as the firm remains true to its performance commitments.

In lieu of the Special Corporate Income Tax, the registered activity may instead be granted the enhanced deductions shown on the screen subject to the regular prevailing corporate income tax rate. These enhanced deductions incentivize good behavior, such as local job creation, exports, and investment in hi-tech. As proposed by the DTI, our enhanced deductions menu was expanded to include deductions for power costs to account for the country’s challenges in this area. The expanded deductions list is shown on the screen.

Like the ITH and Special Corporate Income Tax (SCIT), the availment of enhanced deduction may be extended also for up to 12 years.

 

To attract the biggest investors, like what Vietnam did with Samsung, the President may give incentives for a longer period of up to 40 years for highly desirable projects, provided that the benefit that the public could derive from such investment is clear and convincing and far outweighs the cost of incentives that will be granted.

 

Governance of fiscal incentives 

To ensure that incentives granted are performance-based, time-bound, targeted, and transparent, the present Fiscal Incentives Review Board’s function is expanded so that it can provide proper oversight over the IPAs, in the same way that the GCG law of 2011 created the Governance Commission on GOCCs to oversee the GOCCs and ensure better performance and accountability.

Under our proposal, the Board will be chaired by the DOF and co-chaired by the DTI, with representatives from the Office of the President, DBM, and NEDA.

 

Let me assure all the officials and employees of the IPAs that we are not abolishing your agencies or cutting down your jobs. IPAs will continue to perform their function of promoting investments in the Philippines, receive and process applications, and recommend to the Fiscal Incentives Review Board worthy incentives for approval by the Board. None of you shall lose your jobs because of this reform. Sec. 9 of Senate Bill No. 1357 provides: The IPAs shall maintain their functions and powers as provided under the special laws governing them except on the approval of incentives.

 

Mr. President, esteemed colleagues, allow me to underscore one final point, and this is the urgency of our task ahead. Let us end the uncertainty.

 

As an economics graduate, Mr. President, I was trained to think of resources, including our fiscal space, as limited. With limited fiscal resources, from the hard work of our countrymen, we must ask ourselves the following questions as we deliberate on this measure:

 

  1. Should we cut taxes for the many, or should we keep conditions loose for the few?
  2. Should we move incentives towards Philippine labor and Philippine products, or should we continue privileges that have gained our economy little value-added?
  3. When we spend our country’s fiscal resources, do we prefer more accountability, or less?

 

On these basic questions of principle, I trust that this Senate of the People has seen the merits of this reform.

 

Further, as part of our commitment to the United Nations 2030 Agenda for Sustainable Development, all efforts must be exerted to achieve the Sustainable Development Goals (SDGs) by 2030. This is the ideal future, a future where there is no poverty, and where our people and economy thrive.

Rationalizing incentives and lowering the corporate income tax will bring in more investments and provide more jobs for Filipinos. This ensures we remain on target with SDG 8, which promotes decent work and economic growth; SDG 9, promoting inclusive and sustainable industrialization and fostering innovation; and of course, SDG 1, which calls for ending poverty in all its forms. This is only the beginning, as working on just one SDG creates a ripple effect on all the other SDGs, especially on hunger, health, education, and equality. A flourishing economy driven by the Filipino people will safeguard the country’s future, even beyond 2030.

 

Dear colleagues, you have appointed me to be chair of the ways and means committee and trusted this representation to study the matter and make recommendations. I humbly ask that you review these proposals, keeping in mind that the greater majority will benefit from the lowering of the corporate income tax and that a rationalized incentives scheme that rewards investments that are result-based will lead to greater prosperity for our nation.

 

Thank you, Mr. President. 

Pia bats for ‘fair, efficient, accountable’ CITIRA

“A fair deal for all. The best deal for Filipinos.”

This was how Senate Ways and Means Chair Pia S. Cayetano described Senate Bill No. 1357, or the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) which she sponsored in plenary on Wednesday.

CITIRA seeks to reduce the corporate income tax (CIT) rate in the country, which is currently among the highest in the ASEAN region, and reform the fiscal incentives system to make it more fair, efficient, and accountable.

Under the bill, the country’s CIT rate will be gradually lowered by one percent every year, from 30 percent to 20 percent by 2030.

The measure will also rationalize fiscal incentives given to firms to make these “performance-based, time-bound, targeted, and transparent.”

The bill intends to prioritize incentives to business activities that generate domestic employment; promote research, development and innovation; promote agribusiness; and invest in areas that are less developed or are recovering from disasters and conflicts, among others.

CITIRA shall likewise offer additional tax deductions to reward corporations’ good behavior, such as local job creation, exports, and investment in high technology.

Meanwhile, the committee is also proposing to implement sunset provisions for firms currently enjoying fiscal incentives to help them transition to the new tax regime under CITIRA.

“After listening to the concerns and apprehensions of existing investor groups that will be affected by this bill, we came up with terms that address their request for a smoother transition period. This addresses our objective, which is to keep companies and investors here in the country while rationalizing the incentives that we give them,” the senator stressed in her speech.

Furthermore, the measure seeks to expand the functions of the Fiscal Incentives Review Board (FIRB), which presently grants incentives to government-owned or controlled corporations. If passed, CITIRA shall mandate the FIRB to approve all incentives, including those given to private companies, as recommended by the different Investment Promotion Agencies (IPAs).

“Currently, there are 13 different IPAs… that offer different menus of incentives to various industries, sometimes not in line with national priorities… There is no one simple set of incentives that the country may promote to potential investors,” Cayetano stressed.

Lastly, the measure allows the Philippine President to grant incentives for a longer period of up to 40 years for highly desirable projects, as long as they will primarily benefit the Filipino public.

“This is the urgency of our task ahead. Let us end the uncertainty (in the business community) by passing CITIRA” Cayetano said. #

Download Sen. Pia Cayetano’s presentation here: CITIRA sponsorship speech ppt

On the recent outlook upgrade for PH by Moody’s and Fitch Ratings

Statement of Senator Pia S. Cayetano
Chair, Committee on Ways and Means
February 18, 2020
The two top international credit rating agencies, first, Fitch Ratings, and now Moody’s have both given the Philippines an outlook upgrade. This signifies an upgrade from stable to positive.
This is good news because it sends a signal to the global business world that the Philippines is now a prime candidate for a credit ratings upgrade, which would mean lower borrowing costs from international creditors, both for the government and private sector investors.
The work I am currently doing on tax reforms in the Senate complements this.
Soon to be sponsored is Corporate Income Tax and Incentives Rationalization Act (CITIRA), which is made up of 2 parts: 1) gradually lowering corporate income tax from 30% to 20%; and 2) rationalizing fiscal incentives.
The  CITIRA committee report I will be sponsoring is a product of numerous hearings and consultations with government representatives and the business sector.  Knowing that we have reached out to all of them and have worked out very favorable terms for existing investors, the groups I have met expressed satisfaction and are now looking forward to the swift passage of the measure once it’s sponsored on the floor.

Pia welcomes multi-sectoral support for PIFITA

Senate Ways and Means Committee Chair Pia S. Cayetano welcomed wide support coming from different stakeholders for the immediate passage of the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA).

The panel on Wednesday (February 12) held its second hearing on ‘Package 4’ of the government’s Comprehensive Tax Reform Program (CTRP), which seeks to make passive income and financial intermediary taxes in the country “simpler, fairer, more efficient, and more regionally competitive.”

During the hearing, various stakeholders from government, business organizations, industry groups, and private companies expressed their support for the measure, with only a few concerns raised regarding specific provisions.

Manifesting general support for PIFITA were representatives from the Bangko Sentral ng Pilipinas (BSP), Bureau of Internal Revenue (BIR), Bureau of the Treasury (BTr), Capital Market Development Council (CMDC), Insurance Commission (IC), Association of Global Custodians (AGC), Philippine Insurers and Reinsurers Association (PIRA), and Philippine Stock Exchange (PSE), among others.

“I am very happy to hear that most [stakeholders] are supportive [of PIFITA], and there are just a few issues that need to be resolved,” Cayetano stressed in an interview on the sidelines of the hearing.

On the other hand, the senator noted that the concerns raised by various sectors would also be taken into account when the committee drafts its version of the bill.

Finance Undersecretary Karl Chua, for his part, said the administration remains open to endorse the amendment of certain provisions that are worrisome for industries.

“When you think of passive income, there are many other areas that are affected, like trust corporations, thrift banks, microfinancing, insurance corporations, non-life and life. The objective of the administration is to simplify it… So we have to hear everybody so that we are sure about the effect on all of these sectors,” Cayetano stressed.

“Ang objective talaga natin is to provide a market so that the Filipino citizens – hindi lang mayayaman kundi ang mahihirap – can invest their money and have access to these markets. Para hindi naman mauubos ng taxation ang kanilang mga iniipon,” she added.

The senator said the panel is planning to conduct at least two technical working groups (TWG) to discuss and address specific concerns on certain provisions of the measure.

“At this point, everything is open. I understand the [stakeholders’] concerns. They want a level playing field. We don’t want to create a situation where we are discouraging investments in certain sectors. So we take note of [those concerns and] we want to study them properly,” Cayetano said.

“We just have to [make] clear with everyone that we can try our best to address their concerns,” she further noted. #

The Senate Ways and Means Committee conducts its second public hearing on the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA).
Finance Undersecretary Karl Chua says the administration is open to studying and endorsing amendments to PIFITA from various stakeholders.
Representatives from government and the financial market sector were invited to state their position on the bill seeking to simplify the tax system covering passive income and financial intermediary investments and transactions.

After sin tax passage: Pia seeks comprehensive approach vs binge drinking, smoking

Following the landmark passage of the Sin Tax Reform Law last week, Senate Ways and Means Chairperson Pia S. Cayetano said she will push for a more comprehensive approach to continue protecting Filipinos’ health and well-being.

President Rodrigo Roa Duterte signed into law last January 22 Republic Act No. 11467, which imposes heavier tax rates on alcohol, heated tobacco products (HTPs), and vapor products.

“Part of the task is to get this law signed. We now have accomplished that. I thank all of the [health] advocates and everybody who spent so much time in helping us see this through,” Cayetano said during a press conference in Intramuros on Tuesday (January 28).

The senator in particular thanked her colleagues in Congress for supporting the provision under the law that mandates the Food and Drug Administration (FDA) to regulate e-cigarette products.

RA 11467 provides for the establishment of a framework for the regulation of HTPs & vapes by the FDA, including banning the sale to non-smokers and persons below 21 years old.

“One of the successful provisions that we have been able to include in this law is for the FDA to regulate these products. And I am very happy about that… We have now provided the legal mechanism for FDA to take the lead,” she stressed.

“The challenge is now with them. And I implore upon all the stakeholders, both on the side of the advocates and the industry, to support FDA to allow them to do their job,” she added.

Meanwhile, Cayetano said the campaign to protect Filipinos from the dangers of sin products should not stop with imposing higher taxes. Taxation, she noted, should be complemented by a comprehensive public health strategy.

“The journey is not over because the effectivity of the law is in its implementation,” she said.

The senator then expressed her commitment to work with her fellow legislators as well as with government agencies and advocacy groups to assess and strengthen the country’s smoking- and drinking-cessation programs.

“I would like to work with our Committee on Health in the Senate and our counterparts in the House to strengthen our existing regulations and, to the extent necessary, [implement] new laws for the protection of our youth against these harmful products – alcohol, HTPs, and vapes,” she stressed.

“I am also calling on the education and health departments, community officials, and parents, [to guard the youth against e-cigarette products]… It is supposed to be for those who want to shift from cigarettes to another product. It is not there to encourage the youth to take on a brand new vice,” the senator concluded. #

Sen Pia Cayetano on e-cigarettes: It is supposed to be for those who want to shift from cigarettes to another product. It is not there to encourage the youth to take on a brand new vice.
Signed into law last January 22, Republic Act No. 11467 imposes heavier tax rates on alcohol, heated tobacco products, and vapor products.

Pia: My work continues to tax e-cigarettes for public health

Transcript of interview with Senator Pia Cayetano on President Duterte’s directive to ‘ban’ e-cigarettes 

Question (Q): What happens to the sin tax bill following the order of the President to ban vapes?

 

Sen. Pia: The way I look at it is my work continues. Because our President has really just expressed – from my understanding – his disappointment and exasperation with the e-cig industry. And that’s why he made that statement na “i-ban na yan.”

 

Because actually, all this time, he was waiting for all of us to do our job. And my job is to use taxation as a tool to protect the citizens, and of course, there’s also a fundraising measure as far as DOF is concerned.

 

But we have to understand the background. The background is, DOH issued an Administrative Order regulating e-cigarettes. And they said it in my hearing, they said it in consultations na ayaw ng mga industry ang AO na yan. The industry players said that they were not happy with that AO.

 

In fairness, there were also some industry players who said that they are happy to be regulated. Meanwhile, some of these people went ahead and filed cases to prevent FDA and DOH to regulate them. And these courts issued a TRO. So ngayon, we have products that are clearly harmful to the public [that are not being regulated]. We can debate and we can discuss it longer. But there is no doubt. I don’t know anyone in the business who will say safe na safe ito. There are health hazards there. And they are unregulated. Eh ‘di nabwisit si Presidente, so ang basa ko sa kanya, “Ah ganun ha? Ayaw niyo magpa-regulate, i-ban ko na lang kayo.”

 

And that’s how I feel also. Ayaw niyo magpa-regulate? Eh ‘di lumabas na kayo sa bansang ito. We’re willing to, and that was the direction that I was going. Taxation to me is just a means, a tool to help make these products that are harmful less accessible to the vulnerable, especially the youth.

 

Pero, meron din akong draft bill to regulate vaping and ecigs, etc. na ready rin akong isalang at i-defend as soon as mapasa ko na itong taxation portion. Kasi nauna lang naman yun because meron lang talaga tayong hinahabol na timeline.

 

Q: How will the ban affect the revenue generation of DOF?

 

Sen. Pia: Well, it’s very small compared to the overall collection. That is because e-cigs is still not widespread. It’s a new product. Bago lang yan. Ako nga hindi ko alam na may ganyang product until like a year ago na nakita kong may ganun.

 

So it will not contribute greatly immediately. I remember, DOF had said at some point, kung walang mako-collect diyan, okay lang kasi DOF recognizes that health comes first.

 

But I also understand that the President has also clarified his statement and I just have to push through with my part of the job. My job is to pass the taxation measure whether or not there’s an EO that comes out, if something comes out tomorrow, whether it’s a total ban or regulating, I have to be ready. Because this taxation measure has to be of a more or less permanent nature.

 

Paano kung temporary lang ang ban, tapos walang taxation measure in place? So I have to have that in place. And just to clarify also, there is actually a taxation measure in place. This was the law that was already passed last June towards the end of the 17th Congress [Republic Act 11346]. So that will be the one that will come into effect in January if I don’t push through with this measure and there is no ban.

 

So I have to push through in anticipation. I cannot assume na mato-total ban yan. I have to still do my job.

 

Q: Legally speaking, is the EO powerful enough to stop the entry of vape products and use, etc.?

 

Sen. Pia: You have to recognize, first of all, like I mentioned, again let’s go back.

 

DOH issued an AO. DOH time and again, and FDA, has the power to protect the public from health risks. That is their inherent power. Kung lahat na lang ng risks, let’s say itong sa polio, aantayin nila ang legislature, mahirap yun. There are parts of the work of the Executive that require immediate action.

 

So, DOH cannot always be waiting for the legislature to pass something. It is inherent in the Constitution, Article II Section 15 says that it is the State’s duty to protect the people’s health.

 

So may powers and responsibility ang DOH diyan and that goes without saying ang DOH naman is just an arm of no less than the President. They are under the President, so the President will also act that way.

 

But, I am not going to debate right now what is covered by the legislative powers and the executive powers. For me, you look at it on a case-to-case basis. Right now, the regulations that are supposed to protect the people from the harmful effects of e-cigarettes, vapes, heated tobacco products, otherwise known as HTPs, has been TRO’ed.

 

Kung ako din ang Presidente, sasabihin ko sa kanila, “Ah ganun, ni-TRO niyo yung aking health arm? ‘Di sige, i-ban ko na lang kayo.”

 

Q: Just to be clear, the bill you will push is just to regulate e-cigarettes or to institutionalize banning?

 

Sen. Pia: Right now, on the floor is the taxation measure that you know. So as of now, as of the past few months, I was pursuing, I was going along the lines of the direction of the Executive, which is to highly regulate.

 

The President and even DOF Secretary, DOH, have been very clear that there are harmful effects of ecigs. And I myself went to WHO and have confirmed this. Everything I heard in the hearings were confirmed during my trips abroad that we are dealing with a harmful product. So it must be regulated. And as I said, taxation is a means to regulate it for health purposes.

 

Meanwhile, for the health side, there are bills – I looked at it, I am actually vice chair of the Committee on Health and as you all know, an advocate for health. There are pending bills but I intend to file a bill, which I believe is more comprehensive and is more reflective of the need to highly regulate a product that poses a health risk to the Filipinos.

 

Wala pa ang bill na yun. It’s in the drafting stage. And if you recall, I’ve been busy as the chair of the Committee on Ways and Means, but my interest is always health. So my trip to WHO has given me more knowledge.

 

Actually, during the budget, I was reviewing that bill on the side. I’d say it’s about 90% complete. I just really wanted a few more revisions. But I’ll be ready to file that anytime.

 

Q: The filing will come after the taxation measure passes?

 

Sen. Pia: Hindi naman. If may time naman ako to finalize that bill, I will file it. And that bill, as I said in answer to your question, is going along the direction of highly regulating.

 

Si Senator Tolentino, whom I worked very closely with – he was in WHO – is for a total ban. Kasi for me, it’s a thin line. Ang aming understanding of the health risk is exactly the same. It’s more of the appreciation of what would work better in our country, a total ban or highly regulating [these products]?

 

Part of me wants total ban. But the other part of me is okay with highly regulating. And this is where I want to share this conundrum that I face, because here you have industry players saying, “I-regulate niyo kami, mas gusto naming ma-regulate para ma-weed out natin ang mga fly-by-night diyan and those that might produce products that don’t comply with the safety standard.”

 

But meanwhile, ni-TRO naman nila ang pagre-regulate ng FDA and DOH. ‘Di ngayon, unregulated. Paano ba yun?

 

Q: Can you be more specific, ano ang ibig sabihin ng “to highly regulate”?

 

Sen. Pia: What I mean by saying ‘highly regulate’ is, it can be sold but there are many -not just guidelines, but there are many dos and don’ts. And those dos and don’ts, I will enumerate.

 

But offhand, you cannot sell to the youth and, in this case, I have expanded it to young people. Because ang brain, there is evidence that shows that the brain continues to develop until 25 years old. So at the age of 19, hindi ka na [minor], pero ang brain mo and decision-making skills mo are still very susceptible to persuasion, to advertisement and all that. So, that’s one way of regulating – that you ban the youth and even young people.

 

Advertising, you highly regulate that. You either totally ban or you only allow it in limited spaces. So that’s what I mean, maybe we can have a separate discussion on that. But I am giving you a glimpse of what I mean by highly regulate. And even the places where you will sell.

 

I’d love to give you this example. In the United Kingdom, where they actually allow e-cigs to be sold freely, the reason for that is because their cigarettes are highly regulated. You cannot enter a store and see cigarettes anywhere. So nag-drop na ang consumption ng youth nila.

 

So now, with the e-cig business, it appears that their youth is not vulnerable to it the way the youth in the US is. Because there are no cigarettes around. You can’t enter a store and find it. In fact, I wanted to make a point of buying, I kept forgetting because every time I enter a convenience store, you won’t see it.

 

So ang cigarette industry nila – I’m referring to cigarette industry – is highly regulated. And this allowed them to now look at what e-cigs can do for them. They are not allowing it na walang regulation, ha? Kasi for them, it is still a harmful product. Pero medyo liberal sila in allowing it as an alternative to cigarettes.

 

Q: So the direction towards eventually banning the selling of e-cigs in convenience stores will be part of the bill?

 

Sen. Pia: If you ask me, it should be included in the debates, because it’s a harmful products. And all across the world, connected pa rin kasi yan sa cigarettes. So, cigarettes in other parts of the world, very regulated na ang kanilang pagbebenta.

 

So si e-cigs, saan pumapasok diyan? Eh parang tayo, nafa-fast forward. Hindi pa nga natin totally nare-regulate ang cigarettes, nandito na si e-cigs.

 

So gusto ni e-cigs, “Huwag niyo naman kami masyadong i-regulate, ang cigarettes nga hindi niyo nire-regulate.” That’s not an excuse, eh ‘di i-regulate kayo pareho ng mas matindi. Dapat naman talaga ma-regulate silang pare-pareho.

 

Q: Does the order to ban e-cigs have an effect on the President’s directive to certify the sin tax bill as urgent?

 

Sen. Pia: No. I don’t believe so, because like I mentioned, the President is very vocal about his concerns, ang ideas niya, he will really just say it. So my understanding is, just like me, when he says, “I-ban na lang yan,” it’s because of the facts that he’s faced with. It’s because of the annoying reality that these people don’t want to be regulated and then there are courts that actually felt that the business interest of these vaping companies are more important than the welfare and health of the Filipinos.

 

It boggles my mind. At si Presidente din, takang taka kung bakit ganyan sila magdesisyon. ni-TRO nila ang Department of Health and FDA.

 

Q: Will the sin tax bill be approved before the year ends?

 

Sen. Pia: I hope so. I have been having more detailed discussions with my colleagues. And I have expressed the request of DOF that we expedite this. So napapag-usapan na yan. And I have requested na magkaroon ng caucus right after the budget and that we prioritize the debates. Kasi ready naman ako.

 

Q: Does the caucus have a schedule already?

 

Sen. Pia: Sinabi ko naman kay SP [Senate President Vicente Sottto III] na gusto ko sana mag-caucus right after. Syempre, ayaw ko naman makagulo dahil hilong hilo na kaming lahat sa long hours ng budget. But hopefully. Kasi period of amendments na lang naman kami. So kung masisingit ko yun during one afternoon, para ma-explain ko na and ma-discuss din itong effects ng ban, baka iba-iba din ang ideas nila.

 

Ako, I want to say that tuloy natin ito. Kasi it’s just a question of rates. I don’t think anyone is not for taxing these sin products, it’s just a question of rates. So I wanna just sit down and discuss with them, “Saan tayo ngayon?” kasi ako, I stand by the rates that I propose.

 

Thank you! #

To tax or ban e-cigarettes? Pia to wait for President’s EO banning e-cigs

Reaction to President Duterte’s directive to ban e-cigarettes
By Senator Pia S. Cayetano  
Chairperson, Senate Committee on Ways and Means
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Over the months,  I’ve read numerous studies and reports on e-cigarettes, conducted hearings, had discussions with health advocates, including experts in WHO, and listened  to the industry  and the speakers they arranged for me to meet. All of these led me to conclude that:

 

– We are dealing with products that clearly  have health risks despite industry and their supporters saying the risks are less than smoking and that they are an effective device to help smokers quit;

– These health risks are still being documented and studied;

– Some of these products have caused deaths and severe illnesses in various forms.

What this means is that we must really assess if this is a product that should be outright banned, as has been already done in some countries like Australia, Singapore, Brazil, etc., or strictly regulated, which was the direction I was taking as Chairperson of the Senate Ways and Means Committee.

Meanwhile, the President’s recent pronouncement to ban e-cigarettes is an assertion of the authority of the State to restrict the use of any consumer product that endangers public health. I agree that when the people’s health is at risk, public interest must always take precedence over any business or commercial interest.

As a backgrounder, it is important to note that the e-cigarette industry was previously given the opportunity to work and thresh out issues with the government. The Department of Health (DOH) issued Administrative Order (AO) 2019-0007 last August precisely to lay down regulations for e-cigarette products. Unfortunately,  members of the industry chose to question the AO in court instead of welcoming government regulation.

In the meantime, the very first case of electronic cigarette- or vaping-associated lung injury (EVALI) was reported in the country last weekend, involving a 16-year-old girl.

No issue can be resolved if members of the industry would insist on shunning any form of regulation by constantly suing the DOH and Food and Drugs Administration (FDA)! With this attitude,a  ban is really in order.

I await the EO from the President. Until then, these products that everyone, even those in the industry, recognize as harmful are in the market, and should be taxed. And it is still my job to see this bill through.#
Senate Ways & Means Chair Pia Cayetano holds a giant prescription with health experts during the Sin Tax Coalition’s press conference in the Senate. The coalition had called on other senators to pass the bill seeking to raise taxes on e-cigarettes & alcohol. (Photo: Senate PRIB)

Pia welcomes President’s certification of sin tax bill (SB 1074) as urgent

Senator Pia S. Cayetano today welcomed President Rodrigo Duterte’s certification of the Senate’s version of the sin tax bill as urgent.
“I have always known that the President and I are aligned when it comes to regulating cigarettes, e-cigarettes, and alcohol products. But this certification is much appreciated because it sends a message to all the members of the Senate that this is a priority measure,” the senator said.
Issued on Tuesday, November 12, the certification signed by President Rodrigo Duterte cited the urgent need to pass SB 1074 to generate additional revenue to support the implementation of the Universal Health Care (UHC) Act.
Cayetano is the sponsor of Senate Bill (SB) No. 1074, which seeks to increase excise taxes on alcohol and e-cigarettes, including heated tobacco products (HTPs) and vapes. The measure is currently in the period of interpellations.
Cayetano is hopeful that her fellow senators would likewise welcome the urgency of passing higher sin taxes to protect the right to health of Filipinos.
“A vote for sin tax is a vote for our people’s health and wellbeing,” she noted, while adding that she remains committed to respond to her colleagues’ concerns on SB 1074.
Certification of SB 1074 as urgent by President Rodrigo R. Duterte.
“I am pushing for a version that recommends higher tax rates than those approved by the House of Representatives for two reasons: first, it will provide proper funding for the delivery of health services to all Filipinos; and second, it will effectively reduce the consumption of sin products,” the senator said.
“There is a need to increase sin taxes substantially for it to have any health impact. Otherwise, we will fall short at meeting our health objectives,” she added.
“We cannot save lives by increasing the price of a sin product by a negligible amount. We can only make this an effective measure when the price increase is substantial enough that people would think twice on the volume of the products they will purchase and consume,” Cayetano concluded.
The Department of Finance (DOF) estimates that Cayetano’s proposed rates would generate P47.9 billion for UHC next year, and a total of P356.9 billion for the program over the next five years. #
Senate Ways and Means Committee Chair Pia S. Cayetano shows samples of alcopops to fellow senators during her sponsorship speech on Senate Bill No. 1074.

Pia: Higher sin taxes to make alcohol less accessible to the youth

One of the primary objectives of increasing sin taxes is to make alcoholic beverages less accessible to the country’s youth, Senator Pia S. Cayetano said on Tuesday (November 5).

The chairperson of the Senate Ways and Means Committee stressed this point at the resumption of plenary debates on Senate Bill No. 1074, which seeks to raise the excise taxes on alcoholic beverages and e-cigarettes, including heated tobacco products and vapes.

Responding to the interpellation of Senator Manny Pacquiao, a co-author of SB 1074, Cayetano noted, “What we want to achieve is [to significantly raise alcohol prices] so that these are not so accessible to the most vulnerable: the children and youth.”

“Hindi po tayo naniniwala na kailangan affordable ang alak sa ating mga kabataan. For example, sa isang bote ng gin, ang karagdagang presyo lang dito ay P2.00 per shot [under SB 1074]. Nasa P6.00 ang isang shot [based on the current price of gin],” she explained.

Cayetano also defended the tax rates proposed under SB 1074, which are notably higher than the rates approved by the House of Representatives and those recommended by the Department of Finance (DOF).

“What I have proposed is a rate that is higher than that passed in the House of Representatives. In fact, it is also higher than that initially showed to me by DOF. But both the DOF and DOH [Department of Health] now support my version,” she said.

The senator explained that, even with the P47.9 billion additional revenues that can be generated under her proposal, there would still be an P11.8 billion gap in the funding for government’s Universal Health Care (UHC) program.

Even if this gap is bridged, she said the UHC would only be able to deliver bare minimum services because of the program’s huge funding requirement. As such, she said any additional health revenue should be welcomed to grant Filipinos better access to basic and specialized health services.

“Kailangan lang natin bumisita sa isang healthcare center para maintindihan natin na malayo pa ang patutunguhan natin… Yung mga nakikita nating mga ospital na dilapidated, hindi pa lahat ora-orada magagawa,” Cayetano pointed out.

“Items like catastrophic illnesses, including cancer, hindi pa po covered ng mga packages natin sa UHC. In fairness to DOH and PhilHealth, every year they are increasing and improving their packages. But that is the nature of the problems they face because of the lack of funding… And because we are a country with more than 7,000 islands, it’s going to be very difficult to readily provide the kind of health care we dream of,” she added.

Meanwhile, Cayetano clarified that taxation alone cannot address the country’s problems on alcoholism and cigarette addiction, stressing that it is just part of a more comprehensive plan to protect Filipinos’ health and wellbeing.

“Taxation is not meant to be used as a lone preventive tool, but should be [implemented] along with other measures including education campaigns and advocacies,” she said. #

Cayetano: Even with P47.9 billion additional revenues from SB 1074, there would still be an P11.8 billion gap in the funding for government’s Universal Health Care program.