“We congratulate our partners at the Bicameral Conference Committee under the steadfast leadership of the House and Senate Ways and Means Chairpersons Rep. Isidro Ungab and Senator Franklin Drilon for passing the excise tax reform bill on tobacco and alcohol, a measure certified urgent by President Aquino. We thank as well our civil society partners that have fought for this bill unwaveringly for sixteen years. I would also like to recognize the solid work of our team from the Department of Finance and the Bureau of Internal Revenue, led by Commissioner Kim Henares and Undersecretary Jun Paul, without which this success would not have been possible.

“The passage of the excise tax reform on tobacco and alcohol marks a historic victory for health and revenue reform in the Philippines for five main reasons.

“First, the measure achieves all essential reforms by correcting inequities in tax structure that have plagued the system for decades. These inequities have made sin products cheaper than they should be, to the detriment of public health objectives.

The version that was passed removes the price classification freeze that has pegged tobacco products to 1996 prices as the basis for their tax classification

This version removes annexes that have unfairly favored brands introduced at an earlier date;

This version provides for a unitary tax regime by 2017 for tobacco and fermented liquor, a shift from the current multi-tiered system that has allowed smokers to downshift to lower-priced products.

This version indexes the tax rates of tobacco and alcohol by 4% every year so that these products do not become more affordable over time, consequently exposing the poor and the young to the harmful effects of smoking and excessive drinking;

“Second, the excise tax incidence for tobacco products jump from a measly 29% in 2012 to a respectable 63% by 2017, close to the international standard recommended by the World Health Organization and the World Bank that tobacco products be taxed excise at two-thirds their net retail price.

“Third, this version will allow a collection of P33.96 billion in incremental revenues from tobacco and alcohol for the next year and P184.31 billion over the next four years, adequately covering the financing requirements outlined by the Department of Health for the Aquino administration’s Universal Health Care program.

“Fourth, the excise regime for distilled spirits will be compliant with World Trade Organization standards by adopting a mixed system of P20 NRP per proof liter specific tax + 15% NRP per proof ad valorem in 2013 and 20% NRP per proof in 2015, and having removed raw materials from the current basis of tax classification.

“Fifth and most importantly, this demonstrates the commitment and the ability of the Aquino administration to deliver difficult and significant reform. President Aquino’s agenda for good governance has succeeded in working with industry vested interests for the benefit of the country. With President Aquino’s leadership, we have been able to bring to closure this 16-year struggle for a better excise tax regime on tobacco and alcohol.