Breasted interestBy Conrado Banal
Philippine Daily Inquirer
“Not the interest of anyone!”
Those were the words of Senate President Juan Ponce Enrile, the 88-year-old JPE, commenting on the attacks in media against the Senate version of the “sin” tax bill—the attacks from the Aquino (Part II) administration and supporters of the bill.
Those JPE words were indeed loaded. In effect, he was saying that the Senate was looking out for public interest—not the interest of anyone.
Remember that the “sin” tax was the target of new legislation at the start of every new Congress in the past—without a single exception. And every time Congress would want to touch the “sin” tax, the measure drew intense lobbying from both “pro” and “anti” groups in tobacco and alcohol sectors.
Perhaps JPE only referred to the lobbying. No, the Senate did not succumb to lobby groups. Well, this was the breast-beating insinuation in the attacks against the Senate version. You know—some vested interests in the Senate version!
Anyway, the Department of Finance wants to rush the “sin” tax bill in Congress, pushing for the administration version that would puff up the excise tax on cheap local brand cigarettes by about a thousand percent.
The DOF also claims that, all told, its version should raise for the government some P60 billion more in yearly revenues, including the additional income from the increase in the taxes on alcohol products— i.e., beer and liquor.
Now, the P60-billion figure is just the DOF projection and, in fact, this projection is the main point of disagreement in the uproar over the administration-backed revenue bill.
Also, it is interesting that the DOF version breezed through the House, while it went through intense scrutiny in the Senate. JPE was also saying something about the Senate not being a “rubber stamp.” I am sure he was not referring to the House.
Anyway, as prepared by the ways and means committee chaired by Sen. Ralph Recto, the Senate version reportedly would yield a revenue increase of only P20 billion—or about P14 billion from tobacco, which is more than three times the increase for beer at some P4 billion, and seven times the increase for liquor at P2 billion.
As it is, therefore, the Senate version also invites criticism from the tobacco sector, mainly because of what they call the disproportionate increase in tax burden between tobacco and alcohol products.
For example, when Sen. Franklin Drilon was the Senate president a few years ago, Congress also amended the “sin” tax law, resulting in the tax-take increase of P2.2 billion a year from tobacco, which was slightly higher the P1.8 billion from beer and P800 million from liquor.
And so the tobacco sector—including groups of tobacco farmers, who also attended the Senate hearings on the DOF-backed bill, which they said would kill their livelihood-—has been pointing out that the DOF version was also kind to the alcohol sector while punitive to tobacco.
In a way, the Aquino (Part II) administration does not want to touch beer and liquor. Hmmm. Yet for this, we hardly get an explanation from the Palace boys.
At one time during the Senate hearings, anyway, JPE asked the DOF people if they knew a man named “Bocalan.” They did not. JPE said that “Bocalan” was the biggest cigarette smuggler in the country decades ago, which was the result of too high taxes at that time.
But the groups pushing for the DOF version are, in effect, saying that the smuggling issue, which was feared to result from the thousand-percent increase in tax, is only the handiwork of—fanfare, please—the “tobacco lobby.”
Recently, the DOF nevertheless sponsored a conference on taxation, attended by various government representatives in Asia, featuring as speaker the president of ITIC, the US-based International Tax and Investment Center, a man named Daniel Witt.
In effect, Witt said that high taxes on fast-moving goods like cigarettes, which the DOF wanted, would definitely give rise to illicit trade. In short, smuggling galore! It is hard to say if the US-based ITIC is part of the evil tobacco lobby here.
Anyway, the rise of smuggling is what the Senate version sees in the DOF version. It is the reason why the version opts for a gradual increase in the cigarette tax.
But what is intriguing is that, while the administration people (plus, of course, their supporters) are quick to point at the evil tobacco lobby as the force behind the “anti” sin tax, they are all quiet on the “pro” lobby coming from a foreign cigarette company.
That is none other than the BAT, the British American Tobacco, maker of imported cigarettes like “Lucky Strike” and “Camel,” whose executive called “James,” in fact, even attended Senate hearings, calling for the thousand percent increase in tax on cheap local brands.
Perhaps JPE, in the words “not the interest of anyone,” was also referring to the pro DOF version lobby from BAT. The foreign group has been calling for the drastic changes in the “sin tax” law even during the time of the cute administration of Gloriaetta. Surely the company has interests in the sin tax version of this administration.
It is hard to say, of course, whether or not the DOF version got its inspiration from the BAT lobby. Still, nobody in the administration is mentioning the BAT lobby in some breast-pounding admonition of the evil tobacco lobby.
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As the hot P800-million IPO of Coal Asia (coal mining company with huge claims in Mindanao) ends today (Monday), the stock market surely awaits the eventual listing of the issue at the Philippine Stock Exchange on October 23.
For one, Coal Asia priced the IPO at par value of P1 per share, meaning, the buyers get their shares at the same price as the original incorporators of the company, which is never done in the domestic securities scene.
Anyway, word goes around that Coal Asia has been talking to the biggest power generating plants that use coal, including the Global Business Corp. (Metrobank group), Aboitiz Power, Meralco, Team Energy, Alcantara Group, FDC Utilities, DMCI Holdings, Ayala and San Miguel.
Moreover, talks also started between the company and the cement industry, i.e., multinational firms Holcim, Cemex and Lafarge, not to mention its existing off-take contracts in foreign markets, such as buyers in India, Japan, Taiwan, Hong Kong and Vietnam.
They are already projecting Coal Asia to become the second-biggest producer of coal in the Philippines.
Its subsidiary Titan Mining Energy Corp. (TMEC) holds three coal claims in Davao Oriental and Zamboanga, covering some 13,000 hectares, with coal reserves estimated at 120 million metric tons, or the second-largest proven reserves here.
Based on its market presentation, the company puts the heating value of its coal at more than 10,000 BTUs per pound, which is much higher than the coal mined by the country’s leading producer today.
Thus, the Coal Asia IPO will help fund TMEC’s coal mine claims that are scheduled to start commercial production by 2014 and 2015.
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