This publication was produced by the Galing Pook Foundation and the Friedrich Ebert Stiftung Foundation

Transcription

1 This publication was produced by the Galing Pook Foundation and the Friedrich Ebert Stiftung Foundation

2 FORUM ON SIN TAX AND THE NATIONAL MINING POLICY EXECUTIVE SUMMARY A one day forum was held to discuss current and important issues, specifically the proposed Sin Tax Reform Bill and the (Emerging Philippine) National Mining Policy. The forum, made possible by the support of the Friedrich Ebert Stiftung (FES), served as a value adding activity to the organizational meeting of the 2012 Galing Pook Awards National Screening Committee where members of the Galing Pook General Assembly were among the participants. It was held last at the Astoria Plaza Hotel in Ortigas Center in Pasig City. There were 58 participants including two house representatives and at least six former cabinet members and undersecretaries coming from the academe, government agencies, nongovernment organizations and other concerned sectors that attended the forum. Presentations were made and discussions were conducted as different and divergent views on the topics were passionately argued and defended. Representative Joseph Emilio Abaya of the First District of Cavite, presented the sin tax measures contained in the Sin Tax Reform Bill largely drawn from the one he originally authored. He emphasized the benefits of the proposed law, including greater revenues for the government, simpler tax administration, and better provision for public health facilities. More importantly, he added, the consequent higher prices will discourage the use of sin products. Most of the panel reactors, including Dr. Milwida Guevara, Dr. Jaime Galvez Tan and Ms. Jo Ann Latuja, voiced their support for the new measures, though Dr. Galvez Tan expressed misgivings over the final House Sin Tax Reform Bill that he said was watered down from the original version that he prefers. However, Ms. Mary Jane Ortega, the former mayor of tobacco producing San Fernando, La Union, bewailed the inequitable treatment of local and foreign tobacco products and the lack of alternative livelihood program for affected tobacco farmers. Ms. Latuja countered that taxes must be the same, as sin products bring an even measure of harm, whether locally made or foreignproduced. Dr. Galvez Tan also extolled the benefits of growing as an alternative high value crops like malunggay and saluyot. Professor Edna Co, the Dean of the University of the Philippines National College of Public Administration and Governance, observed that while the proposed measure has taxation as its main feature, the matter is actually one of public administration as it crosses over to other concerns. Thus, this should be dealt with strategically in order to properly address the relevant health, agriculture and human resource issues. i

3 Dean Antonio La Viña of the Ateneo School of Government then presented the emerging national mining policy under the Aquino administration. He said the new policy would be evidence based and grounded on national consensus with the interests of the different stakeholders balanced out. It would also hinge on the primacy of national laws over local ordinances. The Mining Industry Development and Sustainability (MIDAS) council will also be created. Mineral reserves will be established, and small scale mining will be strictly regulated. Panel reactors were Dr. Cielito Habito, South Cotabato Rep. Daisy Avance Fuentes and Sec. Victor Ramos. Dr. Habito added that, while mining is a key driver for high economic growth, the benefits derived from it have to be more inclusive. He also expressed concern over contradicting laws not only on the national and local issuances, but also with the Mining Act, the Indigenous People s Rights Act and the law on the National Integrated Protected Areas. Rep. Fuentes explained the necessity of the passing of a local ordinance in South Cotabato that banned open pit mining as a means to get the national government to respect their views and address their concerns. She expressed alarm over the harmful effects of mining on the local community. Sec. Victor Ramos stated that the problems are also in transparency and governance. He urged a solution to the problem brought about by small scale mining. Professor Co then emphasized the importance of having a coherent policy in mining. Inclusive growth, backward and forward economic linkages, transparent information and other issues related to governance have to be addressed. Rational land use must also be satisfactorily tackled. Capacity building for evidence based studies should be prioritized and steered away from political maneuverings. After the forum synthesis by Professor Co, forum evaluation forms were submitted by each participant as a rating for the entire activity. The participants generally commended the overall quality of the forum and the knowledge of the resource speakers and panel of reactors. The forum s original program was slightly revised due to schedule adjustments. Former DENR Secretary Victor Ramos took over as panel reactor for the mining issue in lieu of Sec. Elisea Gozun and Ms. Margarita Gomez. Presentations are attached as annexes, and evaluation results are at the end of the narrative report in this documentation. ii

4 CONTENTS Executive Summary... i Contents... iii Annexes... iii Forum Concept... iv Objectives... iv Welcome Remarks... 1 Message... 1 Program Overview... 3 Input 1 The Sin Tax Reform... 4 Panel Reaction... 5 Input 2 The National Mining Policy Panel Reaction Evaluation Program Photo Gallery ANNEXES 1. Sin Tax Reform Bill Rep. Joseph Emilio Abaya 2. The National Mining Policy Dean Antonio La Viña 3. Issues in Mining Dr. Cielito Habito iii

5 FORUM CONCEPT Galing Pook Foundation promotes innovative and excellent local governance programs that successfully addressed urgent social and economic problems. Since 1993, more than 250 exemplary development initiatives from local governments throughout the country were conferred the distinction of Galing Pook. These awarded initiatives serve as models of good governance and are being promoted for adoption to other communities that the latter may avail of a wealth of useful insights, strategies and innovative solutions to address common problems. GPF and its partners to the strategic endeavor of making good governance happen in more communities in the country believe that there are still a number of worthy initiatives and programs that need to be brought out, documented and promoted. The GP Forum and organization of the National Selection Committee is second to series of steps/activities undertaken in the selection of GP initiatives. The GP Forum will discuss pressing national issues like the Sin Tax Reform and, which have impact in local governance. The forum is a value adding activity as well to the annual convening of the Galing Pook general assembly and the 2012 GP Awards National Screening Committee. The latter are mostly coming from the GP general assembly pool of experts tasked to review, assess, validate, subject to a panel interview and select winners from the entries to the 2012 GP Awards. The workshop aims: OBJECTIVES to provide a venue for the presentation and discussions of current pressing issues such as the Sin Tax and as a value adding activity prior to the organization of the 2012 Galing Pook Awards National Screening Committee, to organize the 2012 Galing Pook Awards National Screening Committee, and for the NSC to come to an agreement on the selection criteria, processes, guidelines and structure, as well as the tasks and responsibilities of each NSC member. iv

6 Started at 8:40 am with an invocation and the national anthem, with Professor Edna Co of the University of the Philippines College of Public Administration facilitating the forum. WELCOME REMARKS Ms. Ma. Nieves Confesor Chairperson Galing Pook Foundation The forum will focus on two issues that may serve us or divide us. The first issue will be on sin tax, with GPF wishing to concentrate on both the effects of the sin products on the youth and on the issue of taxation on such products. The second issue will be on the mining policy. It s a very hard debate, with an executive order promised months ago still to be released. GPF wishes to move this issue to the forefront. MESSAGE Ms. Anne Helene Vasudevan Program Coordinator, Friedrich Ebert Stiftung Opening remarks delivered by Ms. Anne Helene Vasudevan, who represented Mr. Berthold Leimbach of Friedrich Ebert Stiftung. We are faced today with 2 pressing national issues which are of immediate concerns shaping the country today and its next generations. 2 out of 5 youngsters, years old, or 38.2% or 2.25 million, according to the National Youth Commission (NYC) study, are smokers. An increasing pattern is seen as 27.3% was recorded in 2007, and 19.6% in NYC points out that the imposition of smoking ban on minors is not strictly being implemented on the one hand, and the accessibility and affordability of cigarettes, which can cost as less as candy, on the other, are contributing to this trend. 1

7 While the principles behind sin tax have long been introduced in the Philippines, the manner by which it is being carried out seems to defy the principles. Sin products are still very cheap and inviting, while the government has been losing yearly in real revenue yield since 1997, resulting to a drop of share in GDP from 1.2% to 0.6%, which is lowest in South East Asian region, according to a report from the World Bank. Reforming the Sin tax, as advocates say, has long been in order. Given the political landscape in the House of Representatives, sin tax reform advocates faced dim chances. To the surprise of everyone, advocates had a breath of fresh air after the long languishing proposed reform has been passed at the committee level with an overwhelming vote of 46 for and 14 against. But as we know, the battle is far from over. On another front, and as controversial as the brawl in NAIA, the review of the existing and leading to a new mining policy of the Aquino government had been a front page headline in major dailies and primetime news a couple of months back. There are calls for the review of existing mining permits, introduction of new mining taxes, and to some extent moratorium on mining, until responsible mining practices can be observed. These proposals the Joint Foreign Chambers found highly disturbing. The debate about mining and mining policy comes around the time of Climate Change Adaptation and Disaster Risk Reduction, and is framed by the recent typhoon in Mindanao resulting to flashfloods, and loss of properties and lives. Another overarching frame is of course development, where the business sector is looking at mining as a potential big growth sector for Philippine economy. Climate change adaptation, disaster risk reduction, and development are not necessarily of divergent directions. Towards these, there are renewed talks, internationally and nationally, on climate change and energy policy with the frame of greening the economy, as a means of sustainable development. This is another story and for another forum, but we should always keep these at the back of our mind. 2

8 We need to talk about workers, local people and communities that are the biggest stakeholders but are often neglected or forgotten. The people in the mining communities are usually the ones left out in the development and left with the pollution and environmental destruction in their backyards. The national government, where policies are formulated, hopefully in consultation with different stakeholders, and the local government units, the front, back and center of interaction with people, where the action and drama take place, are also major stakeholders that should come in sync. In this twin forum, we hope to add to our preparedness in waging the battle for sin tax reforms, from the principles behind it, down to the dirtiest detail that we should look out for. We will also have an update on the development, current status and a more sober look at the proposed mining policy, having heard and considered views from different stakeholders. It is our hope in Friedrich Ebert Stiftung that you would take this opportunity to ponder, hard and deep, on the two pressing national issues, on both the social and economic development aspects. We hope this will help in bridging and strengthening the national and local coordination on these concerns. Friedrich Ebert Stiftung is proud to provide the humble means by which a gathering like this can occur, and we look forward to the exchange of ideas, the debates, and unities that will arise from this forum. PROGRAM OVERVIEW Dr. Eddie Dorotan Executive Director Galing Pook Foundation This forum should serve as a conversation between stakeholders regardless of views. GPF always strives to stage forums that concentrate on relevant and hot issues of the day. For this year, the issues are sin tax and mining. Presentations will be provided by very competent resource persons and reactions delivered by a panel of experts on the fields that are going to be tackled. 3

9 INPUT 1 THE SIN TAX Hon. Joseph Emilio Abaya Representative First District of Cavite See annex 1. Taxes are the lifeblood of the government. The primary objective of the sin tax bill is to raise revenues for a universal health program. A simpler tax system will also allow for a more conducive business environment. Key points of the simplified excise tax system include the removal of the freeze on price classification, the indexation of tax rates to inflation, the protection of the youth from the dangers of smoking, and support for tobacco farmers. Fifteen percent of the tax revenues will be plowed back to tobacco producing areas. Current law is difficult to administer, with much discretion given to tax assessors because of a fourtier system. The reformed system simplifies this into two. Disincentive for new players to come into the market has also been removed with the removal of the seemingly benign price freeze that benefits old players whose price is pegged to the 1996 level. The merger of Philip Morris and Fortune Tobacco has also dampened tobacco prices. Prior to its merger, tobacco price was at 95 pesos; this fell to 78 pesos after the merger as the new company controls more than 90% of the market. Thus, the need for new players to come in, as this will enable competition and allow farmers to command a better price for their tobacco products. 4

10 Greater revenues, simpler tax administration, and better provision for public health facilities are just some of the benefits of the reformed sin tax law. While it may result into higher prices for cigarettes, this may not necessarily be a bad thing. Government should also be on the lookout for possible increased smuggling activities as a result of the higher prices, though it must be noted that prices of cigarettes produced in the country is still lower than that of neighboring countries. Counterfeiting is a possible problem, though this is really a governance issue more than anything else and not really a function of the sin tax law. The new system will also be using the same classification for both local and imported products. The old system was not compliant to World Trade Organization standards, as the basis was raw materials. Foreign brands complained it was discriminatory and biased in favor of local manufacturers. The scenario is the same for liquor products. Nothing is fixed yet, as the Senate has yet to pass its version of the bill. The only matter up for discussion however is the tier system. The House of Representatives plans to stand strong on the rest of the issues. PANEL REACTION Ms. Mary Jane Ortega Former Mayor San Fernando, La Union Taking the view of the minority, tobacco has been the lifeline of the farmers in the north. Other crops have been tried, but none has grown in the same way as tobacco. While there is no disagreement on the need to increase the prices of sin products to discourage its use, the inequitable taxation between local and foreign brands was deplored. Local and foreign manufacturers must be differentiated; otherwise, we are just putting a burden on the shoulders of the local farmers. 5

11 Discouraging its use should not be a simple matter of pricing, but rather, of education. Using it should be done on moderation and should be a matter of choice. Dr. Milwida Guevara President and Chief Executive Officer Synergeia Foundation Sin products are harmful commodities, so prices of these should be made prohibitive to discourage its use. Unitary system must also be adopted, as these products can kill regardless of quality. It has been muddled however as the sin product companies have made it an issue about nationalism, anti smuggling, farmer s rights, etc. Those championing the new sin tax law should be steadfast, as there will still be a lot of battles ahead. Ms. Jo Ann Latuja Senior Economist Action for Economic Reforms Local and foreign brands should be taxed equally because their harm is equal regardless of price. It is also not just a matter of education; the environment should be conducive for less consumption, which can be done through increased prices. The AER is pushing for the sin tax law because of the many benefits it brings. Among them are: It s a win for the poor, as reduced consumption will allow them more savings. 6

12 It s a win for the youth, which is another price sensitive sector. Those not smoking will be prevented from being addicted. It s a win for health, as this will raise additional revenues for the universal health program. It s a win for the economy, because of increased fiscal health and better credit ratings. It s a win for the tobacco farmers. The effect will not be drastic as people will still smoke. The bill meanwhile provides a safety net for them. It s a win for the politicians, as they will have more resources. It s a win for the future, as the next generations will be in better health and will have a better health infrastructure. Dr. Jaime Galvez Tan President Health Futures Foundation The original bill was really commendable, although it has been toned down as a compromise to other sectors. The original bill proposes only one tier. The original was also supposed to generate 60 billion, while the revised one would only get 33 billion. A survey of young people shows that they will only stop buying if the cost is more than 5 pesos per stick. The new sin tax law falls short of this price. The price is so low that it really pales in comparison with the prices of our neighboring countries. Price should not only be indexed to inflation and stuck to 8%, it should also be indexed against smoking prevalence. The biggest deterrent in any country to sin products use is the price of the cigarette. An 8% index will just be wiped out once the country s economy grows. The sin tax bill is very much welcomed, but it still is not enough. 7

13 Question: Open Forum Rep. Daisy Avance Fuentes (South Cotabato, Second District): What livelihood alternative is given to tobacco farmers, as providing a safety net in the form of health insurance benefits is not an answer? Replies: Rep. Abaya: Fifteen percent of the revenues will be allocated to the tobacco producing provinces. The money will be allocated for programs and training for farmers to shift to other crops. Support will also be given during the transition period. The Department of Agriculture (DA) must also be tapped so that they can provide ideas and options. Dr. Galvez Tan: There has been no real serious scientific study on what alternative crops can be planted. The DA should conduct a study on this. Malunggay and saluyot grow very well in the Ilocos region and is used heavily in Japan. Perhaps, the region can start with these plants. The market is already there, but no program has been introduced to support its use. Ms. Ortega: Support is badly needed that will replicate the tobacco business. Tobacco farmers get an advance from tobacco companies, thus, making it very easy for them. If malunggay and saluyot planting can get the same kind of financing, then this kind of livelihood alternative is the safety net that tobacco farmers would definitely need and appreciate. Dr. Cielito Habito: Seventy percent of our commodity budget goes to rice, and yet, we still end up importing more of this product. There should be more support for other high value crops like saluyot and malunggay. It is high time that this be looked at as an agricultural reform bill, and not just as a sin tax bill. Ms. Pilar Habito: Social entrepreneurship bill must be pushed to encourage the youth to innovate. This should be incorporated into the sin tax bill. Question: Atty. Caloy Caliwara, Liga ng mga Barangay: Should Congress legislate the use of tobacco and liquor? Will quality degrade as a result of the possible enactment of the law? 8

14 Reply: Open Forum Rep. Abaya: Congress cannot legislate its use, as people s choice must be respected. Quality will not degrade as market forces influence manufacturers. Question: Mr. Kevin See, LMP: Are there clear rules on how to spend the increased revenues? Replies: Rep. Abaya: The law does not specify how the revenues will be chopped up. What is clear are the funding for universal health care, the funding for health facilities, and the 15% allocation to tobacco producing countries. Excise taxes will not fund the whole health care program, as this will only serve a fraction of the need. Ms. Latuja: Universal health care program is the whole health sector, and not just Philhealth. Health promotion should be included. 9

15 Ms. Edna Co summarized the session on sin tax. Synthesis Smoking was heavily discussed, though alcohol is part of the bill. Panelists raised different and diverse views. The need to discourage smoking and drinking was emphasized by many, though concern was raised on the alternative livelihood to be given to tobacco farmers. Youth should be engaged by making them take active and lead roles in society. High value crops, like malunggay and saluyot, should be encouraged as an alternative. There must be involvement of other related agencies, particularly the DA, and they must take an active role in conducting a scientific study that would benefit the tobacco farmers. It is a public administration issue, and while the bill is about raising revenues, the issue crosses over to other concerns. Taxation is a short term purpose, but we have to address the concerns more strategically, as this is also a health, agriculture and human resource concern. 10

16 INPUT 2 THE NATIONAL MINING POLICY Dean Antonio La Viña Ateneo School of Government See annex 2. No matter how good a mining company is, there are always risks involved. And the one bearing the greatest risk is the community. So who has the right to decide on the mining issues? Local governments have a lot of power, with the Tampakan issue as a case in point. The problem with this is that the ban is based on a scientific decision citing the effects of openpit mining. The local government s expertise on the matter, however, is less than that of the national government. Their argument would have been stronger had the decision been based on the risks involved. As an alternative, decisions can also be done using a hierarchy where everyone has a role, but with the national government having the primacy in the final decision. The new national mining policy must be evidence based and grounded on national consensus and a balancing of interests of the different stakeholders. Economically, there should be appropriate valuation, transparent and fair sharing of revenues, and compensation and liability obligations. Future problems brought about by climate change must be taken into consideration. For the Tampakan project, though they have a thousand year disaster plan, this is based on weather patterns of the past thousand years. Contingencies must be put into place to take into account extreme weather changes because of climate change. Environmentally, best practices and environmental law enforcement must be done. Mining should be based on a precautionary principle. Certain areas are also disallowed, like areas in Palawan and small islands and those with resources at a critical level. The forthcoming EO will highlight the primacy of national laws over local ordinances and the creation of the Mining Industry Development and Sustainability (MIDAS) Council. Mineral reserves will be established, and small scale mining will be dealt with. 11

17 PANEL REACTION Dr. Cielito Habito Ateneo Center for Economic Research and Development See annex 3. Mining can be a key driver for high economic growth, but more needs to be done to make it more inclusive. There should be a lot of job generation, but it currently accounts for only 13% as against other industries 20%. Benefits mainly accrue back to the investors. Linkages are also weak. The rest of the economy does not benefit from the mining industry s output. There should be more domestic value adding in the form of downlink industries. The share of the state in the value of minerals is also very low. Clashing laws have complicated the quest for responsible mining in the country. The local government code sometimes goes against the Mining Act and the IP Rights Act. There are also conflicts between the Mining Act and the National Integrated Protected Areas law. Accountability and transparency must also be pronounced with regards mining royalties. The NCIP should provide the rules on who are accountable for the royalties. There is wide scope for strengthening the scientific basis of the costs and benefits. Benefits and negative impact should be accounted for and assessed properly. Risks should be assessed, as well as the level of risk that is acceptable. Benefits of the mining industry must be shared more widely. Indonesia, as an example, gets more from its mining industry compared to the Philippines. 12

18 Hon. Daisy Avance Fuentes Representative Second District of South Cotabato The Supreme Court may overturn the local ordinance passed by South Cotabato. However, the ordinance was still pushed. The national government should respect the view of the local community. If problems arise in the end, it is the local officials who will face the brunt of the ire of the community. Mining companies also have the tendency of corrupting local officials, as they tend to deal with community leaders instead of the institution itself. SMI has been in the province for 23 years, but their contribution to the local government s tax revenue is zero. There have also been problems in dealing with national agencies, like the MGB and the DOE. While relationship with local MGB officials are good, the latter are afraid to speak up as it may run counter with the official line of the agency. In the Tampakan mining area, there is a river which is the source for downstream irrigation. This concern has yet to be addressed by the national government. Sec. Vic Ramos Former DENR Secretary The big problem is governance. Monitoring is also a concern as small scale miners do 2/3 of mining. There is also a lack of transparency, as it was noted that supposedly protected areas have been opened for mining permits. Lack of coordination is also a problem. Excise taxes are being charged on one hand, but incentives are being given out on the other. There should be more fluency in mining investment policies. 13

19 On Tampakan, the case of the local government would have been stronger if the basis of the ordinance is land use. Science, and not politics, should be used as the bottom line when giving out permits. There should also be transparency in the process. Question: Open Forum Mr. Erwin Quinones, National Poverty Commission: Shouldn t there be a national industrialization plan to resolve the issues on mining? It will answer what minerals are strategic for genuine industrialization. All mining stakeholders must work within the bounds of the plan. Replies: Dean La Viña: The MIDAS council has been proposed to precisely address these issues. It will also take into consideration the downstream industries that can be created as a result of mining. With regards to Tampakan, the only remaining question is how they will deal with climate change. The science is not yet there to predict that, so it remains a big question mark. Evidence based policy making is not done extensively in this country and must be developed, as this will be the basis of our mining policy. We have to invest in this capacity, especially given the fact that mining has been identified as a key industry. However, waiting for these capacities to be built up will take a long time and will not be good for the bottom lines of mining companies. The mining industry proposes that capacities be built per site. Dean Lavina opines that moratorium should stay until we become fully capable. Ms. Ortega: La Union has opposed magnetite mining because concerns and issues could not be addressed properly. They agreed to a cement factory however as Holcim has proven that they are a responsible company. Dean La Viña: Tampakan can add 1% to the GDP, but only for a period of 12 years. The problem is what will happen after that. The DENR, up to now, has failed to provide maps that will show no go areas. Off hand, more than 90% of the country is probably no go. 14

20 Question: Open Forum Dr. Dorotan: Is geothermal exploration part of mining? Reply: Dean La Viña: Geothermal exploration is an energy question, not mining. Exploration is allowed, even in mining; what is disallowed is development. Geothermal development is not bad, per se, as most of the problems associated with it before have now been addressed and solved. Besides, the country needs to get as much renewable energy as possible. Question: City Environment Officer, Pasig: How do you encourage vigilance in the communities? How do you protect advocates? Reply: Rep. Avance Fuentes: It will help if the local government has a support system. Those responsible should also be prosecuted no matter how long it takes. But indeed, anti mining advocacy carries a risk. Dean Edna Co summarized the session on mining. Synthesis Policies in mining should be coherent. Governance related issues must also be tackled, especially inclusive growth, cascaded industries that will help other sectors grow, and transparent information with regards to royalties. Rational land use must be considered and satisfactorily addressed in the mining policy. Role of local government should be articulated some more as they are the ultimate responsible agency for the communities to be affected by mining. Corruption is an issue, as companies tend to deal with personalities instead of institutions. Mining has become a political issue. It is time to move it away from politics, and towards capacity building for evidence based studies. The national government s stand on the mining issue is still unclear, but challenges must be made to the DENR for them to identify what areas are really suitable for mining. 15

21 It is pathetic how our efforts on sin taxes and mining pale when compared to our neighboring countries. Studies should be conducted not only on a micro level with an inward focus, but rather, with a broader view relative to other countries. Beyond governance, regulations must be enacted to allow us to check where we stand and what we want to become. The sin tax bill and the proposed mining policy are steps toward this. Lunch at 12:20 pm. EVALUATION The workshop garnered grades in between 4.0 to 4.68 (with 5 being the highest and 1 the lowest). Participants rated highly the overall quality of the forum, as well as the knowledge of the speakers and reactors. The availability of materials seemed to be an issue however, as participants gave a relatively low rating to it, with some asking that they be provided with copies of the presentations. But while the clarity of the objectives before the forum only got a grade of 4.0, there was more than a third of a point increase in the likelihood that the knowledge gained would be applied by the participants. PROGRAM Time Activity 7:30 8 am Registration 8 8:03 am Invocation 8:03 8:05 am Philippine National Anthem 8:05 8:10am Welcome Remarks Ms. Ma. Nieves Confesor Chairperson, Galing Pook Foundation 8:10 8:20am Message Mr. Berthold Leimbach Resident Representative, FES Manila 8:20 8:30 am Program Overview Dr. Eddie Dorotan Executive Director, Galing Pook Foundation 8:30 9 am Input 1: The Sin Tax Hon. Joseph Emilio Abaya, Representative, Cavite, First District 16

22 Time Activity 9 9:30 am Panel Reaction Dr. Midwida Guevara President, Synergeia Foundation Ms. Mary Jane Ortega Former Mayor, San Fernando, La Union Ms. Jo Ann Latuja Senior Economist, Action for Economic Reforms Dr. Jaime Galvez Tan President Health Futures Foundation 9:30 10 am Open Forum 10 10:30 am Input 2: The National Mining Policy Dean Antonio La Viña Ateneo School of Government 10:30 11 am Panel Reaction Hon. Daisy Avance Fuentes Representative South Cotabato, Second District Dr. Cielito Habito Director, Ateneo Center for Economic Research and Development Mr. Victor Ramos Former DENR Secretary 11 11:30 am Open Forum 11:30 12 noon Synthesis and Closing of the Forum 12 1 pm Lunch 17

23 PHOTO GALLERY 18

24 19 Forum on Sin Tax and

25 20 Forum on Sin Tax and

26 21 Forum on Sin Tax and

27 22 Forum on Sin Tax and

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29 ANNEXES 1. Sin Tax Reform Bill Rep. Joseph Emilio Abaya 2. The National Mining Policy Dean Antonio La Viña 3. Issues in Mining Dr. Cielito Habito 24

30 OBJECTIVES FOR TOBACCO Excise Tax Reform on Alcohol and Tobacco Products (HB 5727 as amended) To restructure and simplify the current excise tax system on tobacco products. Remove price/brand classification freeze (Annex D). Index tax rates to inflation. Protect the young and the poor from the harmful effects of smoking. Support tobacco farmers. To help finance the Universal Health Care Program TOBACCO INDUSTRY (Cigarettes Pack of 20 s) TOBACCO INDUSTRY: Costs and Benefits Current System Multi-tiered with tax classification based on their Net Retail Price (NRP) : NRP over P10.00 P Over P6.50 to P P P5.00 up to P6.50 P 7.56 Below P 5.00 P 2.72 Old brands and new brands taxed differently. Old brands are taxed based on their 1996 NRPs (price freeze). New brands introduced after 1996 based on current NRPs. Not indexed to inflation. Reformed System Two tier system as follows: Year 1: NRP over P11.50 P and below Year 2: NRP over P11.50 P and below P 28.30/pack P 12.00/pack P 30.00/pack P 22.00/pack Removal of price/brand classification freeze with reclassification every two years based on latest BIR price survey. No downward reclassification of tax for existing cigarettes. Inflation adjusted with 8% increase every two years effective January 1, 2015 until January 1, Benefits Youth and poor: Higher cigarette retail prices will discourage young and poor from starting to smoke. Industry players: Similarly priced products will be taxed the same resulting to a level playing field. Farmers: More industry competition will increase tobacco leaf prices to the benefit of farmers. Costs Monopoly producer: Risk of losing market share because of more competition and removal of tax advantage. Farmers: May have apprehensions because of their fear of the impact of higher prices of cigarettes on tobacco demand. Risk mitigated since 15% of incremental revenues from tobacco taxes will be allocated to tobacco farmers TOBACCO INDUSTRY: Costs and Benefits OBJECTIVES FOR ALCOHOL Benefits Government: Greater revenues for NG. Better credit rating because of reform. BIR: Tax administration i ti is simpler and less prone to corruption. Indexation makes taxes more buoyant. General public: Bulk of funds to be used for universal health care and provision of better public health facilities. Costs Smugglers and Counterfeiters: May be tempted to increase their smuggling activities. Smoking gpopulation: p Increase in retail prices of cigarettes. For example, Marlboro Filter KS will increase from P30/pack to about P48.25 in the first year of implementation. Likewise, Fortune International FK will increase from P13.67/pack to P24.06 To restructure and simplify the current excise tax system on alcohol products. Remove price/brand classification freeze (Annex A and C). Index tax rates to inflation. Protect the young and the poor from the harmful effects of excessive alcohol drinking. To help finance the Universal Health Care Program

31 ALCOHOL INDUSTRY (Distilled Spirits) ALCOHOL INDUSTRY (Fermented Liquor) Current System Based on Raw Materials: A. Produced from sap of nipa, coconut, cassava, camote, or buri palm or from juice, syrup or sugar of cane: P per proof liter B. Produced from other raw materials, the tax shall be based on 750ml volume capacity: Per proof liter If NRP less than P P P250 to P P More than P P Reformed System Three tier system based on NRP of 750ml of Volume Capacity, as follows: Per proof liter Less than P P P to P P More than P P Taxation not raw material based. Foreign and local distilled spirits face same tax in their particular NRP bracket. Inflation adjusted with 8% increase every two years effective January 1, 2015 until January 1, Reclassification every two years. Current System Fermented Liquor If NRP per liter of Volume capacity: Less than P P P to P P More than P P Reformed System TwotiersystembasedonNRP per Liter of Volume Capacity Less than Php50.60 Php More than Php50.60 Php Removal of price freeze with reclassification every two years. Inflation adjusted with 8% increase every two years effective January 1, 2015 until January 1, No downward classification allowed. Microbreweries at P28/LITER ALCOHOL INDUSTRY: Costs and Benefits ALCOHOL INDUSTRY: Costs and Benefits Benefits Youth and poor: Higher alcohol retail prices will discourage young and poor from excessive alcohol drinking. Industry yplayers: Distilled spirit products of the same alcohol content will be taxed the same resulting to a level playing field. Government: Greater revenues for NG. Better credit rating because of reform. WTO Compliant. Costs Monopoly producer (fermented liquor): Risk of losing market share because of more competition and removal of tax advantage. Oligopoly l producers (distilled d spirits): Risk of losing market share because of more competition from imports and removal of tax advantage. Smugglers and Counterfeiters: May be tempted to increase their smuggling activities. Benefits BIR: Tax administration is simpler and less prone to corruption. Indexation makes taxes more buoyant. General public: Bulk of funds to be used for universal health care and provision of better public health facilities. Costs Drinking population: Increase in retail prices of alcohol products. For example, in fermented liquor, Redhorse 1000 from P per liter bottle will increase to about P in the first year of implementation. Likewise, Distilled Spirits product such as Tanduay from P per 1 liter bottle to P THANK YOU!!! 11 2

32 Issues in mining The emerging Aquino mining policy: Implications for local governments? Dr. Antonio G. M. La Viña Should mining prevail over current land-uses? Are the benefits from mining sufficient and fairly distributed? Are the social and environmental costs fully considered and compensated? Are the risks of adverse impacts reduced to a minimum and socially acceptable to those who bear them? When local stakeholders decide that the risks are unacceptable, can the national government override that decision based on broader criteria? Does small-scale mining provide more equitable access to resources? At what cost? Who has the right to decide? How are decisions made, and on what basis? Alternative approach National Government National Government Local Governments Local Communities (IPs) Local Governments Local Communities (IPs() Mining companies Environmental and other stakeholders Mining companies Environmental organizations Others New Mining Policy Evidence-based and grounded on national consensus and a balancing of stakeholder interests That accurately accounts for benefits and costs in order to make rational decisions Currently, we are not able to accurately measure benefits and costs this is so fundamental The environmental and social costs are high but can be mitigated if done properly. Extractive Industries Transparency Initiative Environmental and Social Impact Assessment (ESIA) Critical island ecosystems need to be closed off to mining (i.e. NIPAS, SEP) Responsible mining: economics Appropriate valuation mechanisms to ensure holistic cost-benefit analysis Transparent and fair revenue-sharing Compensation and liability obligations 1

33 Responsible mining: environment Precautionary principle Best practice in EIA Strict enforcement of environmental laws throughout mining cycle up to post-closure stage Responsible mining: no-go areas Built up areas NIPAS and SEP for Palawan Other areas with critical resources, rces including biodiversity Consent of IPs and local governments Small island ecosystems New: Agriculture/water sensitive areas; Places with high tourism potential Responsible mining: social issues Respect for rights of stakeholders Free and priori informed consent Consent of local governments Forthcoming Mining EO Primacy of National Laws Over Local Ordinances Creation of the Mining Industry Development and Sustainability (MIDAS) Council Additional Areas Closed to Mining Suspension of Approval of All Pending Mining Applications in Palawan. Establishment of Mineral Reservations. Measures related to Small-Scale Mining. Aquino EO: Economic aspects Opening of Areas for Mining through Competitive Public Bidding. Conduct Study on Existing Mechanisms for Benefit Sharing. Value Adding Activities and the Development of Downstream Industries Capacity Building Initiatives Subject matter include (but is not limited to) How to conduct or implement evidence based assessment FPIC assistance and verification services Enforcement of environmental laws Expanded d Impact Assessment (ESIA) Holistic economic valuation Environmental and social monitoring, Restoration biology Environmental economics Risk assessment studies Technology innovation Monitoring, rehabilitation & restoration 2

34 Cielito F. Habito Ateneo de Manila University Philippine Mining: 3 Observations 1. Mining can be a key driver for high economic growth, but more needs to be done to make it more inclusive Mining in the Philippines Towards a Consensus National Policy 2. Clashing laws have complicated the quest for responsible mining in the country 3. There is wide scope for strengthening the scientific basis for assessing the costs and benefits of mining High But Non-inclusive Growth Fastest growing industry in 2009 (21.1%) & 2010 (18.4%) (slowed to 4.1% in 2011) Labor compensation o accounts for only 13.3% of the sector s output, against an economy-wide average of 20.7% 14 workers were employed for every P1 million of mining GVA in 1980; in 2004, this was down to 6 workers per P1 million GVA, and falling High But Non-inclusive Growth Largest share of output value accrues to operating surplus (43%), implying that benefits accrue primarily to the investors Weak backward and forward linkages Share of the State in value of its mineral wealth is highly inadequate Wanted: More domestic value-adding (processing; downstream industries) Clashing Laws Mining Act vs. Local Government Code Indigenous People s Rights Act vs. Local Government Code Mining Act vs. National Integrated Protected Areas Law Legal vacuum on accountability vis-à-vis mining royalties Wanted: Evidence-Based Advocacy Accounting of benefits, costs Attribution and assessment of environmental impacts Risk assessment (e.g., tailings dam breaches) Assessment of acceptable risk 1

35 Towards a Clear National Mining Policy: Questions What is the international norm and best practice on e.g., share of the State, regulatory framework, etc.? How can we ensure that benefits from the mining industry are more widely shared? How exactly should responsible mining be defined, and ensured? Thank You! 2