Smokers, drinkers, and those who love soft drinks may see increases in the price of cigarettes, alcoholic beverages, and sodas with a new proposal to hike so-called “sin” taxes by 25 percent and 70 percent of the invoice price of these imported items, to help promote a healthy lifestyle and fund the Commonwealth Healthcare Corp.
A pack of cigarettes, for example, could cost a smoker an additional $1.30 or a beer can cost an extra 12 cents when wholesalers and retailers pass on to consumers the increased taxes.
These increases will be in the form of a “health care tax,” which will be imposed in addition to the current excise tax on cigarettes and tobacco, alcoholic beverages, and sugar-sweetened beverages.
This early, the proposal from Rep. Felicidad Ogumoro (R-Saipan) is drawing mixed reactions.
Ogumoro's House Bill 18-34 or the Health Care Impact Tax Act is an offshoot of a bill she introduced last year but was not passed by the previous Legislature because of opposition from different sectors of the community including health advocates themselves.
The new bill's purpose is two-fold: to combat the growing problem of obesity and non-communicable diseases, and provide much needed funding to CHCC.
Revenue collected under the additional taxes would be set aside and used for CHCC's debt service, inclusive of principal and interest, to the Marianas Public Land Trust. The bill says such debt includes the prior $4.58 million loan that MPLT entered into with CHC.
John Cool, House legal counsel who reviewed HB 18-34 for legal sufficiency, said yesterday that based on their estimates, the proposed measure could result in about $1.30 increase in excise tax for every pack of cigarettes that an importer or wholesaler brings to the CNMI. He said importers and wholesalers could then pass on to retailers and then to end-consumers these added costs.
For sugar-sweetened beverages including sodas, the added cost could be about 9 cents a can.
Cool said for alcoholic beverages, the increase could be some 12 cents per can of beer, for example.
Some smokers interviewed yesterday said if and when this proposal becomes law, it won't necessarily stop them from smoking but maybe reduce their use.
Under the bill, a health care tax at the rate of 70 percent ad valorem is assessed on all cigarettes, tobacco, tobacco substitute, chewable tobacco products and other substance that can be smoked or snuffed.
A health care tax at the rate of 25 percent ad valorem is assessed on all sugar-sweetened beverages, the bill says.
It also imposes a health care tax at the rate of 25 percent ad valorem on all alcoholic beverages.
The tax assessed in this bill will be collected by the Division of Customs at the point of entry.
House Vice Speaker Frank Dela Cruz (IR-Saipan), when asked for comment on the bill, said it is something he supports if it will help fund CHC and promote a healthy lifestyle.
“Smoking and drinking are not a right but a privilege,” he added.
Rep. Antonio Agulto (IR-Saipan), chairman of the House Committee on Health, said he has yet to see the bill, since it has not been formally introduced and referred to his committee.
Alex Sablan, president of the 160-strong Saipan Chamber of Commerce, said yesterday that the Chamber received an advance copy of the legislation days ago and discussed it at yesterday's SCC Board of Director’s meeting.
“It has been referred to our Government Relations Committee, and we have invited CHCC officials to the next committee meeting to discuss H.B. 18-34. The Chamber will then submit formal comments to the Legislature,” he said.
Ogumoro's original proposal was to levy a new “fat” or “sweet” tax of 5 percent on at least 30 consumer goods, including betel nuts, candies, chocolates, ice cream and edible ice, chewing tobacco, cigarettes, malt beer, wine, soft drinks, cooking oil, and peanut butter and paste.
After taking into consideration the concerns raised last year, Ogumoro came up with a new bill that increases taxes only on cigarettes and tobacco, sugar-sweetened beverages, and alcoholic beverage.
Under the new bill, a special revenue will be established to be called the Special Health Care Impact Program or SHIP Fund, which is separate and apart from the general fund, to be used to help CHC.
There is a sunset provision for this health care impact tax. It ceases once CHC has fully paid all its obligations to MPLT.