REPUBLIC OF THE PHILIPPINES.pdf · an act granting the trans- global airways corporation a franchise to establish, operate and maintain domestic and international transport services,

REPUBLIC OF THE PHILIPPINES

ION NO. 29 Wednesday, September 6,2006

SESSION NO. 20 Wednesday, September 6,2U06

CALL TO ORDER

At 3 5 2 p.m., thc Senate Prcsident, IIon. Manny Villar, called the session to order.

SILENT PRAYER

Sen. Ralph G. Recto led the Body in a miiiute of silent prayer.

R O L L CALL

Upon direction of the Chair, the Secretary of the Senate, Oscar G. Yabes, called the roll, to which the following senators responded:

Biazon, R. G. Cayetano, C. P. S. Defensor Santiago M. Drilon, F. M. Ejercito Estrada, .I. Ejercito Estrada, L. L. P. Enrile, J. P. Flavier, J. M. Lacson. P. M.

Lapid, M. L. M. Lim, A. S. Osmeiia 111, S. R. Pangilinan, F. N. Pimentel Jr., A. Q. Recto, R. G. Roxas, M. Villar, M.

With 17 setlators present, the Chair declared the presence of a quorum.

Senators Arroyo, Gordon, Madrigal, Magsaysay and Revilla arrived after the roll call.

Senator Aiigara was absent.

APPROVAL OF THE JOURNAL

Upon motion of Senator Pangilinan, there being no objection, the Body dispmscd with the rending of the Jouriial of Session No. 19 and considered it approved.

REFEREN& OF BUSINESS

The Secretaly of the Senate read the following matters and the Chair made the corresponding referrals:

BILLS ON FIRST READING

Senate Bill No. 2456, entitled

AN ACT PROVIDING FOR SAFETY MEASURES FOR CULVERTS OR OTHER SIMILAR FLOOD OR DRAINAGE SYSTEMS MAINTAINED BY GOVERNMENTAL ENTITIES

Introduced by Senator Miriain Defensor Santiago

To the, Cotfirnittees on Public Works; and Local Goveranient

Senate Bill No. 2457, entitled

AN ACT CONVERTING THE BATAAN POLYTECHNIC STATE COLLEGE IN THE~PROVINCE OF BATAAN INTO A STATE UNIVERSITY TO BE KNOWN AS THE BATAAN PENINSULA STATE UNIVERSITY (BPSU), INTEGRATING THEREWITH THE BATAAN STATE COLLEGE IN T H E MUNICIPALITY OF DINALUPIHAN WITIH SATELLITE CAMPUS IN THE MUNICIPALITY OF ABUCAY, BOTH IN THE PROVINCE OF BATAAN, AND API'!<OPRIATNG F.LINDS THEREFOR

Introdw-d by Scriator Manny Villar

To the Comm:!tct:.. oti Education, Arts and Cul?urB; a!:d Fin., -:

la ''l=i

WEDNESDAY, SEPTEMBER 6,2006 212

RESOLUTIONS

Proposed Senate Resolution No. 555, entitled

RESOLUTION DIRECTING AN I N Q m Y , IN AID OF LEGISLATION, ON THE IMPLEMENTATION OF STRICTER PROCEDURES IN APPROVING FINANCIAL AND MEDICAL ASSIST- ANCE IN THE PHILIPPINE CHARITY SWEEPSTAKES OFFICE (PCSO)

Introduced by Senator Miriam Defensor Santiago

To t h e Commit tees o n Governmen t Corporat ions and Public Enterprises; and Health and Demography


RESOLUTION DIRECTING AN INQULRY, IN AID OF LEGISLATION, ON THE ALLEGED INVOLVEMENT OF BUREAU OF CUSTOMS PERSONNEL IN THE SMUGGLING OF FROZEN MEAT PRODUCTS IN THE COUNTRY

Introduced by Seiiator Miriam Defensor Santiago

To the Committees on Ways and Means; and Trade and Commerce


RESOLUTION DIRECTING THE PROPER SENATE COMMlTTEE TO CONDUCT AN INQUIRY, IN AID OF LEGISLA- TION, ON THE REPORTED RECOVERY OF IMPROVISED ANTI-PERSONNEL LANDMINES AND BOMB-MAKING MATERIALS LEFT BY COMMUNIST INSURGENTS IN MARBON, TALA- COGON, AGUSAN DEL SUR

Introduced by Senator Miriam Defensor Santiago

To the Committees on National Defense and Security; and Foreign Relations

COMMUNICATION

Letter from Assistant Director-General Daniel F. Pabelloil of the National Economic and Develop-

meiit Authority, dated 28 August 2006, providing the Senate, for its informatioil and guidance, a copy of Memorandum Circular No. 01, Series of 2006, dated 23 August 2006, issued by Socio-Economic Planning Secretary and NEDA Director-General Romulo L. Neri, entitled “Guidelines Implementing the Unified Multi- Purpose Identification (UM-ID) System Pursuant to Executive Order No. 420, dated 13 April 2005, and its Implementing Rules and Regulations”.

To the Commit tees on Cons t i tu t iona l Amendments, Revision of Codes and Laws; and Finance

COMMITTEE REPORTS

Committee Report No. 94, submitted by the Committee on Public Services, on House Bill No. 4429, introduced by Representative Mitra, et al.,

AN ACT GRANTING THE PUERTO PRINCESA BROADCASTING CORP- ORATION A FRANCHISE TO CONS- TRUCT, INSTALL, ESTABLISH, OPERATE AND MAINTAIN RADIO AND TELEVISION BROADCASTING STATIONS IN THE CITY OF PUERTO

PALITIES IN THE PROVMCE OF PALAWAN,

PRINCESA AND ALL THE MUNICI-

recommending its approval with amendments.

Sponsor: Senator Arroyo

To the Calendar for Ordinary Business

Committee Report No, 95, submitted by the Committee on Public Services, on House Bill NO. 4220, introduced by Representative Nograles, et a l , entitled

AN ACT GRANTING THE FREE AIR BROADCASTING NETWORK C O W . A FRANCHISE TO CONSTRUCT, INSTALL, ESTABLISH, OPERATE

TELEVISION BROADCASTING STATIONS NATIONWIDE,

AND MAINTAIN RADIO AND



To the CaJendar for Ordinary Business f l

WEDNESDAY, SEPTEMBER 6. 2006 273

Committee Report No. 96, submitted by the Committee on Public Services, on House Bill No. 4636, introduced by Representative Teodoro, et al., entitled

AN ACT GRANTING THE TRANS- GLOBAL AIRWAYS CORPORATION A FRANCHISE T O ESTABLISH, OPERATE AND MAINTAIN DOMESTIC AND INTERNATIONAL TRANSPORT SERVICES,

recommending its approval without amendment.


To the Calendar for Ordinary Business

Committee Report No. 97, submitted by the Committee on Public Services, on House Rill No. 4430, introduced by Representative Dtimarpa, et al., entitled

AN ACT GRANTING MUSLIM MINDANAO RADIO AND TELE- VISION NETWORK CORPORATION A FRANCHISE TO CONSTRUCT, INSTALL, ESTABLISH, OPERATE AND MAINTAIN RADIO AND TELEVISION BROADCASTING STATIONS IN THE PROVINCE OF LANA0 DEL SUR,



To thc Calendar for Ordinary Business

ACKNOWLEDGMENT OF THE PRESENCE OF GUESTS

Senator Pangiliiian acknowledged the presence afthe following gucsts: Rep. Caiinen Cari, Rep. Remedios Petilla, Rep. Clwel Martinez, Rep. Raffy Nantes, Rep. Gerry Salapuddin, and Rep. Satur Ocampo; Mayor Jesse Robredo of Naga City; Mayor Jose Carlos Cari of Baybay, Leyte; Mayor Godofredo Mintu of Sablayan, Occifiental Mindoro; Mayor Carl Ladetnora of San Francisco, Agiisan del Sur; Mayor Roderick Furigay of Laniitan, Basilan; Mayor Camilo Lammawin of Tabuk, Kaliriga; Mayor Jcsus Nnfupta Jr. of Batac, Ilocos Norte: 'Mayor Fidel Anacta Jr. of Boroii::an; Easterii Samai:: Mayor Coefredo Uy of Catbaloyan, Samar; and Mayor Sevcriiia Nadres of

Tayabas, Quezon; foriner Gov. Antonio Calingin of Misamis Oriental; vice mayors and Sangguniang Bayan members from Baybay, Sablayan, Tayabas, San Francisco, Lamitail, Tabuk, Batac, Borongan, and Catbalogan; barangay captains from Tayabas, Quezon; and students from the University of Makati and from the Romblon State College.

COMMITTEE REPORT NO. 79 ON SENATE BILL NO, 2263

(Continuation)

Upon motion of Senator Pangilinan, there being no objection, the Body resumed consideration, on Second Reading, of Senate Bill No. 2263 (Committee Report No. 79), entitled

AN ACT TO MAKE THE LAWS ON PATENTS, TRADENAMES AND TRADEMARKS MORE RESPONSIVE TO THE HEALTH CARE NEEDS OF THE FlLPlNO PEOPLE BY CLARIFY- UiG NON-PATENTABLE INVENTIONS, ALLOWING THE IMPORTATION AND EARLY DEVELOPMENT OF PATENTED MEDICINES, AND MODIFYING GOVERNMENT USE PROVISIONS FOR DRUGS OR MEDICINES, TO LOWER PRICES AND INCREASE ACCESS TO AND SUPPLY OF QUALITY DRUGS OR MEDICINES, AMENDING FOR THIS PURPOSE CERTAIN PROVISIONS OF REPUBLIC ACT NO. 8293 OTHERWISE KNOWN AS THE INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES.

Senator Pangilinan stated that the parliamentary status was still the period of sponsorship.

Thereupon, the Chair recognized Senator Cayetano for the cosponsorship.

COSPONSORSHIP SPEECH OF SENATOR CAYETANO

In cosponsoring Senate Bill No. 2263, Senator Cayetano delivered the following speech:

TOWARDS MORE SUSTAINABLE ACCESS TO QUALITY AFFOKDABLE MEDICINXh

I rise to seek your support for the passrige of Senate Bill No. 2263, originally introduced by ,$f

274 WEDNESDAY, SEPTEMBER 6,2006

Senator Mar Roxas as Senate Bill No. 2139, which I am honored to cosponsor.

The argument fot the passage of Senate Bill No. 2263 is pretty straightforward. What is the price of becoming ill in our country? If your heart ailinent and/or any other ailment do not kill you, then, drug prices surely will. Just last August 16, our colleague Senator Roxas stood before us and minced no words when he described how important drugs used for the treatment of just about any ailment cost more in the Philippines than elsewhere.

One example is the common antibiotic Bactrim, generically named Co-trimoxmole, that is widely used. Manufactured by the multinational drug company Roche, Bactrim is priced locally at P14.80 per 400/80mg capsule. But the same capsule is sold by Roche in India at only P0.75. In Pakistan, Roche sells the same 400/801ng capsule at the much lower price of P1.09. This means that Bactrim is being sold in the Philippines at prices around 1,300% to 1,900% higher than in Pakistan and India. Why should this be so?

Aside frbm Bactrim, many more pharmaceutical drugs are sold exorbitantly higher in the Philippines than they are in other countries - varying from 150% to l ,OOO% higher. These include the anti-diarrheal drug Imodium, the painkiller Ponstan, the anti-spasmodic Buscopan, the anti-asthma inhaler Ventolin, just to name a few. No wonder, there are so many Filipinos dropping dead of ailments that could otherwise have been controlled because of the drop-dead prices of medicines here.

AS a sidebar, it is a good thing that my physician, no other than Senator Flavier, has merely prescribed that 1 drink hot water and salt for my sore throat today.

Surely, the arguments that the cost of manufacturing and local taxes result in higher prices cannot justify the exorbitant high prices of medicines here as compared to our Asian neighbors.

Senate Bill No. 2263 seeks to address this problem. It posits that things should not be so - that access to medicines is a question of life or death, and medicines cannot be treated as mere commodities. As its title explains, Senate Bill No. 2263 seeks -

to make the laws on patents, tradenames and trademarks more responsive to the health care needs of the Filipino people by allowiqg the importation, early development of patented medicines and exceptions to the application of

standard compulsory licensing reqnire- ments for drugs or medicines to lower drug or medicine prices, by amending for this purpose certain provisions of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines.

Problem of access to medicines in RP At no time has the plain objective of Senate

Bill No. 2263 - to broaden the access and lower the prices of medicines - become all too pressing. Based on the Philippine National Health Accounts, only half of our population have access to essential drugs and medicines. Further aggravating this fact is that in 2003, annual per capita health spending at current prices was only P1,817, and for 2004, it was P1,979. It should be noted that this per capita health spending is inclusive of all health care costs and not just limited to drugs and medicines.

Given these facts, the objective of Senate Bill No. 2263 to protect public health indeed becomes most urgent. Health care is a basic right - but the cost o f medicine is making a mockery of that right. As consumer organizations have so aptly noted, unlike most commodities that consumers purchase everyday, medicine is an essential item. It is like water - when you need it, you got to have it.

Without legislation, the market has shown that on its own, it does not have sufficient mechanisms for ensuring their affordability. It will simply charge as much as it can, and it has done so.

In the course of the committee proceedings on Senate Bill No. 2263, attended by our country’s foremost health exponents, it was noted that the protection given by the Intellectual Property Code of the Philippines in favor of drug patent holders has resulted in a significant imbalance between supply and demand of drugs and medicines. Specifically, it was also noted by most of the participants that the market dominance of the multinational companies has created artificial barriers to the fair trade of medicines. This has consequently led to expensive pharmaceutical drugs and lack of access to such for majority of our people.

In 2002, industry estimates pegged the Philippine pharmaceutical industry market at around P8S billion, with the multinationals consistently dominating the field with nearly 83% market revenue share. The rest ofthe market revenues share of around 17% were earned by various small- and medium-sized pharmaceutical #f

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companies, some of which are still foreign- owned hut which may not be classified as multinational companies.

According to Coininittee Report No. 19, the multinational companics justify their dominance of the Philippine pharmaceutical market on the ground that the medicines that they produce are of good quality with their efficacy and safety assured. In relation to the- alleged high prices that they impose, they ju s t ib such because of the quality and the need to recoup their research and development costs in relation to each successful patent which is given exclusive rights by the intellectual property law of the Philippines. In other words, the strength of the inultinationals lies in the patents of the drugs or medicines.

On the other hand, the sm+ller Filipino pharmaceutical companies contend that there are a lot of barriers to a level playing field in the local pharmaceutical market. As much as they acknowledge that they do not have that much capital, they especially note that, unlike in other countries, local intellectual property laws are designed in favor of heavily protecting the patents of the multinationals, thus granting more marketing monopoly in favor ofthe multinationals.

Not surprisingly then, multinationals have gained a monopoly in pharmaceutical patents. Based on data froill the Intellectual Property Office, of the 191 pharmaceutical patents tiled from 2001 to 2004, at least 89% were foreign patents while only 11% were local. Of the number of pharmaceutical patents issued from 2002 to 2005, only one - I repeat - on& one iocoi potent was issued compared to 448 foreign patents issued in 2001, 363 in 2002, 351 in 2003, 53 1 in 2004, and 404 in 2005. The country now has a total of 3,113 foreign patents on medicines but only five local patents due to expire from 2006 to 2015.

Cornerstones of Senute Bill No. 2263

We know that there are many other issues that contribute to the continued high cost of medicines. These are intertwined with the need to strengthen our lociil pharmaceutical industry to enable it to compete with multinational companii:.s as well as the need to promote research and development in public health, This will, of course, entail increasing the national budget for health, further strengthening the generics law and the Bureati of Food and Druss (BFAD), as well as providing increased government support in the form of tax exemptions for active substance drugs, technical a$sistance, loans and parallel importation.

Whatever the case may be, for now, there is an overriding need for us to revisit the framework of the Intellectual Property Code of the Philippines. There is an overriding need for us to see to it that the protection given to intellectual property owners, who are invariably the same as the multinational drug firms, will be balanced with the greater public health interest of providing a more sustainable access to quality affordable inedicines for the benefit of the greater populace.

In this regard, Senate Bill No. 2263 lays down four cornerstones that will make quality medicines cheaper and more accessible to our people. Specifically, the bill shall make patents and trademark laws more responsive to the health care needs of our people by amending the Intellectual Property Code of the Philippines to allow the following ~

1. the parallel importation ofmedicines;

2. the early development of patented medicines;

3. exemption of government importation, manufacture, sale or distribution of medicines from the standard compulsory licensing requirements; and

disallowing new uses or derivatives of patented drugs to he covered by a separate or new patent.

4.

At this point, let me stress that all these proposed amendments comply with our basic covenants under the Agreement on Trade- Related Aspects of Intellectual Properly Rights (TRIPS) and the Doha Declaration on the TRIPS Agreement and Public Health of the World Trade Organization (WTO). As Committee Report No. 79 states, “The proposed amendments are in exercise of the flexihilities allowed to developing countries under the TRIPS Agreement and the Doha Declaration.”

The TRIPS flexibilities were envisioned “to balance the protection of intellectual property owners with economic and social welfare, as well as with technological development.” The Doha Declaration recognized “the gravity of the public health problems affecting many developing and least-developed countries.” It also emphasized “the need for the TRIPS Agreement to be part of the wider action to address these problems:’ and included an acknowlcd’~moiit that intelltictual property protection has tin effect on thc price of medicines, even as it is important for pharmaceutical reswrch aud development. jf‘


On parallel importation

Now, let me just put in a word about parallel importation.

Parallel importation refers to the importation, without the consent of the patent holder, of a patented product that is marketed in another countiy. It allows one to “shop around” for a good price. Competition in the supply of drugs or medicines is thus enhanced because the importation of much lower priced identical drugs would redound to the benefit of all. Parallel imports are not a means of ignoring the patentee’s right to remuneration, but a means of ensuring~that patents work “to the mutual advantage of producers and users of technological knowledge in a global economy.”

The acceptance of parallel imports must be regarded as one of the measures, consistent with the TRIPS Agreement, that member countries are explicitly authorized to take to protect public health. Parallel importation is, in fact, permitted in several countries. The European Union permits parallel importation between European countries. In Japan, the courts have held that the parallel importing of patented products sold in one country into Japan does not violate the patents granted in Japan. Argentina, Cambodia, Thailand and Vietnam also permit parallel importation, with clearly worded legislation.

However, this is not the case in the Philippines. Under the present Intellectual Property Code, parallel importation is not allowed because of the adoption of the domestic exhaustion principle of intellectual property rights. Section 72.1 of the Code effectively grants exclusive rights in favor of the patent owner only, including sole authority to import on patented products. Clearly, there is a need to amend this particular provision to allow for the doctrine of international exhaustion of intellectual property rights in drugs and medicines, as this will effectively allow the importation into the Philippines to shop around for a better price for drugs and medicines that are already in fact being marketed in other countries at a much lower cost.

Now, let us note again the right of a country to adopt an international exhaustion regime is one of the “flexibilities” recognized under the TRIPS Agreement. As noted by the local Intellectual Property Office, nothing in the TRIPS Agreement prohibits the adoption of the doctrine of international exhaustion of intellectual property rights. This proposed amendment is very important because it would allow the supply of the product to be increased and prices to be moderated through competition, thus improving accessibility

through importation of drugs priced cheaply abroad than their counterparts in the Philippines.

Bohr exception or “Early Working” excepiion

Now, regarding the amendment supporting the early development of patented medicines. This refers to the “early working” process by which generic companies would be allowed to experiment and test for regulatory approval of generic versions of a drug or medicine before its patent expires.

This “early exception,” also universally called the “Bolar exception,” in effect supports the development of a generics pharmaceutical industry to serve the needs of people. As explained by the WHO, in the absence of such a provision, generic manufacturers can only start the time-consuming process of testing and registration after the expiry of the patent. This would delay the marketing of generic drugs for two to three years after patent expiry.

Senate Bill No. 2263’s proposed amendment is consistent with Article 30 of the TRIPS Agreement. It would allow the sick to get aceess to medicines at a lower price by allowing the immediate entry of a possible competitor once a patent expires. This exception is aimed at ensuring that scientific research towards generating new knowledge is fostered and not impeded by patents. It is particularly useful at fostering pharmaceutical technological progress by exempt- ing experimentation acts for purposes such as inventing around the initial invention, improving on the invention or for purposes of evaluating the invention and determining if it works.

Let us note that this limitation on patent rights is already exercised in many other jurisdic- tions. The United States, Canada, Australia, Argentina, Malaysia, Thailand, Indonesia and Israel, among other countries, have admitted this exception by law or through case law. In exchange for this permission, in some of those countries, the term of a patent may be extended for an additional period.

In 2002, the European Parliament agreed to formally introduce a “Bolar” type of exception into European law. In 2003 in India, the Patent Act was revised to introduce a new section on this. The laws of Brazil, China, Kenya, Pakistan, Singapore, Uruguay, New Zealand and Japan also contain the Bolar provision.

On governmeni use and legal cover for government use

As for the other proposed amendments to the Intellectual Property Code, provisions f o r 6

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the governmental use of patented medicines or processes for their manufacture constitute an important tool to protect public health. The amendments would also protect government importation, manufacture, sale and distribution of medicines from teinporaly restraining orders or injunctions; provide legal protection for concerned government officials from lawsuits for acts done in good faith; and endow original and exclusive jurisdiction to the Intellectual Property Office (IPO) over cases involving government’s importation and issuance of compulsory licenses for medicines, including trademark cases filed.

Again, let us note that many countries, including the United States, have extensively applied such “government use” provisions 011

the non-voluntary licensing o f patented inventions to facilitate public, non-commercial uses especially for purposes of national defense. The United States has also used this same legal tool to reduce the costs of certain medicines and to advance both environmental and economic development goals for its own needs.

In sum, the amendments will effectively allow the government to directly import medicines and encourage the production of generic medicines by local manufacturers to ensure the availability of cheap yet quality medicines in our country. This will strengthen the capability of the government to import or manufacture a drug that is needed to deal with existing health problems and emerging ones like bird flu.

On new use of existing substances as non-patentable inventions

The proposed amendment disallowing new uses or derivatives of patented drugs to be covered by a separate or new patent is also founded on the same premise. On the same grounds of psotecting public interest, patent owners shall not be allowed to file new patents for each demonstrable “new use” of a previously patented product or process. The amendment will effectively limit the possibility of several patents being issued for what is essentially the same invention. Moreover, it will prevent frivolous patents and prolonged multinational monopoly while allowin:; the entry and development of generic versions of off-patent medicines sooner.

Patterned after Section 3:d of the 2005 Amendments to the India Patent Law, this amendment likewise remains consistent with the TRIPS hgyecment which does not require its member countries to grant patents on new uses of existing substances. Pritunt laws in other countries already disallow new usm of products

or procedures from patenting like .in Kenya, Pakistan and the Andean community (Bolivia Colombia, Ecuador and Peru).

Conclusion: Public rij$ts are always paramoriiri

As I have explained earlier, everywhere around the world, governments are exercising the function to define the proper role of intellectual property protection in relation to balancing the private rights of innovators against the broader interest of the public.

The need to help our citizens gain access to affordable and quality medicines is surely more urgent than the issue of changing our form of government. After all, the Constitution mandates the State “to protect the health of the people and adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost.”

Millions of our people wait upon our decision to solve the problem of expensive drugs and medicines. And as their elected legislators, we have a big responsibility to unburden or, at least, lessen this heavy load on our people, especially to those living in poverty.

Together with Senator Mar Roxas of the Committee on Trade and Commerce, we, in the Committee on Health and Demography, ask for your support for the passage of Senate Bill No. 2263. The health of our people cannot wait.

SUSPENSION OF CONSIDERATION OF SENATE BILL NO. 2263

Upon motion of Senator Pangilinan, there be ing no objection, the Body suspended consideration of the bill.

ACKNOWLEDGMENT OF THE PRESENCE OF GUESTS

At this juiicture, Senator Pangilinan acknowledged th presence of fo rmer Sen . John FI. Osmefia, Congressmen Del de Guzinan of Marikina, Larry Wacnang of Kalinga and Rey Aquino O F Ptimpanga, and Marikina City Mayor Maridcs Feshando.

COMMITTEE REPORT NO. 75 ON SENATE BILL NO. 2261

(Conrinuatiun)

Upon motion of Senator Paiiiiiiii:m, there bein!,, no objection, the Body rcsumed cotisideration, on


Second Reading, of Senate Bill No. 2261 (Committee Report No. 78), entitled

AN ACT AMENDING SECTIONS 24, 3 1, 34, 35 AND 110 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

Senator Pangiliiian stated that tlie parliamentary status was tlie period of interpellations.

Thereupon, tlie Chair recognized Senator Rccto, Sponsor of the measure, and Senator Defensor Santiago for her interpellation.

INTERPELLATION OF SENATOR DEFENSOR SANTIAGO

Senator Defensor Santiago stated that the simplified tax system that is sought to be achieved would obviously be achieved and it would improve administrative feasibility but at the cost of PI3 billion reduction in income tax collection. Moreover, she expressed concern that this would impair the country’s fiscal adequacy, the principle of the equity of taxation and the progressive nature of the present taxation system.

Senator Defensor Santiago averred that a tax is equitable if it is fair, just, reasonable and propor- tionate to one’s ability to pay and definitely, she said, the rates presently applied on individual income earners are more equitable and faithful to the mandate of the Constitution to adopt a progressive tax system.

She expressed the view that even with a simplified system of computing iiicome tax, it is iiot tlie multitude of individual taxpayers, accounting for 83.48% of the total tax collection, who would be benefited but the employers because they would be relieved of the rather complicated way of computing taxes. She pointed out that under tlie present system, pure income earners do iiot even have to file their income tax returns since the employers already collect the full tax, for which purpose they have an accounting staff to perform this function routinely and they may even be using a payroll software.

Of the individual taxpayers, Senator Defensor Santiago further pointed out that only the self-employed who account for a meager 16.52% of tlie total income- tax take would be directly benefited by the simplified taxation system.

Moreover, she believed that tlie uncollected P7.17-billion tax from income earners is iiot SO much the fault of the individual taxpayers but of their employers, most likely corporate taxpayers or self- employed individuals, who have disregarded the applicable requirements. Thus, she submitted that it is unlikely that simplifying the manner of computing individual income tax would significantly reduce tlie uncollected income tax.

On the one hand, Senator Defensor Santiago believed that the measure would be applauded by low- and middle-salaried employees and even those who earn about P800,OOO per annum, not because it simplifies tlie manlier of computing individual taxes, but simply because it increases the exemption level to P144,OOO. On the other hand, she said that higher income earners who shall bear the higher taxes would definitely dispute the measure.

With respect to tax deductions for self-employed individuals, Senator Defensor Santiago surmised that since they have tlie option, they would continue to claim itemized deductions rather than optional standard deduction (OSD) in spite of its convenience. If the self-employed individuals could get away with just paying an effective income tax of 1% of their gross revenues, she believed that they would not shift to tlie OSD because they will be paying an effective tax of 21% which is based 011 the following computation: 100% - 40% (standard deduction) = 60% (taxable income) x 35% (tax rate). Since it would be difficult for the taxpayer to forego the 20% tax savings, she said, the chance of the measure reducing the P25.43 billion tax loss is dim.

In tlie light of all these concerns, Senator Defensor Santiago asserted that from a purely taxation point, there would be no concrete and significant benefit to be gained from the measure that is sufficient enough to offset the revenue loss of P13 billion.

On the proposal to reduce the 35% individual tax rate to 30% in January 2009, Senator Defensor Santiago asked whether this would unwittingly compromise the adequacy of government revenue collections. Further, she asked on the underlying assumption that led government to believe it could afford to reduce income tax rate to 30% starting in 2009.

At this juncture, slie m.anifested that she would not debate on tlie concerns she raised but if needed, at the proper time, she would propose amendments.


On tlie issue of progressivity, Senator Recto stated that the effective tax rate determines tlie progressivity of the tax system, meaning, it is based on tlie taxpayer's ability to pay. He said that while the Committee recommended the reduction of the tax brackets from 7 to 2, the system is still progressive because there is still a two-tax rate structure: income of P144,000 and below is zero or exempt from income tax, and income above P144,OOO is taxed at 35%. To clarify, he said that for an individual with a gross income of P154,000, the tax computation is as follows: P154,000 - P144,000 = P10,000, and P10,000 x 35% = P3,500, which is the tax. He pointed out that if the P3,500 tax is divided by P154,000, tlie effective tax rate is 2%. He noted that as one's income goes higher, tlie effective tax rate also goes higher which makes the system progressive.

On the concern that the government stands to lose P13 billion in revenues if the measure was adopted, Senator Recto agreed that indeed, there would be revenue loss but he pointed out that countries that have adopted the VAT system have reduced their income taxes. He reasoned that by simplifying the tax system, the public would be easily educated on their tax liabilities, pointing out that the present income tax system uses 25 variables.

Moreover, Senator Recto agreed to the observa- tion that the proposal would benefit roughly 80% of the taxpayers, especially government employees, 50% of whom would be exempted from paying income tax. He pointed out that those in the higher income bracket would be affected because tlie tax rate would be increased from 32% to 35%. He believed that it is important to align the individual income tax aiid the corporate income tax.

Senator Recto stated that while the Committee believed that corporations should contribute to the alleviation of tlie fiscal problem of the country, it recommended nonetheless that by 2009, assuming that there would be a balanced budget by 2008, the corporate income tax rate and individual tax rate would be reduced to 30%.

On tlie revenue side, Senator Recto admitted that tlie government would lose about PI3 billion with a new income tax rate, but on the one hand, it would I ) give the public a tax break in the face of rising prices aiid inflation; 2) widen the tax base; and 3) simplify tlie system aiid therefore make it easier for tlie corporate taxpayers aiid employers to know bow much taxes should be withheld, and for the

individual income taxpayer to understand and determine his tax liability. He stated that during the period of amendments, he would even propose that by 2012, the income tax rate be reduced from 30% to 25% and, thus, widen tlie tax base.

On the issue of the 10% optional standard deduction (OSD) for self-employed and professionals or those engaged in trade or business., Senator Recto believed that it would be fair to extend the sane to corporations. He posited that tlie Simplified Net Income Tax System (SNITS), which was recomiilended by the DOF and tlie House of Representatives, iiiitially would limit the available deductions for professionals and the self-employed. He argued that tlie SNITS is an unfair system because at present, corporations are allowed to make all kinds of deductions which the self-employed are not allowed to do. That is why, he said, the Committee recommended a 40% OSD because it would be easier for the BIR to audit gross sales or gross receipts of individuals and corporations and lessen, if not eliminate, chealiiig in the computation of deductions. He added that with the OSD, individual and corporate taxpayers need not hire expensive accountants and lawyers and go through periodic BIR audit.

MANIFESTATION' OF SENATOR PANGKINAN

Senator Pangilinan manifested that other senators would interpellate Senator Recto on the bill at a later date.


Upon motion of Senator Pangilinan, there being no objection, the Body suspended consideration of the bill.

SUSPENSION OF SESSION

Upon motion of Senator Pangilinan, the session was suspended.

It was 4:SO p.m.

RESUMPTION OF SESSION

At 4:52 p.m., the session was resumed

SPECIAL ORDEB

Upon motion of Swator Pangilinan, there being no objection, the Body approved the transfer o f &


Coininittee Report No. 84 on House Joint Resolution No. 1 to the Calendar for Special Orders.

COMMITTEE REPORT NO. 84 ON HOUSE JOINT RESOLUTION NO. 1

Upon motion of Senator Pangilinan, there being no objection, the Body considered, on Second Reading, House Joint Resolution No. 1 (Committee Report No. 84), entitled

JOINT RESOLUTION TO EXEMPT CERTAIN MUNICIPALITIES EMBODIED IN BILLS FILED IN CONGRESS BEFORE JUNE 30, 2001 FROM THE COVERAGE OF REPUBLIC ACT NO. 9009.

Pursuant to Section 67, Rule XXIII of the Rules of the Senate, with the permission of the Body, upon motion of Senator Pangilinan, only the title of the resolution was read without prejudice to the insertion of its full text into the Record of the Senate.

The Chair recognized Senator Lim for the sponsorship.

SPONSORSHIP SPEECH OF SENATOR LIM

In sponsoring House Joint Resolution No. I , Senator Lim delivered the following speech:

I rise today to seek your kind approval of House Joint Resolution No. 1 under Committee Report No. 84. This measure seeks to exempt from the coverage of Republic Act No. 9009 certain municipalities that applied for city status before June 30,2001.

The Joint Resolution before us today is about fairness. As in basketball or in any other sports, this is about not changing the rules in the middle of the game.

Republic Act No. 9009, which lapsed into law on February 24, 2001, increased the income requirement for the conversion of a municipality into a component city from a two-year average aiinual income of P20 million to PlOO million of locally generated income.

At thc time the bill was enacted into law, there were a total of 57 hills pending in Congross proposing the conversion of certain municipalitics into component cities. Ofthe 57 proposals, 32 bills eventually became cityhood charters. One was

defeated in a plebiscite while the rest, 24 in all, were overtaken by events.

The officials of these 24 municipalities tried to heat the effectivity of Republic Aot No. 9009 which was fixed at June 30,2001, or three weeks after the sine die adjournment of the 1 Congress. But their efforts were overwhelmed by the turn of events that redirected the focus of the Congress away from ruplar lawmaking. These events are now part of the nation’s -political history, namely: tlx incomplete impeachment of President Joseph Estrada; his aborted trial in the Senate; the EDSA 2; the transition in the presidency; the campaign period; and the senatorial and local elections. In other words, the bills were never approved by Congress due to lack of material time and not nscessarily because the municipalities concerned failed to meet the requirements then prevailing, especially the income requirement of P20 million.

On the strength of the certification issued by the House Committee on Local Government, the following municipalities applied for city status during the 1 IIh Congress and, as such, in the spirit of fairness, the Committee seeks their exemption from Republic .Act No. 9009,

1. Carcar, Cebu; 2. Baybay, Leyte; 3. Binalbagan, Negros Occidental; 4. Sahlayan, Occidental Mindoro; 5 . San Francisco, Agusan del Sur; 6. Bayugnn, Agusan del Sur; 7. Pontevedra, Negros Occidental; 8. Lamitan, Basilan; 9. San Juan, Metro Manila;

IO. Tandag, Surigao del Sur; 11. Tabuk, Kalinga; 12. Batac, Ilocos Norte; 13. Naga, Cehu; 14. Borongan, Eastern Samar; 15. Clavcria, Misamis Oriental; 16. El Salvador, Misamis Oriental; 17. Opol, Misamis Oriental; 18. Cathalogan, Samar; 19. Pototan, Iloilo; 20. Tubod, Lanao del Norte; 21. Cahadbaran, Agusan del Norte; 22. Bogo, Cehu; 23. Los Bafios, Laguna; and 24. Tayabas, Quezon.

It is significant to note that their rospective congressmen are liere in this Chamber and their respective mayors and local officials. as read by Sen. Kilco Pangilihan. I will not repeat their 11allleS

anymore. But we are aware of their presetice and their commanding, shall we say, persuasion.

b

WEDNESDAY. SEPTEMBER 6,2006 28 1 1 .

I t should be noted^ that three municipalities from this list were not included in the House Joint Resolution, namely: Tubod, Lanao del Norte; Los Bailos, Laguna; and Tayabas, Quezon. To correct this oversight, intentional or not, they shou1.d be included among those to be exempted.

On the other hand, two municipalities that were not listed in the House certification were included in the approved House Joint Resolution. Again, to correct this oversight, intentional or not, they should be excluded from those to be exempted.

It bears emphasizing the obvious that each of these 24 municipalities being proposed to be exempted has to go through the usual process of public hearings and plenary deliberations in both Houses of Congress and satisfy all the requirements, including that of the previous requirement on income before it can be converted into a city. In other words, this resolution does not give automatic or blanket approval of the cityhood bills of the exempted municipalities.

I believe that we need some sort of creativity in addressing the issues surrounding House Joint Resolution No. 1, aware ofthe fact that this Chamber, as a policy-formulating body, has the difficult duty to weigh things in the interest of all concerned. The qualified municipalities seeking exemption from the coverage of RA 9009 are justified on the basis of fair play and in their desire to be given the chance to hasten their progress while at the same time existing cities have the right to ensure their economic and financial viability also for the sake of their respective constituents.

It is in this light that with bended knees, I appeal for the adoption of House Joint Resolution No. 1.



It was 5:02 p.m.


At 5:06 p,m,, the session was resumed.

MANIFESTATION OF SENATOR PANGILmAN

Senator Pangilinan manifested that some of the Members wwted to study the resolution and they

have requested that they be allowed to interpellate thereon at a later date.

SUSPENSION OF CONSIDERATION OF HOUSE JOINT IZESOLUTION NO. 1

Upon motion of Senator Pangilinan, there.being no objection, the Body suspended consideration of the resolution.



It was 5:07 p . m


At 5:07 pm., the session was resumed.

Senator Lim acceded to the request of the Members to be given more time to study the measure.



It was 5:08 p.m.


At 5:14 p.m., the session was resumed

SPECIAL ORDER

Upon motion of Senator Pangilinan, there being no objection, the Body approved the transfer of Committee Report No. 94 on House Bill No. 4429 to the Calendar for Special Orders.

COMMITTEE REPORT NO. 94 ON HOUSE BILL NO. 4429

Upon motion of Senator Pangilinan, there being no objection, the Body considered, 011 Second Repding, House Bill No. 4429 (Commjttee Report No. 94), entitled

AN ACT GRANTING THE P U E R f O PRlNCESA BROADCASTING CORP- ORATION A FRANCHISE T O N

P


CONSTRUCT, INSTALL, ESTABLISH, OPERATE AND MAINTAIN RADIO AND TELEVISION BROADCASTING STATIONS IN THE ClTY OF PUERTO PRINCESA AND ALL THE MUNICI- PALITIES IN THE PROVINCE OF PALAWAN.

Pursuant to Section 67, Rule XXIII of the Rules of the Senate, with the permission of the Body, upon motion of Senator Pangilinan, only the title of the bill was read without prejudice to the insertion of its full text into the Record of the Senate.

The Chair recognized Senator Arroyo for the sponsorship.

SPONSORSHIP REMARKS OF SENATOR ARROYO

Senator Arroyo said that in a public hearing last April 4,2006, the incorporators of t1ie.Puerto Princesa Broadcasting Corporation, namely, the Hagedorii family, had promised to increase its capital outlay following a recommendation by the-Committee on Public Services.

Senator Arroyo informed the Body that surveys conducted by the ~compiiny have revealed that 95% of Palawan residents, particularly those in Puerto Princesa City, rely on the broadcast media for information^- 56% get information from radio, 39% from television and the remainder from newspapers. He said that the residents’ dependence on the broadcast media is due to the fact that the province is isolated from the main islands in the Visayas.

In closijig, he stressed the Committee’s endorse- ment of the application of the Puerto Princesa Broad- casting Corporation for a franchise to operate radio and television broadcasting stations i n the Province of Palawan.

SUSPENSION OF CONSIDERATION OF HOUSE BILL NO. 4429

Upon motion of Senator Pangilinan, there being no objection, the Body suspended cnnsideration of the bill.

-SPECIAL ORDER

Upon riiotion of Senator Pangilinan, there being no objection, the Body approved the transfer of

Committee Report No. 95 on House Bill No. 4220 to the Calendar for Special Orders.


Upon motion of Senator Pangilinan, there being no objection, the Body considered, on Second Reading, House Bill No. 4220 (Committee Report No.95), entitled

AN ACT GRANTING THE FREE AIR BROADCASTING NETWORK CORP. A FRANCHISE TO CONSTRUCT, INSTALL, ESTABLISH, OPERATE AND MAINTAIN RADIO AND TELEVISION BROADCASTING STATIONS NATIONWIDE.

Pursuant to Section 67, Rule XXIII of the Rules of the Senate, with the permission of the Body, upon motion of Senator Pangilinan, only the title of the bill was read without prejudice to the insertion of its full text into the Re:cord of the Senate.



Senator Arroyo noted that television and radio broadcasts are gaining acceptance as medium for semi-formal education. In this light, he stated that the Free Air Broadcasting Network aims to broadcast relevant local news and information via radio and television nationwide.

He added that aside from devoting most of its time to showcasing provincial and regional activities, the Free Air Network Broadcasting would also air regional music on a 24-hour basis to acquaint Metro Manila viewers with the provincial cultures and traditions. This, he said, is in contrast to what is being done by giant networks in Metro Manila that extend their broadcasts to the provinces.

INTERPELLATION OF SENATOR EJERCITO ESTRADA (J)

Asked by Senator Ejercito Estrada (J) whethor franchise bills need congressional approval, Senator Arroyo explained that the Bigger House initiates the franchise bill and passes it on to the Senate for f l


Concurrence or disapproval. As such, he said that the Committee oiily presents franchise bills that emanate from the Bigger House.

Senator Ejercito Estrada (J) wondered why the resolution approving the transferisale of controlling interest in the Meridian Telekoms to Smart Com- munications that was sponsored by the Committee on Public Services was eventually archived on the grounds that it no longer required congressional approval. Senator Arroyo explained that the Committee did not recommend that the resolution be archived; rather, Meridian (the seller) and Sinart (the buyer) wrote the House Committee on Legislative Franchises that congressional approval is not necessary in cases where both the seller and the buyer have franchises. Moreover, he said that the resolution was archived because he did not push for the Senate's concurrence therein since the Bigger House no longer pursued it.

Asked if the lawyers of the two companies never knew that there was no need for a congressional approval, Senator Arroyo explained that the lawyers of Sinart and Meridian discovered that the Telecommuuications Act allows the sale of one franchise company to another without the need for congressional approval. Senator Ejercito Estrada (J) said he would file a motion expressing his disagree- ment to this opinion at a later time.



SPECIAL ORDER



Upon motion of Seaator Pangilinan, there being no objection, the Body considered, on Second Reading, House Bill No. 4636 (Committee Report No. 96), entitled

AN ACT GRANTING THE TRANS- GLOBAL AIRWAYS CORPORATION

A FRANCHISE TO ESTABLISH, OPERATE AND MAINTAIN DOMESTIC AND INTERNATIONAL AIR TRANSPORT SERVICES.

Pursuant to Section 67, Rule XXIII of the Rules of the Senate, with the permission of the Body, upon motion of Senator Pangilinnn, only the title of the bill was read without prejudice to the insertion of its fa11 text into the Record of the Senate.



Senator Arroyo explained that Transglobal Airways' franchise application for domestic and international airport services is actually an application for cargo services. He said that Transglobal Airways would operate within a limited area such as from Manila to Hong Kong, Vietnam or Singapore for cargo and charter services.

Senator Arroyo informed the Body that Trans- global Airways is currently offering cargo services by virtue of the provisional permit granted to it by the Civil Aeronautics Board (CAB). He said that the CAB usually grants a provisional permit to an airline to determine whether it could be a viable enterprise, and according to the CAB, the company is viable, but it cannot go on operating on a temporary permit. Since the country's cargo services are dominated by international companies like FedEx and UPS, he believed that small companies should be given the chance to prove their worth. He stated that Transglobal Airways Corporation is not as big as its name connotes as it would operate only in a few countries.



SPECIAL ORDER


Yd I""

284 WEDNESDAY. SEPTEMBER 6.2006


Upon motion of Senator Pangilinan, there being no objection, the Body considered, on Second Reading, House Bill No. 4430 (Committee Report No. 97), entitled

AN ACT GRANTING MUSLIM MINDANAO RADIO AND TELEVI- SION NETWORK CORPORATION A FRANCHISE TO CONSTRUCT, INSTALL, ESTABLISH, OPERATE AND MAINTAIN RADIO AND TELEVISION BROADCASTING STATIONS IN THE PROVINCE OF LANA0 DEL SUR.

Pursuant to Section 67, Rule XXIII of the Rules of the Senate, with the permission of tlie Body, upon motion of Senator Pangilinan, only the title of the bill was read without prejudice to the insertion of its full text into tlie Record of the Senate.



Senator Arroyo stated that~House Bill No. 4430 is an application for a franchise to operate a radio and television network in the province of Lanao del Sur, one of the priority provinces. At present, he said, there are only three radio stations in the province, namely, DXSO Radio ng Bayan, operated by the Philippine Broadcasting Services under the Office of the Press Secretary; DXAD, operated by the Muslim Development Multipurpose Cooperative; and DXSM, operated by Lanao Radio Broadsasting and TV System Corporation. Since all these companies are small, lie said that thcir communication linkage with the rest of the nation and abroad is quite inadequate: It is in this light, he added, that Muslim Mindanao Radio and TV Network was established and, hopefully, tlirougli the passage of House Bill No. 4430, it could already construct, install, operate and maintain radio and television broadcasting stations in the province of Latino dcl Sur.

Senator Arroyo said that tlie network intends to espouse positive values i n its pro::raiiiining, reach out to tlie youth and young ailults, and promote balanced

and responsible broadousting of public service programs to enhance the Muslim culture.

Senator Arroyo stated that radio and television networks have a gestation period of three years, but if they cannot operate at the end of this period, then their franchises would be automatically cancelled. He urged the Body to approve the bill and give the network a chance to deliver on its promise.


Upon motion of Senator Pangilinan, there being no objection, tlie Body suspended consideration of tlie bill.



It was 5:37 p.m


At 5:37 pm., the session was resumed.

ADDITIONAL REFERENCE OF BUSINESS

The Secretary of the Senate road the following matters and the Chair made the corresponding referrals:

MESSAGES FROM THE HOUSE OF REPRESENTATIVES

Letter from the Secretary General of the House of Representatives, informing the Senate that on 28 August 2006, the House of Representatives concurred with the Senate amendments on House Bill No. 884, entitled

AN ACT CREATlNG THE PROVlNCE OF DINAGAT ISLANDS.

To the Archives

Letter from tlie Secretary General of tlie House of Representatives, transmitting to the Senate the letter of the Honorable Speaker Jose de Venecia Jr., datod 1 September 2006, addressed to tlie Honorable Senate President Manuel B. Villar, informing tlie Senate of the designation, effective &'

r;


1 September 2006, of the following House Members as members of the House Panel in tlie Joint Congressional Power Commission created pursuant to Section 62 of RA 9136, or the Electric Power Industry Reform Act:

Representatives Badelles as Chairman; Jaraula as Vice Chairman; Defensor Jr., Garcia, Fuentebella, Valdez and Plaza as members.

To the Committee on Rulea


Upon motion of Senator Pangilioan, the session was suspended.

It was 5:39 p.m.


At 5:48 p.m., the session was resumed.

COMMITTEE REPORT NO. 55 ON SENATE BILL NO. 2231

(Continuation)

Upon motion of Senator Pangilinan, there being 110 objection, tlie Body resumed consideration, on Second Reading, of Senate Bill No. 2231 (Committee Report No. 58), entitled

AN ACT AMENDING REPUBLIC ACT NO. 8436, ENTITLED "AN ACT AUTHORIZING THE COMMISSION ON ELECTIONS T O USE AN AUTOMATED ELECTION SYSTEM IN THE MAY 11, 1998 NATIONAL OR LOCAL ELECTIONS AND IN SUBSEQUENT NATIONAL AND LOCAL ELECTORAL EXERCISES, PROVIDING FUNDS THEREFOR AND FOR OTHER PURPOSES."

Senator Pangilinaii stated that the parliamentary status was still the.period of individual amendments.




At 7:30 p,m,, the session was resumed

Senator Pangilinan stated that th9 session was suspended to give Senators Gordon, Osmeiia and Roxas the opportunity to discuss the crafting of some amopdmeiits to the election automation bill. However, he said that after almost two hours of meeting, they would need additional time to put the language together.



REMARKS OF SENATOR GORDON

Senator Gordon requested the technical staff to work on the amendments over the weekend so that the Body could vote on these amendments on Monday. He said any Member who would like to propose amendments could do so in writing.

ADJOURNMENT OF SESSION

Upon motiou of Senator Pangilinan, there being no objection, the-Chair declared the session adjourned until three o'clock in the afternoon of Monday, September 1 I , 2006.

It was 7:33 p.m

I hereby certify to the correctness of the foregoing.

BES

It was 5.49 p.m. Approved GI1 September 11, 2006

Documents

REPUBLIC OF THE PHILIPPINES.pdf · an act granting the trans- global airways corporation a franchise to establish, operate and maintain domestic and international transport services,