THE DEPARTMENT of Finance (DoF) will push for its original version of a bill hiking taxes on tobacco and alcohol products, a Cabinet official yesterday said as a Senate panel started hearings on the contentious measure, claiming that more stringent provisions are needed to increase state revenues and improve public health.
“I prefer the original bill, of course, if the Senate will give it to me. The higher tax rates will generate more revenues and discourage smoking and drinking,” Finance Secretary Cesar V. Purisima said as the Senate ways and means committee held its first hearing.
The Finance department had to settle for a relaxed version of the so-called “sin” tax bill at the House of Representatives. After over a decade of attempts to have the measure pass, this compromise eventually led to the historic passage of the measure in the chamber.
House Bill (HB) 5727 was approved last June and the Senate is now in the process of deliberating its own version of the bill, which the Aquino administration wants to become a law by the end of the year.
“We will present our original bill to the Senate ways and means committee but we are not turning our back on the discussions in the lower house,” Mr. Purisima said.
“If we had our way, we would take this first version, but we are open to negotiations,” he stressed.
The Finance department has already submitted its version of the bill to the Senate, Finance Assistant Secretary Ma. Teresa S. Habitan said.
“The next step now is to look for a sponsor … but the bills filed by Senator Miriam Defensor-Santiago (Senate Bills 2998 and 3249) also carry similar rates and provisions,” she explained.
The department’s original bill aims to raise excise taxes on alcohol and tobacco products and peg subsequent increases to inflation. These provisions were later amended amid fears that sharp changes would lead to unemployment and smuggling. The tax hikes were lowered and 8% increases every two years were instead scheduled.
The department also hoped to move to a unitary system of taxation, with one tax imposed on all products regardless of price and content. This proved to be a thorny issue as opponents of the bill argued that this would burden local manufacturers that produce low-priced products and the poor who consume these.
The relevant provisions were then revised to allow two tiers for tobacco products and three for alcohol products, from the four currently provided in the National Internal Revenue Code (NIRC).
As a result of the modifications, the expected P60-billion revenue take of the “sin” tax bill was slashed to P31.35 billion.
Equitability, however, again became the issue yesterday.
“Why do we place the same tax on a Johnny Walker Black and a Ginebra San Miguel? Bigger shoulders should have bigger burdens,” said Senator Ralph G. Recto, ways and means committee chairman.
Senate President Juan Ponce Enrile urged the Finance department to consider an ad valorem tax instead, where a uniform rate would be levied across all products based on their price.
“Why don’t we return to an ad valorem tax? Isn’t that more equitable? This system today is distorted; the poor are expected to pay as much taxes as the rich,” Mr. Enrile said.
Finance officials, however, said an ad valorem tax would be more difficult to administer.
“The same bottle of beer will be sold anywhere from P35-P100 in different sari-sari stores, groceries, restaurants and bars. If we don’t know their retail price, how do we detect their excise taxes?” tax commissioner Kim S. Jacinto-Henares asked.
Mr. Purisima added that the “regressive” nature of the current excise tax system served an important function.
“The high tax burden is especially to discourage the poor and the young from smoking and drinking since they are the sectors most vulnerable to their risks,” he said.
The Finance chief likewise contested the arguments of Senator Ferdinand R. Marcos, Jr. that since the “sin” tax bill would jack up prices and cut down consumption, it would put tobacco farmers out of work.
“Cigarette prices have gone up by as much as 99% since 1996 (when the NIRC was made). There were no jobs lost. It only created more profit for these companies,” Mr. Purisima said.
Health Secretary Enrique T. Ona was also present in the hearing to show the impact of alcohol and tobacco on public health care.
There are 17.3 million smokers in the country and they consume an average of 1,073 cigarettes per year, he said. Heavy cigarette use is directly correlated to six major illnesses, and the “sin” tax bill could add 10 to 20 years to a smoker’s life expectancy, he claimed.
Three more committee hearings are set for the excise tax reform bill.
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Source: Diana Claire J. Jiao, BusinessWorld (16 August 2012)
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