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House panel approval of ‘sin’ tax bill uncertain


MANILA, Philippines - Approval of a measure seeking to raise the tax rates on alcohol and tobacco products looks uncertain with congressmen divided over its urgency. Antique Rep. Exequiel B. Javier, ways and means committee chairman at the House of Representatives, said current economic conditions dictate that higher taxes be deferred until less difficult times. But committee vice-chairman Camarines Norte Rep. Liwayway P. Vinzons-Chato said changes to the tax system governing the so-called "sin" products were necessary given the billions in taxes that remain uncollected because of its complexity. House Speaker Prospero C. Nograles, meanwhile, is throwing his support behind the measure to allow the government to raise the revenues that will finance projects meant to spur growth at a time when the economy is slowing. At a committee hearing Tuesday, Mr. Javier suggested postponing discussions on several measures seeking to raise "sin" tax rates and to restructure the system since current economic conditions are not conducive for higher taxes. "We will consolidate these bills, come up with a neutral tax rate in order to make sure this bill is not favoring a company over another. But first, we have to decide if now is the time to talk about this," he told BusinessWorld at the sidelines of the committee hearing. Mr. Javier said during the hearing that raising taxes at this time runs counter to what other countries are doing to stimulate their economies. "I haven’t heard of countries imposing taxes ... they have been giving out bail-outs, stimulus packages." "Also, raising taxes will discourage spending by the consuming public, and this will lead to reduction in volume, sales and in effect lower revenues for the government." At the same hearing Ms. Vinzons-Chato, who used to head the Bureau of Internal Revenue, said she favored the simplification of the "sin" tax structure. Cigarettes are classified into low-, mid-, high- and premium-priced based on their 1996 net retail prices. Alcohol products are also classified into several tiers. "Lots of taxes are not collected ... due to the multi-layered taxation scheme. Collection is inefficient because there are so many tiers," she told the panel. Mr. Nograles, meanwhile, gave a commitment that the House would act on "safety net measures." In a statement, he said measures to adjust the "sin" tax rates will be "seriously considered". "This is good for the economy and the health of the people," he added. House Bills (HB) 3759, 3787, 3917 and 2551 all aim to increase "sin" tax rates. HBs 3759 and 3787, authored by Quezon Rep. Danilo E. Suarez, also seek to amend the current excise tax structure by imposing a unitary tax system. Under Mr. Suarez’s bills, cigarettes will be taxed at a rate of P14 per pack; distilled spirits at P20.38 per proof liter; wine at P502.41 per bottle; and fermented liquors such as beers at P21.52 per liter, provided that two years after the effectivity of the new law and every year thereafter, the tax rate shall be indexed to inflation. Mr. Suarez said his bills were hinged on a "double-bladed approach": providing additional revenues for the government (P34 billion in estimated incremental revenues for cigarettes and P17.375 billion in estimated incremental revenues for alcohol products), and lessening government spending on health programs. Finance Secretary Margarito B. Teves expressed support for Mr. Suarez’s bills. "The tax system will be much simpler, and easier to administer than the present tax system," he told the hearing. "As much as a considerable amount of the budget is earmarked for infrastructure spending this year, we believe there is a need for additional spending. We are currently faced with retrenchment problems which the government must address. Contributions for spending, such as this bill, are needed," he added. Industry players, meanwhile, had mixed reactions to the proposed legislation. Lawyer Cynthia de Castro, legal counsel for San Miguel Corp., said the company had no objections to the simplification of the tax structure and to higher taxes. Susan M. Resurrecion, assistant vice-president at La Suerte Cigar and Cigarette Factory, said the firm supported new taxes provided that locally-manufactured and international brands were subjected to different tax schemes. Olivia Lim-Aw, president of Destileria Limtuaco & Co. Inc., favored the removal of the multi-layer tax structure and imposition of a single tax system on alcohol but opposed any tax increases. — J. F. S. Valdez, BusinessWorld
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