DOF OK with a two-tier sin tax scheme, instead of one

MANILA, Philippines - The Department of Finance (DOF) is willing to forego its earlier proposal to impose a single tax rate on tobacco and alcohol products just so it can collect much-needed revenues as soon as possible. Finance Secretary Margarito Teves told reporters after a dialogue with House of Representatives leaders that the department is willing to settle for a two-step system instead, after Ways and Means committee chair Exequiel Javier told him that imposing uniform taxes on all "sin" products would be "difficult." Simplifying the current four-tier arrangement for alcohol and tobacco products is expected to rake in around P20 billion in revenues for the government in the first year of implementation alone, the Finance chief said. "The sooner we have it the better because my blood pressure is shooting up," Teves said in jest. Cigarettes fall into four categories — low, mid, high, and premium — based on their 1996 retail prices with premium brands paying the highest taxes. Alcohol products also have similar categories. Under a simplified tax rate scheme, cigarettes will be levied 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. Two years after the proposed sin tax law is imposed, the tax rate will rise depending on inflation. Manila is currently experiencing "difficulties" brought about by the global financial crisis so the DOF needs the help of Congress in passing legislation that would help raise revenues, he said. Even though House-approved measures on the Simplified Net Income Taxation Scheme (SNITS) and the rationalization of fiscal incentives are already awaiting Senate approval, the government would be able to raise more money by simplifying taxation on sin products, he added. The Finance department has earlier expressed support for two bills authored by Quezon Rep. Danilo Suarez - House Bills 3759 and 3757, which seek to impose uniform taxes on alcohol and tobacco, respectively. The bills are still pending in the Ways and Means committee. A uniform tax system would impose problems, Javier said. However, Javier said he hopes to reach a "compromise" in further hearings on the proposals. The committee will resume deliberations on the measures next week. Should Congress fail to approve proposals to adjust sin taxes, the DOF can bank on other Congress-initiated measures that would bring in additional revenues for the government. Among these is another proposal by Suarez which seeks to lower the cost of short messaging services (SMS) to P50 centavos per text message from the original P1. Under the proposal, P5 centavos per text message will go to the government. Quoting Suarez, Teves said the measure, once approved, would bring in as much as P70 billion. While the Finance department has yet to thoroughly study the proposal, Teves said he would welcome any measure that would generate much-needed revenues for the government. - GMANews.TV