Purisima: Sin taxes to solve monopoly, tax efficiency issues

Raising sin taxes shoots two birds with one stone, according to the Department of Finance: monopoly and tax efficiency. The need to raise the six taxes on alcoholic beverages and tobacco products will help improve the Bureau of Internal Revenue’s tax efficiency rate and the stranglehold of practically a single company that makes cigarettes, said Finance Secretary Cesar Purisima. At present Purisima said one company controls the Philippine tobacco industry, a situation that needs to be changed in order to level the playing field, according to the Finance chief. “Right now, there’s practically one company having 90 percent market share. There are appendices that prevent entry of new competitors," Purisima told a private forum on Open Budget at the Asian Institute of Management in Makati City on Monday. According to PMFTC, the new company formed by merger between Philip Morris in the Philippines and Lucio Tan-owned Fortune Tobacco Corp. in February 2010, they control 90 percent of the local market. "We need to change the brackets, we need to index inflation so that the tax collections become buoyant. Those are things that we are open to, but right now that mandate that has been given to me by the President is to improve tax efficiency," the Purisima said. Once the sin tax measure is in place, the government estimates the BIR may raise P19 billion to P20 billion in the first year, P30 billion to P40 billion in the second year, P40 billion to P50 billion in the third year and P60 billion to P70 billion in the fourth year. The current tax structure is inequitable because tobacco products that sell at the same retail price can be taxed differently, depending whether that product was introduced before January 1997 or after 1997, according to the Finance Department. The government is trying to finance and contain the 2011 budget deficit at roughly P300 billion or 3.2 percent of the gross domestic product. — VS, GMA News