Senate secures 'consensus' on sin-tax issue

By Butch Fernandez, BusinessMIrror

Posted at Aug 23 2012 08:16 AM | Updated as of Aug 23 2012 07:17 PM

MANILA, Philippines - Senators secured a consensus to adopt a more “equitable” burden-sharing between alcohol and tobacco industry stakeholders under the P60-billion Palace proposal to raise more revenues from so-called sin taxes.

Sen. Ralph Recto, chairman of the Senate ways and means committee, explained on the eve of Thursday’s resumption of “sin” tax hearings that “what is important in the ongoing tax- reform deliberations is [for us to]come up with the effective tax rate.”

Recto earlier told reporters “it is the sentiment of majority in the Senate to come up with a tax structure that would benefit all players equally.”

As chairman of Senate committee reviewing the Executive branch’s plan to impose higher taxes on alcohol and tobacco products, he said he would “strive to make that fair as much as possible.”

Finance Secretary Cesar Purisima had said the government is not likely to realize its goal of reducing smoking among Filipinos even if it imposes extremely high taxes on tobacco products.

He also told a previous Senate hearing on the restructuring of the excise-tax system that recent experience proved that cigarette consumption even went up slightly despite increases in tobacco taxes and prices.

Purisima said cigarette prices from 2004 to the present increased by as much as 61 percent to 99 percent, but that consumption did not go down and instead went up. He was referring to tobacco-tax increases, which over the years have led to corresponding hikes in retail prices of locally produced cigarettes by as much as 99 percent, based on Department of Finance (DOF) studies. Republic Act 9334 mandates tax increases on tobacco and alcohol products starting January 1, 2005, and every other year until January 1, 2011. The DOF is proposing a new round of excise-tax hikes for tobacco and alcohol.

?A bill approved by the House of Representatives provides for cigarette-tax increases of 708 percent, while certain alcohol products are given concessions in the form of tax reductions in the initial period of the bill’s implementation and a mere 32-percent tax hike after two years.

PMFTC Labor Union (PMFTCLU) President Rodelito Atienza had asked, “If the declared objective will not be achieved, why is the DOF willing to cause so much injury to millions of stakeholders in both alcohol and tobacco industries who stand to lose their jobs or source of livelihood?”

Blake Dy, vice president of Associated Anglo-American Tobacco Corp., said the government was being “heavy-handed” needlessly because there are alternative ways of raising the money without causing such radical displacement.

“I think the government should maintain an open mind on this matter. There are a number of ways to achieve the government’s objectives without destroying the industry.” Dy added.