Business Business News Feud on sin tax still rages in House
Feud on sin tax still rages in House
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- Published on Monday, 09 July 2012 00:00
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The House ways and means committee can’t seem to get its act together over the controversial question of raising taxes on sin products, particularly cigarettes.
In a meeting on May 12, the committee “mangled” the original provisions of HB 5727 sponsored by Cavite Congressman Joseph Abaya.
The drastic revisions, which practically left the original bill without its substance, raised the hackles of the committee’s vice chairman, Antique Representative Paulo Javier.
He declared imposing extremely high taxes on local cigarettes and liquor could imperil revenue targets from excise tax collections and lead to a rise in smuggling incidence in the country, the vice chairman of the House committee on ways and means said.
Rep. Paolo Javier of the lone district of Antique said the bill recently approved by the House of Representatives that seeks to impose steep excise taxes, particularly on tobacco products, presents several problems, instead of solutions, to the government’s goal of raising more revenues for its universal health care program.
“What we need is moderation. I’m not against increasing the tax on these so-called sin products but what we want is a moderate and not an abrupt increase,” the congressman declared.
“What’s the guarantee that the volume of sales (of cigarettes) will be maintained if they increase the price?....Smuggling incidence will get worst,” Javier added.
The House-approved version seeks a 708% tax hike on low-priced cigarettes, and it aims to raise an additional P31 billion in revenues from excise taxes, which would be used mostly to augment funding for the government’s universal health care program, according to its proponents.
Javier noted that there was no guarantee that tax collections will increase if the bill in its present form is passed into law because factors such as the rise in smuggling cases and the decline in sales of local products could jeopardize revenue targets.
The Antique lawmaker affirmed fears of a rise in smuggling cases as a result of a very high tobacco tax hike.
A small cigarette manufacturer, the Associated Anglo-American Tobacco Corporation (AAATC) discussed the potential of black market to rule over the country should the tobacco tax hike bill is passed into law.
AAATC vice president Blake Dy said that the high tax to be charged on cigarettes will only give consumers no option but to shift to the cheaper smuggled cigarettes.
The worst case would be that the legitimate cigarette market will go down by 50 percent, while the best scenario on market reduction is 26 percent, according to the industry.
Further, smuggling and counterfeits will take the place of the legal cigarettes, Dy, whose company manufactures the low-priced brands, stressed. He said his company would close shop with such an exorbitant tax hike , which never happened anywhere in the world.
Under the excise tax bill approved by the House of Representatives before Congress adjourned sine die last month, low-priced cigarettes will be taxed at 708 percent; mid-priced brands at 297 percent and high-priced brands at 150 percent by 2014. Cigarettes in the low-priced tier currently taxed at P2.72 per pack will pay P12 in 2013 and P22 in 2014. Mid-priced brands now paying P7.56 in tax and high-priced brands paying P12 will both be taxed P28.30 in 2013 and P30 in 2014 under the House version.
Premium imported brands will enjoy a tax holiday on the first year of the law’s implementation and a measly 6 percent tax increase in 2014.
Javier pointed out this disparity in the taxes imposed on local and imported brands. “The premium priced cigarettes will drop its prices.
