An ally of President Aquino at the House of Representatives has warned against a possible decrease in government revenues as a result of a poorly crafted sin tax bill.
Antique Rep. Paolo Javier felt that the imposition of “extremely” high taxes on local cigarettes and liquor may yield negative results even as the vice chairman of the House committee on ways and means said the ill-advised measures stipulated in the sin tax reform bill might just imperil revenue targets from excise taxes.
Javier foresaw an imminent rise in smuggling if local manufacturers of sin products were made to pay taxes that would be passed on the consumers by retailers.
The Antique legislator averred the recently approved bill rationalizing the tax computation system resulting in a 708-percent increase in taxes, particularly on tobacco products, presented several problems rather than solutions to the government’s top agenda of sourcing funds to bankroll programs in universal health care.
“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-percent tax hike on low-priced cigarettes and aims to raise an additional P31 billion in revenues from excise taxes.
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 Corp. (AAATC) voiced out fears that the black market would dominate the industry if the bill is enacted.
AAATC vice president Blake Dy said the high tax to be charged on cigarettes would give consumers no option but to shift to the cheaper smuggled cigarettes.
The worst case would be that the legitimate cigarette market would shrink by 50 percent, while the best scenario on market reduction is 26 percent, according to the industry.
Further, smuggled and counterfeit brands will usurp the place of the legal cigarettes, said Dy, whose company manufactures the low-priced brands. He said his company would close shop with such an exorbitant tax hike, which has 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 P2.72 per pack will pay P12 in 2013 and P22 in 2014. Mid-priced brands now paying a P7.56 tax and high-priced brands paying P12 will 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 bill’s implementation and a measly six percent tax increase in 2014. Javier pointed out this disparity in the taxes imposed on local and imported brands. Fernan J. Angeles
Source: www.tribune.net.ph
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