The Senate ways and means committee is out to design a tax regime that will be fair both to the government and the public on the matter of coming up with a law on excise tax or “sin” products, Senate President Juan Ponce Enrile said yesterday.
Enrile said the committee chairman, Sen. Ralph Recto, made the assurance as they both shared the position in enacting a reasonable increase on taxes of sin products — liquor and cigarettes — in which the government is expecting an additional P60 billion revenues yearly.
“Recto and I discussed this. To be fair to Recto, he’s a reasonable man. He said he will design a tax regime that will be fair to this government and to the people so that we will not destroy the source of income for the government,” the Senate chief said.
Enrile himself emphasized that he does not oppose the bill per se, insofar as providing needed additional income for the government. He said he is only after providing an acceptable increase for the consuming public and realistic target for the Aquino administration.
“I will state for the record, I am in favor of increasing the so-called sin taxes up to a reasonable level. What that reasonable level will be determined by us. I am not against it. What I am against is the distorted nature of the proposal coming from the House of Representatives and coming from the Finance sector of the government.
“When you design a system of taxation, the tax must be equitable. There must be an equitable distribution of tax burden. You cannot tax the poor similar to the rich because their capacity to pay the tax is different,” he said.
“That is why we will study this and we will come up with a reasonable measure that will not shock the market and the economy. People will not stop smoking. They will find a way to get the product like smuggling and we have experienced it in this country. The trouble with us is that we did not learn from the past. Can the government guarantee that they can handle this? How much will be the cost to the government? So that the supposed high revenue coming from the source could be assured. I doubt whether you are going to deal with arresting smuggling with the high regime of cigarette products will come by, the cost of enforcing the law will not eat up the incremental revenue that we think we will get from the government to provide other government services,” he explained.
Recto’s committee is due to hold its last public hearing and hopefully come up with a panel report for floor deliberations that is expected to last until October.
Recto is targetting to have the reconciled versions of the bill approved by the Senate before the end of the year.
Meanwhile, Sen. Antonio Trillanes IV yesterday asked finance and health officials to stop confusing the public on their contradictory positions on the excise tax, which is to raise additional revenues and reduce consumption.
Speaking from experience of his days as a Navy officer, Trillanes cited rampant selling of smuggled cigarettes in Mindanao which he suspects continues up to now, given that the government does not have the resources to address the problem.
Trillanes, a member of the ways and means committee, said the exorbitant tax increases being pushed by the Finance and Health departments on cigarettes and alcohol will only aggravate the problem of illicit trade in the Philippines.
“Smuggling is continuously developing in Mindanao. Malaysia and Mindanao are not far from each other, and our Navy cannot control the backdoors,” he said in a radio interview, as he recalled his own experience when he was assigned in Zamboanga.
“The question is, are we efficient to curb smuggling? No, we are not,” the senator remarked, saying he agrees with Enrile that tax increases must be studied carefully, and the ideal rate the market can absorb must be identified so that smuggling would not worsen.
Trillanes was a former lieutenant senior grade and was acting commanding officer of a patrol gunboat in the Navy where he served from 1995 to 2000.
His Navy unit then handled dozens of cases of smugglers, human smugglers and illegal loggers in the waters off Batanes, Ilocos, Cagayan, Isabela, Zambales, Scarborough, Quezon, Bicol, Palawan, Mindoro, Romblon, Iloilo, Cebu, Zamboanga Peninsula, Basilan, Sulu, Tawi-Tawi, Davao and Maguindanao.
In the radio interview with dzXL’s Ely Saludar, he attested to Enrile’s previous statements on the country’s inability to regulate illicit trade.
During the committee hearings, Enrile said the government cannot collect what it wants to collect because of a likely boom of the black market once the bill becomes a law.
“We are one with Senator Enrile on this. If this will pass into law, smuggling will be the consequence. Are we efficient in addressing smuggling? No we are not. When I was assigned in Zamboanga, I witnessed the so-called ‘blue-seal’ smuggled cigarettes enter the country,” Trillanes said.
Trillanes added that government is confused on what it wants to do with the excise tax bill — referring to opposing proposals from the DoF and the Bureau of Internal Revenue (BIR) on one hand and the DoH on the other hand.
“If this is a tax measure, then DoF and BIR must be the only agencies concerned with this issue. Let’s not put any drama to this,” he said.
"The DoH, on the other hand, says it wants to reduce smoking consumption and yet desires that the DoF collect additional revenues of P60 billion so that it can use it for universal health care," Trillanes pointed out.
Commenting on the DoH position that the excise tax bill is also a health measure, he challenged the government to also start taxing unhealthy food products like fatty and sweet foods, among others.
He stressed that the objectives of the DoF-BIR and the DoH are contradictory, pointing out that a very high tax will not generate the projected revenues, and thus offer no substantial funds for health care.
What is reality here, Trillanes reiterated, is that smuggling will intensify.