Sin tax doomed with high rates

By Macon Ramos-Araneta | Posted on September 19, 2012 |

 

Contending parties on the ‘sin’ tax proposal have been asked to look for a middle ground so that the Executive won’t ask Congress for a new bill once the measure fails to meet its P60-billion additional revenue target.
That was the proposal made by Senate President Juan Ponce Enrile who said the government can optimize the tax gains with a rate that would not encourage smuggling and diminish consumption.
He warned that imposing very high taxes on liquor and cigarettes will defeat the government’s twin goals of raising P60 billion in additional funds for health care and discouraging Filipinos from drinking and smoking.
He told Finance officials that pushing for a tax hike of up to 1,000 percent for alcohol and tobacco products is unrealistic because exceedingly high tax rates come with unavoidable costs.
“One of these is a decline in revenue collections from cigarettes and liquor because a drop in consumption will result in high taxes and, subsequently, high prices,” said Enrile.
While he agrees with Finance officials and health advocates that there is an urgent need to eradicate diseases from smoking and drinking, Enrile said the economics should also be factored in.
Tobacco farmers and manufacturers said there are jobs and livelihood opportunities that will be lost if the tax rate is increased unreasonably.
Smuggling will also prosper, Enrile said, noting that smuggled goods in the black market will fill the void if low-income consumers are left with no affordable choices.
He had cautioned the Finance officials that the Philippine Navy or even the entire Armed Forces would not be able to prevent smuggling, particularly in the country’s highly porous entry points in the South.
Anti-tobacco groups, however, decried the tobacco industry attempts to improve their image through “social responsibility projects” and partnerships with NGOs to increase legitimacy and improve public perception.
Romeo Marcaida, head of the Patient Navigation Program of the Philippine Cancer Society, said smoking is not just the leading cause of preventable death world-wide – it is the most preventable cause of cancer around the world.
Health Undercretary Ted Herbosa said the cost of treating the top four killers of Filipinos, all smoking related, amounts to P188 billion.
But farmer leader Benedict Montero said the sin tax hike will displace hundreds of thousands of jobs, and forego revenues that would have financed delivery of public health care services.(END)