Int'l tax expert warns gov't against high taxes

MANILA, Philippines - The chief of the US-based International Tax and Investment Center (ITIC) has warned the Philippine government against high taxes on fast-moving goods like cigarettes, saying this would definitely give rise to illicit trade.

Daniel A. Witt, president of ITIC, is in the country for the 9th Asia Tax Forum at the Makati Shangri-La Hotel, with finance and tax experts from various governments around Asia   in attendance.

Witt predicted a tax shock to occur if taxes are raised abruptly and the amount is too high.

“With fast-moving goods, you need to be aware of the risks of illicit trade. If you raise taxes too high and too fast you create a tax shock and you will push the legitimate market to illegitimate market,” the head of the international tax policy think tank stressed.

Witt instead advised the Philippines to raise taxes gradually so as to avoid the proliferation of the illegal market. “Do it in a gradual way so you don’t destabilize the market and advance your tax objective,” he said

He told an interview on ANC’s Inside Business Tuesday that tax reforms in the Philippines should be aligned with global standards and it should be done moderately and gradually.

 He also noted that imposing gradual tax increases would prevent the Philippines from losing investors to its Asean neighbors ahead of the region’s planned integration by 2015.

The Senate is currently working on the draft law increasing the excise taxes on tobacco and alcohol products, to which the Department of Finance (DOF) is pushing for as high as 1000 percent increase on low-priced cigarettes for additional revenues to finance universal health care.

Yet, senators led by Senate President Juan Ponce Enrile had warned the DOF on the likely occurrence of smuggling under an excessive tax hike.

Since 1991, Witt has led over 30 delegations to Russia, Kazakhstan, Azerbaijan, Vietnam, Ukraine and Libya to hold meetings with senior finance, taxation, customs, and parliamentary officials. He also organized the Iraq Tax Reform Project that supports the Ministry of Finance and Ministry of Oil reform initiatives. Witt is the cofounder of the Asia Tax Forum that regularly brings together top tax policy officials from the Asia-Pacific region.