Compromise on sin taxes sought

Administration lawmakers supported yesterday the move for a uniform increase in cigarette excise tax at the current structure, saying it is the best compromise between the proposals of the Department of Finance for indexation and shifting to the old ad valorem tax system.

Eastern Samar Rep. Marcelino Libanan has filed a bill that seeks a P1 increase of tax in all brands of cigarettes. He said this is "the best middle ground" in the ongoing tax debate which will guarantee the government P4.5 billion in revenue collections on the first year.

"This measure thus aims to increase government revenues notwithstanding possible consumer downtrading to cheaper brands, simplify tax administration and provide a long-term approach to tax increases that will help optimize future government tax revenue," Libanan said.

For his part, Batangas Rep. Hermilando Mandanas said the 1997 shift from specific to ad valorem tax will guarantee the government an increase in revenues from P14.9 billion to P16.02 billion.

"While the government has benefited under the current tax system, actual tax collection remained below official targets," he said.

Mandanas proposed a collapsing of the four brackets of taxes into two tiers.

Opposition lawmaker Cavite Rep. Crispin Remulla, however, said any proposal for a uniform increase of P2 on all cigarette brands is speculative.

"The government cannot afford to gamble on indexation or to revert to ad valorem," he said.

Salvador Mison, president of Basic Holdings Inc., a holding company of Fortune Tobacco Corp., recently told a forum that the proposal to shift back to the ad valorem tax system will guarantee the government more revenues of P2.6 billion annually.

He explained the ad valorem tax scheme will be based on the actual retail price of cigarettes in the market. — Paolo Romero