“The Aquino administration continues to support the indexation of sin taxes on tobacco and alcohol to inflation as a key reform measure. It is expected to generate about P60 billion, of which about P33 billion that we can use for social services for the poor, particularly universal healthcare for the second quintile of poor households,” he said, noting that the first quintile is already being fully assisted starting with the 2012 National Budget.
Strange that the story about the decision of the Bureau of Internal Revenue (BIR) to apply the 20 percent withholding tax on the celebrated or notorious (depending on which side you are on) PEACe Bonds did not merit space in the major dailies.
The major dailies like the Philippine Daily Inquirer and the Philippine Star did not run the story though it is an explosive one. The PEACe Bonds controversy, which happened in 2001, continues to hound its main characters till today. During the resistance to Gloria Macapagal-Arroyo, sections of the opposition cited the PEACe Bonds as one of the blatant cases of corruption during her long term.
All told, the total cumulative revenues to be generated from the sin tax reform will amount to more than PHP530 billion pesos in six years (2012-16). For the first year alone, the revenues to be collected will reach PHP 60.63 billion pesos, half of the amount to be contributed by the tobacco taxes.
Furthermore, health objectives will be satisfied. We can expect a reduction of approximately two percentage points in smoking prevalence, and we can generate substantial funds to finance the government’s program for universal health coverage.
Recently, the Philippine Daily Inquirer’s editorial titled Taxing vices (27 August 2011) made this conclusion: “So whether it is to raise taxes or curb vices, this is one piece of legislation that merits serious consideration by Congress. And the time to enact it is now during the current session, when our lawmakers are still not too preoccupied with ensuring their reelection.”
A week earlier (19 August 2011), Inquirer columnist Raul Pangalangan explained through his essay the essential features of the sin tax reform, namely the indexation of the specific tax to inflation, the adoption of a simplified unitary tax, and the removal of the discriminatory price freeze classification for certain tobacco products, where tax rates are pegged at 1996 prices. The Inquirer editorial cited above also discussed these attributes. Professor Pangalangan extends his work to tackle the “legal sophistication of the tobacco industry.”
The Pangalangan piece was an effective one, if we go by Mao’s statement that to be attacked by the enemy is a good thing. Someone rejoined, through a letter to the editor, which the Inquirer published.
While some pioneering civil society groups have long been campaigning for fairer tax systems, the critical role of tax in achieving development and social justice has often been neglected by civil society in the North and the South. For many, tax is a complex topic, best left to ‘experts’. But this need not be the case.
Tax may appear technical, but it is an issue too critical to bypass. Fair and effective tax collection is essential for raising the revenue to deliver services that citizens need. It is a powerful tool for redistributing wealth within society to address poverty and inequality. And tax is the glue that builds accountability of governments to their citizens.
The toolkit is not intended to be read from cover to cover in one sitting. It is designed to allow you to dip in and read the sections that are most relevant to your level of experience and knowledge, your interests and your context. We hope there’s some useful material here for everyone and that it inspires you to take forward, or start, your tax justice advocacy. Around the world, organisations and networks are demanding tax justice in growing numbers. Together we can create a sea change in tax policy that genuinely benefits those living in poverty and creates a more equitable distribution of resources, North and South.
Last week, Representatives Victor Ortega (1st District La Union) and Eric Singson (2nd District Ilocos Sur) defended tobacco interests, arguing that there is no need to correct the excise tax on tobacco and cigarettes. They repeated the call earlier made by Phillip Nelson, President of Philip Morris and Fortune Tobacco Corp. This if-ain’t-broke-don’t-fix-it argument is wrong. The system is really in shambles: the rates are not keeping up with inflation; some brands are still taxed based on their 1996 prices; and we have a complicated four-rate tax structure.