29 November 2017


Senate bill on tax reform rejected, tagged pro-rich, anti-health by economic, health leaders


Economic, finance and health leaders expressed disappointment  today over the failure of Senate Bill 1592, or the Senate version of package 1 of tax reforms for catering to self-interests,  failing to correct the structural problems, falling short of revenue goals to match development spending, and excluding health tax measures , particularly an increase in tobacco tax.


Action for Economic Reforms senior economist Jo-Ann Diosana criticized the Senate bill favoring the rich by lowering the fuel taxes mainly consumed by the upper classes,  lowering the excise tax on luxurious automobiles, exempting from value added tax (VAT) or giving VAT zero rating excise to vested interests in real estate, economic zones and free ports, among others.


Former economic planning secretary Prof. Solita Monsod of the University of the Philippine School of Economics criticized the Senate for not including tobacco tax increase when it is a most effective measure to generate hefty revenues and to promote health, as evidenced by scientific studies.


Monsod also criticized too many exemptions that were retained in the VAT provisions of the Senate bill. She cited the conflict of interest in the Senate bill with the introduction of zero-rating for suppliers of goods and services to economic and tourism zones, and free ports.


Angara and his father, former Sen. Edgardo Angara were the authors of the Aurora Pacific Economic Zone while Sen. Dick Gordon who proposed the inclusion of zero-rating in tourism zones hails from Subic.


“When Sen. Ralph Recto raised the documentary stamp tax (DST), no one bothered to ask the effect on capital markets and other business and financial transactions. It is disgusting that they exempted the real property transactions only because there is one senator with self-interest on real property,” Monsod added.


Former finance secretary Gary Teves said some improvements that can be done in the bicameral deliberation of the measures should be on the DST because this would possibly affect overseas Filipino workers.


Economist Gilbert Llanto, president of the Philippine Institute for Development Studies (PIDS) explained: “The arbitrarily higher DST creates friction costs in capital markets that will aggravate our failure to develop this sector. The tax reform proposal presented to us a wonderful opportunity for reform but we seem to have missed the opportunity to make a more efficient and equitable tax system. I call attention to the VAT because it creates distortions. Failure to index certain taxes creates rigidities. Worse, we are introducing more inequity in the system with the automobile tax on lower priced vehicles higher than pricey vehicles.

Atty. Benedicta Du-Baladad, president of the Financial Executives Institute of the Philippines (FINEX) said the Tax Reform for Acceleration and Inclusion (TRAIN) could have been an opportunity to attract investments in the country to provide employment to the people and additional incomes and savings to participate in the financial market.


Baladad said the DST collections amount to PhP80 billion pesos, PhP39 billion pesos of this from capital transactions.


“By doubling the DST rate, we raise transaction costs. It does not have clear reason but to raise revenue. However, this makes us less competitive with our ASEAN counterparts. The intention of the tax reform was to simplify, make it more equitable, and make ourselves more competitive. However, the exercise has become revenue-driven,” Baladad added.


In the press conference held today, former health secretary Dr. Paulynn Ubial tagged the Senate bill as anti-health.


“If we do not increase the tobacco taxes, there will be 200,000 new smokers every year until 2022 when we will have 1 million new smokers. That’s mostly the young and the poor. This will result in 2,000 deaths per year,” Ubial said.


Teves said the bills of Sen. Manny Pacquiao and Sen. JV Ejercito to raise tobacco taxes would really have helped the government raise revenues for universal health care, rebuilding Marawi, funding the transfers. “Tobacco tax increase should be included in second package of tax reforms regardless of the political environment,” he added.


Meanwhile, Dr. Antonio Dans of the University of the Philippines College of Medicines and National Academy of Science and Technology warned that one of the problems of the current version of TRAIN is the lack of earmarking to address one of the chronic problems of the country: malnutrition. Specifically, he said, there should be an earmark for fruits and vegetables.


“The tax collection from sugar-sweetened beverage (SSB) should be earmarked to address the insufficient caloric intake of 69 million Filipinos that leads to involuntary hunger for 14 milllion Filipinos, then on to undernutrition among 11 million Filipinos. In adults, chronic energy deficiency affects 6.35M people. In children, wasting affects 4.7M. The tax will decrease obesity by 90,000 persons. Without the earmark, this is what will happen,” explained Dans.


He emphasized that TRAIN is anti-health because it will result in 150,000 additional undernourished Filipinos, 200,000 additional smokers, 2,000 preventable deaths, and increase in the incidence of six out of the top 10 causes of mortality in the country.


“This is a sad picture, not even considering the inflationary impact. Health is wealth, even more important than monetary wealth. Because of this, we decry the non-inclusion of tobacco tax and earmarking to address malnutrition,” Dans added. (END)