In a privilege speech last Wednesday, Rep. Exequiel Javier, former chairman of the House ways and means committee, assailed Department of Finance (DOF) acting Assistant Secretary Ma. Teresa Habitan for her memorandum criticizing Congress’ alleged failure to reclassify old brands of cigarettes manufactured specifically by Fortune Tobacco Corp., which, she said, resulted in billions of pesos in foregone revenues.
Javier said the memo of Habitan clearly shows her lack of understanding, if not total ignorance, of the legislative history of the excise tax law on cigarettes. He stressed it is not yet time for Congress to enact a new round of increase in excise taxes.
He said Habitan herself admitted that her computation were based on the NCSO (National Census and Statistics Office) price survey commissioned by the DOF, which was a component activity of the "Fiscal Policy Analysis Activity (FPAA), a USAID-funded project."
"By mere mention of USAID, it can be easily deduced that this price survey was done under the auspices of the AGILE project, a much maligned US lobby group in the Philippines," Javier said.
He added: "In fact, wasn’t this group recently booted out of government agencies like the DOF after the Senate inquiry established that AGILE agents were undermining Philippine sovereignty by pushing the policy agenda of the US?
Javier believed that because of AGILE’s influence on DOF data, the estimated tax losses contained in Habitan’s memo were attributed only to Fortune Tobacco, a local company, and to the exclusion of multinational firms and their erstwhile local partners.
"Habitan should be made to explain why she singled out a local company when there are many other cigarette firms whose products could also contribute a significant slice of excise tax revenue," he emphasized.
He pointed out that by attributing the potential revenue losses to a single company like Fortune, Habitan deliberately or unwittingly failed to show the whole picture of the total revenue that may be extracted from the entire tobacco industry.
"Meanwhile, it was clear that despite Habitan’s touted USAID data, the DOF failed in the past four years to capture additional taxes from the new cigarette brands of La Suerte Cigar and Cigarette Co. With this serious act of omission in failing to implement a law (RA 8424) that cost government nearly P3 billion in lost revenues from La Suerte alone, DOF officials, past and present, should be prosecuted for plunder, if not economic sabotage," Javier said.
He said Habitan’s memo is aimed at pressuring Congress to pass the new bill on sin taxes. "The DOF should first implement existing tax laws before it convinces Congress to act on any new tax measures."
He said the tobacco industry is an overtaxed industry, paying no less than P85.5 billion in excise taxes since 1997 when RA 8424 was enacted into law. "Yet, the industry must contend with the stringent laws on anti-smoking, which shrank the world of smokers, thereby reducing demand."