What’s wrong with indexing?

As one of the unfortunate many who will surely be burdened by the government’s proposed new tax measures, I can’t help but ask myself why our very own government is making us suffer.

Ok, the government is cash-strapped. But why should that be my problem? I haven’t contributed to the mismanagement of our resources so why am I being made to pay for it?

Improving tax collection efficiency seems better said than done, which makes the imposition of new taxes a foregone conclusion. The only question that remains to be answered is what new taxes should be imposed without killing the goose that lays the golden egg.

Taxing text messages will surely be unpopular in Congress. So now, government is once again turning to the so-called sin products, a move that would be easy to justify since taxation is also a means to regulate unwanted businesses.

Finance officials are talking of indexing sin taxes or increasing the taxes imposed on sin products like cigarettes and liquor in proportion to the increase in the inflation rate. For instance, if the increase in inflation is 10 percent, the excise tax on cigarettes and beer will likewise be increased by 10 percent. If the four tiers or classes of cigarettes namely low, medium, high, and premium are paying an excise tax per pack of P1, P5, P8, and P12 respectively, a 10 percent indexation will increase the taxes paid to P1.10, P5.50, P8.80, and P12.12. So what’s wrong with this scenario?

Government is reportedly looking at a 37.7-percent increase representing the cumulative inflation from 2000-2003 alone. If this happens, the new tax rates per tier will be P1.54, P7.71, P12.34, and P18.51.

Notice that the gaps between the tiers became wider. Nothing wrong with that, except that an already burdened consumer base whose income does not increase in the same proportion as the inflation rate will either shift to a lower priced classification or stop buying cigarettes or beer altogether.

If this happens, then government might end up collecting less taxes from sin products. In short, government, by increasing taxes on sin products, will end up killing the goose that lays the golden egg.

Instead of indexation, government should instead impose a fix amount of increase, say P1 for all tax tiers. This way, cigarette manufacturers share in the burden equally.

PNB Turns 88

Congratulations are in order for the Philippine National Bank (PNB) as it turns 88 tomorrow. To mark this very important milestone in PNB’s history, the bank opened a trade fair at the PNB Financial Center in Pasay City last Monday, kicking off a diverse mix of events and activities that will surely make the weeklong celebration memorable.

Dubbed as "Galleria Pinoy," the trade exhibit features some of the best manufacturers of local handicrafts, among which are: Narda’s, Patis Tesoro, and Ugu Bigyan. DOT Secretary Roberto Pagdanganan, who was the guest of honor during the opening of the trade fair, lauded PNB for showcasing some of the country’s best products and at the same time, undertaking an activity that can eventually translate to job creation.

While the trade exhibit easily became an instant hit among PNB employees and clients, the anniversary celebration’s principal highlight is happening on Friday yet. Following the footsteps of highly successful global companies such as Procter and Gamble, IBM, Citibank and Microsoft, PNB is inviting everyone who have been part of the company’s roster of employees to a grand alumni homecoming at the bank’s Banking Hall on July 23.

Through the years, the bank’s hallowed halls have been home to some of the country’s top business and political leaders including two Senate presidents, four senators, six justices of the Supreme Court, three finance chiefs, three BSP governors, and a good number of other Cabinet secretaries. Many of those who did not join the government became presidents of some of the best-run companies both here and abroad. Serving as either presidents or chairmen of PNB, some of these distinguished gentlemen will gather in one venue to join the rest of their fellow Philnabank alumni to reminisce their past memories in the bank.

Among those who have reportedly confirmed their attendance to the homecoming are Senator Joker Arroyo, former BSP Governors Jaime Laya and Gabriel Singson, former Chief Justice Andres Narvasa, former NEDA directors General Placido Mapa and Gerardo Sicat, former Finance Secretary Vicente Jayme; and bankers Panfilo Domingo, Feliciano Miranda, Arsenio Bartolome and Peter Favila. Also expected to make an appearance is current DBP president Simon Paterno, who began his career in PNB. Former RCBC president Valentin Araneta and former GSIS president Federico Pascual are also said to be coming, both being former senior officers of PNB.

Not only will the event be one of the biggest gatherings of banking superstars this year: it will likewise be an effective marketing tool for the fast-recovering bank. One can only imagine just how effective all these banking personalities will be as endorsers of PNB’s recent accomplishments. Among the bank’s latest achievements: it ended 2003 with a net income of P168 million, a complete turnaround from the yearly losses the bank was suffering from since the 1997 Asian financial crisis.

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