DOF eyes back-channeling to push revenue measures

MANILA, Philippines - With Congress in recess, the Department of Finance (DOF) tries to make a last-ditch effort to get lawmakers into passing three major revenue measures aimed at propping state coffers, officials said during the weekend.

A ranking DOF official said the department would resort to “back-channeling efforts” and reiterate appeals to senators and congressmen to approve pending proposals seeking to raise sin taxes on alcohol and sin products, a measure seeking to rationalize the country’s fiscal incentives and another measure seeking to simplify the net income taxation scheme.

“We will try to do that while Congress is in recess,” said the official.

Another official said the Finance department is still “hopeful that back-channeling efforts would work.”

Congress has a few remaining sessions this year, from Nov. 9 to Nov. 21 and again from Dec. 1 to Dec. 18.

The Department of Finance is willing to settle for an interim two-tiered sin tax rate on alcohol and tobacco products before having a single-tax rate for all products. The idea is for it to be a phased-in increase until there is a single rate by 2014.

According to government estimates, the proposed amendments to the sin tax law could raise as much as P19 to P20 billion in the first year of implementation, P30 to P40 billion in the second year, P40 to P50 billion in the third year and P60 to P70 billion in the fourth year.

The DOF said the current tax structure for cigarettes is inequitable because products having the same current net retail price can be taxed differently if one was introduced before January 1997 and another one after 1997.

Aside from the sin tax measure, the government is also pushing for the measure that would rationalize fiscal incentives given by state agencies to investors and also the measure seeking to simplify the country’s net income taxation scheme.

The government expects to raise P10 billion a year from the proposed fiscal incentives measure and another P6 billion a year from the measure seeking to simplify the country’s net income taxation scheme.

The department has been struggling to contain the government’s swelling budget deficit. This year, it expects the deficit to hit P250 billion from a previous program of P199 billion.

Finance Secretary Margarito Teves said last week that if revenues do not improve, the government may end up with a P300 billion budget deficit or 3.96 percent of gross domestic product. This is P50 billion more than the budget ceiling of P250 billion for 2009.