House panel bats for current excise tax structure

MANILA, Philippines -  A sub-committee within the House ways and means committee has recommended the adoption of a draft law that aims to retain the current excise tax structure on alcohol and tobacco products.

The recommendation, which was contained in a report by the sub-committee on national internal revenue headed by Ilocos Sur Rep. Eric Singson Jr. and signed by the sub-committee members, imposes automatic and moderate tax increases starting in 2013 up to the year 2017.

Under the approved committee report, increases on the tax rates ranging from four to 10 percent will be imposed on the four tax tiers over five years, with the lowest tier absorbing 10 percent. The increases will be done every other year over the five-year period.

“A new excise tax law must be passed to address the public’s needs,” Singson explained.

“However, this must be balanced by the need to protect the livelihood of the more than five million and 2.7 million people dependent on the alcohol and tobacco industries, respectively. The government simply cannot afford an increase in the number of unemployed Filipinos, particularly at this time of financial uncertainty. Now is not the time to conduct experiments which could adversely affect people’s lives by pushing for an excise tax structure which has no proven track record,” Singson said.

Singson added: “Steep and abrupt increases in excise taxes have done more harm than good in other countries such as Malaysia and Singapore. A marked increase in smuggling and trade in counterfeit cigarettes followed the imposition of steep tax increases in those countries and their governments did not realize the projected revenues because no taxes were paid on these unauthorized products. Obviously we do not want this to happen. It defeats the very purpose for increasing the tax rates and penalizes the legitimate tax-paying industry.”

Singson said their recommendation for automatic excise tax increases do not cover distilled spirits in view of the Dec. 21, 2011 ruling of the World Trade Organization (WTO) against the Philippines.

The world trade body ruled that the Philippines should “bring its measures, found... to be inconsistent with the GATT (General Agreement on Tariffs and Trade) 1994, into conformity with its obligations under that agreement.”

“I presume that the Department of Trade and Industry (DTI) is still holding talks with the alcohol industry on the terms and reasonable time for compliance,” Singson concluded.