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"SIN" TAXES NO LONGER PENITENTIAL
The Philippine Star With the dismal collection from manufacturers of cigarettes and liquor falling short for the first nine months of the year by P1.12 billion despite the imposition of higher taxes on sin products, a serious review of how sin taxes are computed is in order. Just recently, a Congressional think-tank urged legislators to update the basis in the computation of excise tax slapped on sin products. In particular, it called for revising these products' net retail price schedules under the National Internal Revenue Code and the Tariff and Customs Code of the That's because from 1996 to 1997 alone, excise tax collections from sin products plunged sharply when the Comprehensive Tax Reform Program was implemented. Continuing losses The think-tank also forecast that collection of excise tax will further deteriorate by 2008, despite the implementation of Republic Act 9334, or the indexation of excise tax on sin products. Why is this so? The prescription in the Tax Code of the net retail price was based on 1997 prices of cigarettes and liquor on which tax rates are to be computed. The reality however, is that prices have gone up since the 1997 benchmark. This has led to significant revenue losses on the part of the national government as the Bureau on Internal Revenue cannot impose higher excise tax unless Congress revises the net retail price schedules specified under the Tax Code. Compared to its 1997 net retail price of P7.48 per pack, Philip Morris 100s is now sold at P20 and should be charged a higher excise tax; same with other brands such as Winston which is now at P19 compared to P5.55 a decade ago, while Hope is now selling at P13.50 from P5.86. The There certainly could be some room for increases in the excise tax on cigarettes. More importantly, since we are the only country in A simplified tax mechanism leaves little room for “mis-interpretation” in tax assessments. Misplaced optimism The Department of Finance says it expects excise tax collection from cigarette makers going up 3.62 percent to P27.78 billion this year, despite government's slow excise tax take. DOF's optimism seems misplaced when you think about the BIR's apparent difficulty in collecting taxes. Its excise tax take from cigarette makers fell 19.6 percent to P11.05 billion in the first half of the year from P13.75 billion a year ago. It's apparent that the issue is not just one of collecting proper excise taxes. The government and lawmakers should bear in mind that even with the graduated increase in the excise taxes for sin products, the BIR's excise taxes collections will not be improving as fast as the prices of the products itself. A law passed in December 2004 requires that the increase of the excise tax rate on alcohol and tobacco products be based on inflation. The law prescribes for an increase every two years until 2011. The base index was set in 2005. Cigarette and alcohol manufacturers however, found a way to get around it by advancing production in December last year. Since excise tax is charged once products are taken out of manufacturing plants, several makers increased stocks in warehouses to avoid the higher excise tax rates starting January this year. Major cigarette producers include Fortune Tobacco, Philip Morris Philippines Manufacturing Inc., and La Suerte Cigar & Cigarette Factory; alcohol producers, on the other hand, include Ginebra San Miguel, Tanduay Distillers, Consolidated Distillers of the The BIR has vowed to increase vigilance in plugging leakages such as what happened last year. But this seems to be misplaced since critical views are pointing on the basic structural flaw of the Sin Tax Law. Comfortable arrangement Understandably, giant tobacco and liquor corporations will be on a warpath over any changes in the current structure. The current use of different specific rates on cigarettes depending on their price bands, for example, has worked well for these big companies. Among local tobacco companies, Fortune Tobacco is the country's biggest cigarette manufacturing company owned by business tycoon Lucio Tan. Its brands include Hope, Champion, and Westpoint, among others. Unless a true review unfettered by vested interests takes place, let us not be surprised if in the coming years the BIR and BOC will repeatedly declare their inability to meet collection targets. Collegiate National Championship Final Four From the sixteen collegiate teams invited to participate in the Filoil Flying V Collegiate National Championship, we are now down to the “Final Four,” namely, Ateneo de Manila University Blue Eagles, UST Growling Tigers, The surprise of the competition is the entry for the first time in the Final Four of the STI Olympians. They made the historic advance by upsetting the Unigames champion FEU Tamaraws in a closely contested game. The STI Olympians is the reigning champion of National Athletics Association of Schools, Colleges and Universities (NAASCU). The semi-finals on Monday, 26th November, will held at The Arena, Winners of the Monday games will meet on Wednesday, 28th November, at the same venue to determine who will grab the coveted title of Collegiate National Champion. Losers will play in the first game for 3rd and 4th places. All semi-final and final games will be televised live by Solar Entertainment Basketball TV over Sky Cable. Watch and enjoy the excitement and hustle of collegiate basketball. Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center,
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