Gov't to boost revenue from sin taxes

Posted at 03/24/12 2:59 PM

MANILA, Philippines – The government's finance managers are targeting higher revenues this year through sin taxes and tax collection from professionals.

Department of Finance chief Cesar Purisima tried and failed to reform sin taxes 7 years ago during his first turn as finance secretary.

At that time, the main opposition in the cigarette industry came from the no. 1 player--Lucio Tan's Fortune Tobacco.

No. 2 player Philip Morris was on the government's side.

But in 2010, Philip Morris and Fortune Tobacco merged and now have a new monopoly.

Purisima said this will help the government win the debate on imposing higher sin taxes.

“Their market share is about 97% and that makes their position more difficult because it's hard to justify a monopoly. Being a US-listed company that believes in competition and good governance, I think they will be very open to making sure they operate in an environment in line with corporate principles,” said Purisima.

Philip Morris Fortune Tobacco said it supports moderate tax increases and that the proposed increases will push smokers to buy illegal cigarettes with zero tax, thus reducing revenue.

In a phone interview, Philip Morris Fortune Tobacco President Chris Nelson said all operating tobacco, beer and distilled spirits companies oppose the government's bill.

British American Tobacco, which says it plans to enter the Philippines, supports it.

Purisima needs to boost revenue to fund the spending needed to accelerate economic growth.

He said cutting oil taxes as a way of limiting the rise in fuel prices is a “shotgun approach” that's wasted on those who can afford the higher prices.

“Kasi ‘yung suspensyon parang shotgun ‘yan, mas maganda rifle para matulungan talaga natin ‘yung nangangailangan ng tulong, mahirap kung ‘yung mga naka-Mercedes, naka-Jaguar, magtitipid pa. Sayang naman,” said Purisima.

Purisima reiterated that the government is targeting professionals whom he said pay an average of just P6,000 a year in income taxes.

"My instruction to the Bureau of Internal Revenue is that we should aim to increase this average by P100,000 and we've communicated it to all regional directors that they are going to be measured by these statistics and if we succeed, you're talking of P160 billion, since there's 1.6 million of them,” he said.

The warning comes 2 weeks before the deadline for filing and paying income taxes, giving lawyers and doctors with messy books that much time to seek the help of another group of professionals: accountants.