MANILA - The finance department is willing to defer implementation of a proposed measure restructuring tobacco and alcohol excise taxes, citing the global downturn, despite officials having prodded Congress to pass new measures aimed at addressing declining state revenues.

The possible compromise, Finance Undersecretary Gil S. Beltran yesterday said, was raised following a series of hearings with lawmakers last month.

"We listen to the industry and they complained that it is the wrong time to do it because there is a worldwide liquidity crisis ... so let us implement it in 2012," he told reporters.

"We are offering it as a possible compromise... This was also discussed during the LEDAC (Legislative Executive Development Advisory Council) meeting last month and during congressional hearings," he later said.

Mr. Beltran said the Finance department was hopeful the proposal would mean a measure being approved before the 14th Congress wraps up its business next year.

"We hope they will pass it," he said adding that every P20 billion spent on projects would contribute P67 billion to gross domestic product.

To address the revenue lack, Mr. Beltran said officials would work hard to improve tax administration while awaiting the measure’s approval, along with other revenue bills the department is backing.

"We will have to ensure tax efficiency," Mr. Beltran said.

But Rep. Exequiel B. Javier, chairman of the ways and means committee of the House of Representative, was not supportive.

"That is not a compromise. It tolls the death knell of the local industry. A one tax rate for sin products effective 2012 is just a reprieve before the liquidation of the local industry," he said.

"The Finance department’s proposal favors foreign brands."

Dave M. Gomez, communications manager of Philip Morris Manufacturing Philippines, declined to comment, saying the Finance department proposal needed study.

"But ever since, our position is that Congress should not disturb the current law increasing the taxes until 2011. The law has given the government a predictable stream of revenues," he said in a telephone interview.

"There will be a forthcoming increase in 2011. We see no reason to disturb the implementation of the law."

Republic Act 9334, signed into law in 2004, mandates tax increases on all types of alcohol and tobacco products beginning January 2005 and every two years thereafter until 2011.

Some lawmakers to file measures seeking to restructure the structure of these "sin" taxes in a bid to simplify collection and raise additional revenues past 2011, among them House Bill 3759 and 3767 which propose uniform rates and indexation to inflation.

The Finance Department has backed the measures, saying these would generate around P20 billion during the first year of implementation.

The affected industries and other legislators, however, said the moves would kill small businesses, worsen unemployment and destroy farmers’ livelihoods.

The sin tax measures are currently languishing at the House committee level.

Mr. Beltran, meanwhile, said the Finance department wants to keep existing proposals regarding the rationalization of fiscal incentives and simplified net income taxation scheme (SNITS) intact.

"The SNITS has been approved at the House and we need to convince the Senate to approve it," he said.

The SNITS is expected to generate P5.2 billion a year. Rationalization of incentives, meanwhile, is projected to yield P10 billion.

Both measures have been approved by the House of Representatives and are still awaiting Senate action.

The 14th Congress ended its second regular session early last month. Its third and final session will open on July 27.