Lagarde backs sin tax; hints at need for tax on SMS, calls

Posted at 11/16/2012 2:47 PM | Updated as of 11/16/2012 11:01 PM
IMF chief Christine Lagarde gestures as she answers questions during a news briefing at the presidential palace in Manila November 16, 2012. / REUTERS

MANILA, Philippines - International Monetary managing director Christine Lagarde on Friday voiced her support for the sin tax bill and suggested taxes levied on telecommunication services may be the next thing needed by the country to boost government revenues.

"If the so-called sin tax [bill] is voted on [on] Monday, that will be great progress for the revenue collection of the country," Lagarde said in a press conference in Malacanang.

"So, let’s hope that this bill would be voted on [on] Monday and that tax collections would result from this piece of legislation," she added.

The sin tax reform bill, seeking to collect P40 billion from additional taxes levied on alcohol and tobacco, remain pending in the Senate.

President Benigno Aquino III on Friday certified the bill as urgent, allowing the Senate to tackle the bill on second and third reading on the same day.

Revenues collected by the government from the sin taxes will be allocated for health care services in the country.

Lagarde said that if the government needs to raise more revenues, it might want to consider slapping taxes on mobile phone services such as text messaging and calls.

"If more is needed in the pure decision of the government of the Philippines, then telecommunication would satisfy those two criterias," Lagarde said.

"Well, I was actually told this morning by the Vice President [Jejomar Binay] that the text coverage, if you will, or the telephone coverage, was way in excess of a hundred percent. It was in the range of 112% which clearly satisfies one of the two criteria for what we call a good taxation," she continued.

The criterion for a "good" tax being broad-based and having a small rate.

"What matters, of course, is the possibility to raise revenue in as transparent a way as possible and as much distributive effect as possible as well," Lagarde noted. -- with a report by Willard Cheng, ABS-CBN News