9 May 2017:
ACCORDING to non-governmental group Action for Economic Reforms (AER), the increase in the tax rate of the tobacco products in the country and the tax scheme shifting to a unitary one is a form of tax justice, since it not only prevents Filipinos from dying due to smoke-related diseases, but also eases the tax burden on the poorer sector of society.
AER senior economist Jo-Ann Diosana explained that most of those who consume cigarettes are the poor, so they are the ones taxed more. A higher tax on cigarettes will push more poor consumers to stop smoking, according to Diosana. Since cigarettes are cheap, it should be priced higher because it poses great harm to society and to those who consume it, the AER official said.
Also, a purpose of the higher tax rate on cigarette products, other than lessening tax burdens on the poor, is to regulate behavior or to shape the behavior of smokers, helping them to decrease their intake or stop consuming altogether.
“That is the tax justice, not just in terms of computing for the tax burden, but also, in a perspective that you are helping Filipinos to behave properly,” Diosana said. “If a smokers lessens his or her cigarette intake, or chooses to stop completely, there wouldn’t be any cost at all, whether it be health or the person’s out-of-pocket cost.”
UNDER the two-tiered tax system, cigarettes with a net retail price (NRP) of P11.50 and below are taxed at P25, while those with a NRP of above P11.50 per pack are taxed at P29 for every pack. Under the unitary tax scheme implemented this year, a flat tax rate of P30 per pack of cigarettes is imposed with a 4-percent annual increase in the succeeding years.
The proposal to address the unchanged tax rates imposed on fuel and oil prices in the country is another form of addressing vertical inequity, since most of those who consume fuel products are among the affluent sectors, Diosana added.
According to data from the DOF, the excise tax on diesel in the country has remained at P0 per liter since the year 1997, while excise rates on gas started at P4.35 per liter in the same year.
“It has been a while since we tweaked the taxes on fuel, we even lowered it to P0 for diesel since 1996,” Diosana said. “So who are the ones benefiting from the static taxes?” She added: “Essentially, you subsidize the taxes on fuel because you did not increase it.
You did not partner it with the growth of the economy, if the taxes were increased, the government would have a bigger fund already that can be used for social services for the vulnerable sectors.”
Under the first package of the DOF’s CTRP, staggered increases in excise oil prices will be implemented that will also be indexed to inflation. This year a rate of P3 per liter was imposed on diesel products, gradually increasing to P5 per liter in 2018 and P6 per liter by 2019. “That is why I emphasized that the tax system should not veer far away from spending,” Diosana said. “[The tax system and spending] should always be together, since the spending can also address the impact with the increase in fuel taxes.”
A way seen by tax experts to address tax injustice is to implement much needed reforms in the tax system. That’s why we desperately need the CTRP to correct and end tax injustice, Abrea Consulting Group President Raymond A. Abrea told the BusinessMirror.
“We need to make the rich pay more, while the poor or ordinary employees continue to give their fair share,” Abrea said. “Unlike now, more than 85 percent of the total collections from individuals are from employees, while the professionals and self-employed, who obviously make more than fixed-income earners, are contributing less than 15 percent.”
The AER is also pushing for the passage of the CTRP, as the measures taken into account to build the form of the proposal is noted to be comprehensive, and that other stakeholders were consulted in the crafting of the reform measure, not just on the tax system, but also, in administrative measures in government agencies as well.
“The only way that you can provide for the vulnerable sectors is through the provision of services, and how will you be able to provide services without a fresh source of funding, there is no other way but through taxation,” Diosana added.
THE implementation of lowering personal income-tax rates from 32 percent to 25 percent along with other offsetting measures to help address revenue losses from such a move is expected to create a revenue gain impact of P302.2 billion in 2018. Losses are expected to reach P139.6 billion.
According to the DOF, the CTRP, when seen as a package, will provide benefits to as much as 99 percent of the population.