Not quite a long time ago, a previous administration, upon the suggestion of the International Monetary Fund (IMF), passed the Comprehensive Tax-Reform Program (CTRP) to impose what then-Finance Secretary Jesus Estanislao called sin taxes on liquors and cigarettes.

Estanislao, a celibate belonging to a religious organization called the Opus Dei, was the principal sponsor of the CTRP bill, which argued that taxes on liquors and cigarettes must be raised for the twin but contradictory purposes of stopping the consumption of the two dreaded vices but at the same time raising tax revenues derived from such sinful acts.

Congress succeeded in passing the CTRP, but to its dismay, collections fell short of projections because consumption, as anticipated by those against the CTRP, relatively dropped.

As of end-September this year, sin taxes were able to generate only P22.89 billion, a drop of P1.1 billion from the target of P30.94 billion. The annual collection projection for this year is P44.72 billion, but it is likely that it will not be met within the next three months.

Last year, sin taxes on cigarette consumption amounted to only P18.68 billion, and P11.83 billion on liquors or alcohol. Almost throughout the history of the CTRP, the results were far from convincing.

And if ever Pall Mall succeeds with finality on the Department of Finance (DOF) decision to lower the tax rates for this imported brand, against the suggestion of the World Health Organization (WHO) on cigarette taxes and that of the Bureau of Internal Revenue (BIR), expect a further decline in tax revenues because of the undoing of the government itself.

If the government is in such a quandary, it can only blame itself. The DOF wants to have its cake and eat it, too.

What this means is the government, if it wants cigarette consumption lowered to its barest minimum, should also be ready to face the consequence of reduced tax collections. It cannot forever fry the cigarette makers in its own lard. Furthermore, government must have the will to tell the Pall Mall owners and representatives in the Philippines that lowering the tax rates might be against the CTRP concept.

Government should not play favorites in the interpretation of the CTRP law. The law is clear that only Congress—not the DOF—has the power to change excise-tax rates one way or another.

The DOF decision on the Pall Mall tax rate, needless to say, will have a telling effect on the overall tax-collection target of the BIR.

As it is, taxpayers are already saddled with all sorts of taxes, from withholding taxes to value-added taxes far from their desired outcome.

What the DOF should instead do is to simply run after tax evaders and minimize the number of organizations, religious or not, foundations and the like that are at present entitled to tax exemptions.

The BIR itself should further control the number of tax collectors known to be or suspected of being coddlers of these shenanigans. It and the DOF should desist from killing the goose that lays the golden eggs even before they could be hatched.  

E-mail: raulbvalino@yahoo.com.ph

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