LEAD legislators looking to boost revenue flows that is possible with existing tax measures ruled out the plan cutting the four-tier excise system in half, saying a two-tier alternate will only raise cigarette and alcohol prices by an unacceptable 500 percent.
What should be put in place instead, Batangas legislator and ways and means committee chairman Hermilando Mandanas said by email on Sunday, is an updated version of the four-tier system in which the excise tax is based on latest prices rather than on prices prevailing yet in 1996.
Competing proposals should also hit the tobacco farmer the most given that home-grown manufacturers obtain their basic tobacco ingredients from local farmers.
Mandanas, who in a public forum insisted that new taxes are taboo, urged keeping the four-tier system but in slightly modified form to address the critical need for more revenues.
“If we don’t adjust the current tax brackets, we will end up with only two brackets with very high tax rates. We cannot do that. If it will be two brackets, the increase will be 500 percent, which is too much,” Mandanas argued.
He pointed out that some industry players sell only low-priced cigarette products and that around 50 percent of tobacco farmer output in the Ilocos Region and elsewhere is bought by low-priced cigarette manufacturers.
“So we have to keep the four-tier system and we need to calibrate the rate increases,” he stressed.
The current system classifies the various “sin” products as low, medium, high as well as premium products and taxed accordingly at a rate based on prices obtaining yet in 1996.
But by rebasing the system to current prices, Mandanas said existing policy against new tax measures imposed by Malacanang is observed.
The existing excise-tax law mandates excise rate increases every two years beginning 2005 and the scheme lapses next year, making mandatory the finding or adoption of a new measure more in keeping with prevailing conditions.
Mandanas claimed his proposed legislation under House Bill 3059 should lift excise-revenue flows by 100 percent representing incremental revenues equal to P25 billion up to P30 billion a year. --Jun Vallecera
