Biz buzz: Businessmen unit vs 'sin' tax scheme

January 19, 2017 News

Source: Philippine Daily Inquirer

With all their vested and competing interests, the country’s business leaders are notorious when it comes to their inability to get behind a single mission.

But there are exceptions. Sometimes, these captains of industry can actually agree on something important—important enough for the welfare of the nation—that they can set aside their differences (petty or not) and push in the same direction.

We’re talking about the joint manifesto put out during the weekend by 14 major business groups, which have come together, political differences notwithstanding, to support the full implementation of the so-called “Sin Tax Reform Act of 2012.”

And getting behind this common cause are traditional rivals like the Makati Business Club and the Philippine Chamber of Commerce and Industry, which—although one will never hear their leaders say it openly—often find themselves on opposite ends of the local political spectrum.

Yes, both the MBC and the PCCI support the current Sin Tax Reform Law, along with the Employers Confederation of the Philippines; the Federation of Filipino-Chinese Chambers of Commerce and Industry; the Federation of Philippine Industries; the Financial Executives Institute of the Philippines; the Foundation for Economic Freedom, and the Management Association of the Philippines.

Also joining the crusade are the American Chamber of Commerce of the Philippines; the Australia-New Zealand Chamber of Commerce; the Canadian Chamber of Commerce; the European Chamber of Commerce of the Philippines; the Japanese Chamber of Commerce and Industry of the Philippines, and the Korea Chamber of Commerce Philippines.

Their common battle cry is to allow the Sin Tax Reform Law to “run its course” (language used first by Finance Secretary Carlos Dominguez III in a statement earlier last week).

What prompted this united stand? Well, there is a very strong lobby in Congress (and everyone knows how susceptible to particular types of lobbying the Lower House can be) to amend the law to retain the two-tier tax system for low- and high-price tobacco products and increase these tax brackets to P32 and P36 a cigarette pack, respectively—instead of allowing the law to unify the taxes under one rate as scheduled in January 2017.

The story everyone knows is that a unified sin tax rate will make it easier for the Bureau of Internal Revenues to collect taxes from all tobacco manufacturers, removing the discretion on classification, which can often lead to corruption (not to mention loss of revenues needed to fund the Duterte administration’s proposed P8-trillion infrastructure program).

But there is an unseen hand behind this lobby to retain the two-tier tax scheme. One particular tobacco player wants Congress to raise the tax rate for its market rival, which produces higher-priced products, while imposing a smaller increase on its own lower-priced products. If its proposal is adopted by Congress, this tobacco manufacturer’s products will remain affordable to the masses, while those of its rival will end up prohibitively priced, thus pushing more smokers to the low-priced manufacturer. One cursory glance at the tobacco manufacturing landscape will reveal the forces behind this hidden hand.

Mighty smart scheme huh? —DAXIM L. LUCAS