If the work of government is the unending sourcing and spending of cash, then its job is already half done when it is able to raise enough revenues or even extra income to cover all expenditures.
Therefore, the administration must support any and all measures being proposed in Congress that seek to maximize revenue generation.
Quite thankfully, the House of Representatives has not been remiss in this exclusive duty.
Objectively speaking, the controversial two-tier House Bill No. 4144 is pro-revenue, said a UP-Manila Economics professor.
“There is a need to modify the existing unitary tax system to a two-tier approach to preserve revenues derived from low-income consumers who constitute the bulk of cigarette consumption,” Dr. Ernesto R. Gonzales said.
The London School of Economics-educated economist cited the concept of price elasticity where the rich sector of society is less responsive to price increases than low-income consumers.
“A unitary system is inequitable because it essentially makes the poor or low-income sector devote a higher percentage of their income to paying the tobacco tax than higher-income individuals who can actually afford to do so,” he said.
“Besides, a unitary system impedes on consumers’ freedom to choose a product that suits his level of income,” Gonzales argued, stressing that the demand for cigarettes is omnipresent and one of the easiest ways for a government to drive in revenues is to “fine” smokers by way of taxation.
HB 4144 proposes a two-tier system with an excise tax rate of P32 per pack on cigarette packs priced P11.50 and below (low-end) and P36 for those priced higher (premium) and a five percent increase thereafter beginning 2018.
In his explanatory note, Rep. Eugene Michael de Vera of the ABS Partylist argued that incremental revenue is expected to increase the government’s budget which may be used to fund more social and vital infrastructure projects.
The precursors of the current Sin Tax Law, House Bill No. 5727 and Senate Bill No. 3299, considered and provided for the two-tier approach which was eventually rejected.
Staunch two-tier supporter Senator Ralph Recto predicted in a Philippine Daily Inquirer report dated October 14, 2012 that a radical change in structure from the original four-tier to a one-tier or unitary system means a move to loss revenues.
The Aquino administration instead passed a unitary tax system into law thinking it would result in an increase in revenues.
However, Department of Finance data as of October 2016 revealed an excise tax collection decrease of 13.30% or more than P8 billion from the previous year, ultimately making the unitary system a counter-productive measure.