Enrile pushes for ‘ad valorem’ tax on tobacco

MANILA, Philippines – Ad valorem or specific tax?

Senate President Juan Ponce Enrile is pushing for ad valorem tax on tobacco products, saying it is more equitable for all players in the industry.

But finance officials thumbed down his proposal because they said the ad valorem scheme, which is based on value, would be difficult to administer.

Enrile, who hails from the tobacco-planting province of Cagayan, said the government slapped ad valorem tax on the so-called sin products — tobacco and alcohol — until it shifted to specific tax in the mid-90s.

“Please review and consider changing the tax based from indexation to ad-valorem. I believe the latter is fairer,” Enrile told finance officials during the first committee hearing on the sin tax bill.

Ad valorem is tax based on a product’s value or retail price, which many vary in stores across the country. Specific tax, on the other hand, is fixed and based on a price range, and is withheld at source such as factories and warehouses.

Bureau of Internal Revenue Commissioner Kim Henares said the ad valorem scheme would be a nightmare for the agency.

“If we will impose ad valorem, how will we determine the retail price?” she asked senators.

The Senate committee on ways and means began tackling the sin tax bill on Thursday, August 16.

Aside from Enrile, other senators present in the hearing were Senators Ferdinand “Bongbong” Marcos, Franklin Drilon and committee chair Ralph Recto. 

The Cabinet officials present were Henares, Finance Secretary Cesar Purisima, Health Secretary Enrique Ona, and Trade and Industry Secretary Gregorio Zaragoza.

Purisima urged the senators to pass their counterpart measure of the sin tax bill, saying additional revenues from the bill will boost the government’s health program.

House Bill 5727, which was approved by the House of Representatives in June, is estimated to raise P31 billion during the first year of implementation. This would increase to P41.51 billion by the end of President Aquino’s term.

Purisima said at least 85% of the revenues will go to health services and the rest will be used to support tobacco farmers who will be affected by the measure. – Rappler.com