MANILA, Philippines – The passage of the sin tax bill, which is expected to raise at least P31 billion additional revenues for government, is crucial in containing the 2013 budget deficit, the World Bank said Friday, September 7.
“Controlling the deficit for 2013 would hinge on additional tax collections (equivalent to some 0.3% of gross domestic product) from inflation-indexed excise duties on alcohol and tobacco,” the multilateral lender said in its July quarterly update on the Philippines, which contained recommendations on how to improve the country’s fiscal health.
The House of Representatives passed in June amended House Bill 5727, which is projected to raise P31 billion on the first year of implementation through a two-tiered excise tax system for tobacco, and two- and three-tiered for fermented liquors and distilled spirits, respectively. Under the bill, indexation will be fixed at 8% every two years starting 2015.
At least 85% of the revenues will go to the government’s health care program, while 15% will be used to help tobacco farmers shift to alternative crops.
The Senate is currently conducting hearings on the sin tax measure, and is expected to come out with its own version in about two months.
The sin tax measure will help boost the Philippines’ chances of getting its first-ever investment grade status from credit ratings agencies that have been closely watching its fiscal performance.
In its quarterly update, the World Bank warned that the country’s budget deficit will likely rise further if the global downturn worsens.
“Weaker domestic economic activity due to declining exports and remittances, falling corporate profitability and job losses in manufacturing will all take a toll as automatic tax and spending stabilizers come into play,” it said.
The World Bank said that higher tax revenues are needed to ramp up job creation, infrastructure spending, and social protection measures in the country.
“The projected 4.6% growth for 2012 assumes sustained government spending from the continuing appropriations of last year’s Disbursement Acceleration Plan, which would mitigate the impact of a projected 2012 global slowdown,” it said.
The government has programmed to raise P1.56 trillion in revenues this year and P1.78 trillion in 2013. The budget deficit is expected to hit P279.1 billion in 2012, and P241 billion in 2013. – Rappler.com
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