Enrile: sin taxes should not ‘shock the economy’

MANILA, Philippines – Senate President Juan Ponce Enrile is supporting the passage of the sin tax reform bill as long as the additional taxes are “reasonable” and will not “shock the economy.”

“I am in favor of increasing sin tax up to reasonable level. I am not against it,” Enrile said on Monday, September 10, at the Kapihan sa Diamond press forum.

“We will come up with a reasonable measure that will not shock the market and the economy,” he added.

The sin tax reform bill, the only revenue measure that the Aquino government is pursuing, aims to reduce consumption of sin products – cigarettes and alcohol – by reducing the current 4 tax brackets, which was designed to favor locally made products consumed mostly by the poor.

“When you design a system of taxation, the tax must be equitable. There must be an equitable distribution of tax burden. You cannot tax the poor similar to the rich,” Enrile added.  

“What I’m against is distorted nature of proposal coming from the House of Representatives and coming from the finance sector of the government,” the senator said.

Last July, the House of Representatives has passed the Palace-backed bill, which is estimated to raise around P30 billion additional revenues that the government will use to fund its universal health program.

The Senate committee on ways and means has conducted 3 public hearings on the bill. Senator and committee chair Ralph Recto is set to make a report on the Senate’s position on the bill soon.

Enrile said Recto is a “reasonable man” who can “design a tax regime that’s fair to the government, to the people, to the goose that lays the golden egg so we will not destroy the source of income for the government.”

At the August 30 Senate hearing, Recto expressed misgivings about the amount of revenues projected by finance officials, citing what he said is the basic principle of the sin tax bill: higher taxes will result in higher prices of tobacco and alcohol, which in turn, will result in lower consumption.

Lower consumption equals lower tax revenues for government, he said then.

Recto’s fears are “unfounded,” sin tax reform advocates countered. Filomeno Sta Ana, an economist and coordinator for Action for Economic Reform (AER), said Recto’s argument does not take into account that demand for sin products is “inelastic” because of their addictive nature. – with reports from Ayee Macaraig, Rappler.com

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