DOF Hails Sin Tax Law

Without a doubt, year 2012 was one of the most memorable years for the Philippines' fiscal authorities after they successfully passed into law the controversial sin tax measure as well as winning several positive rating actions from the three big credit companies.

The enactment of the sin tax law may also be the last missing ingredient for the Aquino administration's vision of transforming the Philippines into an investment grade nation.

But it was not an easy job for the Department of Finance (DOF), headed by Cesar V. Purisima, to persuade first lawmakers from the Senate and the House of Representatives to vote in favor of the excise tax reform bill after its 16-year failed attempts.

President Aquino signed the bill into law on December 20, 2012.

Because of strong lobby groups in the past, the DOF had, in more than one and a half decades, struggled to remove the annexes attached with the 1996 four-tier tax system as well as the price freeze classification and the insertion of the indexation to inflation provision.

The DOF was against the price classification freeze provision of the old law because it had pegged tobacco products to 1996 prices as the basis for their tax classification, while the annexes favored brands introduced at an earlier date.

Meanwhile, without the indexing the taxes to inflation, prices of sin products will eventually erode as consumer prices, such as food, rise. This will result to affordable cigarettes and alcoholic drinks.

Finance Assistant Secretary Ma. Teresa S. Habitan explained that the sin tax law is an incomplete measure without the indexing tobacco and alcohol taxes to inflation.

On December 10, 2012, the long wait was finally over after the two chambers of Congress ratified the Aquino administration's one priority measure. The excise tax reform bill was just one signature shy of becoming a full-fledged law starting January 1, 2013.

The DOF expects the sin tax law to yield R34 billion in revenue during the initial year of implementation and an ultimate R64.18 billion by 2017.

Purisima said the passage of the excise tax bill marks a historic victory for health and revenue agenda of the government as the measure obtained the three key elements to institute the reforms the Aquino administration wanted.

Now that the Philippines has a new excise tax regime, its enactment into law may be all that is needed to persuade the big three rating agencies to immediately upgrade the country's credit standing to an investment grade.

The projected revenue from the sin tax law will help further boost the confidence in the Philippine government's ability to maintain its good credit standing by reducing its debt burden.

The investment grade rating will, likewise, surge the foreign direct investments into the country.

To date, all big three credit firms-Moody's Investors Service, Fitch Ratings and Standard & Poor's-have rated the Philippines to a notch below investment grade after nine positive ratings actions since July, 2010, ending a decade's worth of decline.

These positive rating actions for the Philippines were due to the country's continueD strong performance in the current global economic climate, achieving a respectable growth rate of 6.5 percent in the first nine-months of the year.

As the economy continues to grow, the government's revenue collection was also expanding on the back of strong and steady performances of the country's two main tax agencies at a rate faster than the nation's nominal gross domestic product (GDP) growth.

The Philippines' foreign exchange reserves also continue to provide a healthy buffer from external shocks in 2012, and are bolstered by sustained growth in dollar remittances and business process outsourcing revenues.

Singaporean-lender DBS has already projected that the Philippines' investment grade rating would come in 2013 as country's ability to repay has improved compared with the past few years.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • ‘Taklub’ wins jury prize in Cannes
    ‘Taklub’ wins jury prize in Cannes

    The Yolanda-inspired film “Taklub” has won a special award at the Cannes Film Festival in France. The advocacy film, which had a successful premiere last Tuesday under the festival’s Un Certain Regard section, is directed by 2009 Cannes best director Brillante Mendoza and top-billed by Nora Aunor. The award cited the film’s sensitive portrayal of individuals and communities in the Philippines fighting to continue living despite natural disasters exposing them to suffering and death. …

  • Orphan tops chemical engineering board exam
    Orphan tops chemical engineering board exam

    A 21-year-old orphan from Capiz topped the chemical engineering board examinations held this month. Remington Salaya, a cum laude graduate of the Central Philippine University in Iloilo, ranked first in the board examinations with a score of 83.30 percent. Out of 405 chemical engineering graduates who took the exam in mid-May, 239 passed. …

  • A sunset party for APEC delegates
    A sunset party for APEC delegates

    Greeted by the beat of Ati-atihan drummers, delegates of the Asia-Pacific Economic Cooperation trade ministers meeting enjoyed a welcome dinner and cultural presentation at sunset yesterday. Dubbed FuntaSea, Shangri-La Boracay Resort and Spa’s Banyugan Beach was transformed into a fantasy island, complete with mermaids, fire dancers, and choreographed paraws (sailboat) representing the best of Boracay. With APEC meetings being held all over the Philippines, each presentation is conceptualized …

  • UN chief urges peaceful solution of sea dispute
    UN chief urges peaceful solution of sea dispute

    United Nations Secretary-General Ban Ki-moon called Friday for a peaceful solution to territorial disputes in the South China Sea, where China’s increased assertiveness has alarmed its smaller neighbors. In Manila, Presidential Communications Operations Office Secretary Herminio Coloma Jr. appealed to China to respect various international agreements on freedom of navigation and aviation. Coloma’s call came in the wake of an incident Wednesday where Chinese naval forces warned a US …

  • Phl seeks transparency, inclusivity in Asean-China Center
    Phl seeks transparency, inclusivity in Asean-China Center

    Philippine Ambassador to the Association of Southeast Asian Nations Elizabeth Buensuceso has called on participants of the ASEAN-China Center (ACC) brainstorming session to vigorously work on promoting ASEAN-China relations under the principles of inclusivity, transparency and centrality. The brainstorming session, attended by the ACC’s joint council and joint executive board members, also involved a midterm review of ACC’s work since its establishment in 2011. The ACC aims to promote …

  • Lebanon tightens rules on HSW repatriation
    Lebanon tightens rules on HSW repatriation

    Distressed Filipino domestic helpers in Lebanon may find it more difficult to return home. The government of Lebanon has tightened the rules on repatriation of distressed household service workers (HSWs), Labor Secretary Rosalinda Baldoz reported yesterday. Citing a report from the Philippine Overseas Labor Office (POLO), Baldoz said the Lebanese government opted to re-impose a previous policy requiring investigation into every case of HSWs who ran away from their employers and sought …

  • Army execs face attrition over promotion quota
    Army execs face attrition over promotion quota

    Dozens of Philippine Army officials may be removed from the service due to a promotion quota system in the Armed Forces of the Philippines, according to AFP chief Gen. Gregorio Pio Catapang. In a letter to Defense Secretary Voltaire Gazmin, he requested that the 30 percent promotion quota – which means that only 30 percent of those eligible for promotion in a given year will actually be promoted – in the Army be raised to 50 percent. Under the military’s attrition law, middle-grade officers …

  • Philippines backs support for small enterprises at APEC meet

    MANILA, Philippines (AP) — The Philippines' top trade official on Saturday called for support for the integration of micro, small and medium enterprises in global trade, which he said would help reduce poverty and inequality in the Asia-Pacific region. …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options