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.

  • Pacquiao pleads for Indonesia to spare death row Filipina
    Pacquiao pleads for Indonesia to spare death row Filipina

    World boxing superstar Manny Pacquiao took time out Monday from final preparations for his $400 million megafight with Floyd Mayweather to plead for the life of a Filipina on death row in Indonesia. Pacquiao, a national hero in the Philippines, added his voice to a chorus of global opposition led by United Nations Secretary General Ban Ki-moon to the executions of a group of eight foreign drug convicts, including compatriot Mary Jane Veloso. The eight-division world champion, who will face …

  • Halt Indonesia drug executions until graft claims probed: Australia
    Halt Indonesia drug executions until graft claims probed: Australia

    Australia urged Indonesia Monday to delay the execution of two men for drug offences until a corruption probe into their case is complete, after a report that judges sought tens of thousands of dollars in bribes. "Bali Nine" drug traffickers Myuran Sukumaran and Andrew Chan could face the firing squad within days, along with others from Brazil, Nigeria, the Philippines and an Indonesian prisoner. The Indonesian attorney-general's office said the executions would take place this week but did …

  • FordPH Launches the All-New Mustang
    FordPH Launches the All-New Mustang

    Ford Philippines launched the all-new Mustang in a rock concert held at Bonifacio Global City, Taguig, last week .  The All-New Mustang is the sixth generation since Ford  launched the first model in April 17, 1964. “The all-new Mustang represents the very best of Ford and its arrival marks the latest chapter of the iconic muscle car’s rich legacy, crafted with a more contemporary look and feel.  With a history spanning more than 50 years, this iconic car is at the heart and soul of Ford and …

  • China maritime tensions dominate Southeast Asia summit
    China maritime tensions dominate Southeast Asia summit

    By Manuel Mogato and Praveen Menon KUALA LUMPUR (Reuters) - Southeast Asian leaders edged closer to open criticism of China's land reclamation in the disputed South China Sea at a regional summit on Monday, as the Philippines drew the ire of Beijing which called its objections to the work "unreasonable". The Association of Southeast Asian Nations (ASEAN) Summit in Kuala Lumpur, which was supposed to showcase the 10-member bloc's progress towards economic integration, was overshadowed by the …

  • The ‘All You Need’ 2015 Isuzu D-MAX launched
    The ‘All You Need’ 2015 Isuzu D-MAX launched

    Isuzu Philippines Corporation (IPC) just recently introduced the 2015 Isuzu D-MAX pick-up truck at the Clark International Raceway to show that their pick-up model can conquer any kind of terrain.The high-end LS variant and standard LT 4x4 is now equipped with a more powerful engine, the 4JK1-TC (Hi) 2.5-liter engine which with Common Rail Direct Injection and an intercooled Variable Geometry System (VGS) turbocharger. IPC also introduced a new standard ride variant, the LT-X 4x2 manual …

  • Limited Edition Honda CR-V and Jazz now available
    Limited Edition Honda CR-V and Jazz now available

    If you’ve always wanted to be part of an exclusive group of car owners, now might be the time for you to consider getting a Honda CR-V or Jazz.  Honda Cars Philippines Inc. (HCPI) just came out with their limited edition All New Jazz and New CR-V. …

  • ToyotaPH hit its highest monthly sales last March
    ToyotaPH hit its highest monthly sales last March

    Toyota Motors Philippines hit its highest monthly sales to date last March, registering 10,237 units sold.  This recent CAMPI report puts Toyota’s market share at 43.5% last month. …

  • VolkswagenPH launches Child Safety Initiative
    VolkswagenPH launches Child Safety Initiative

    Volkswagen Philippines just  launched the VW Child Safety Initiative (CSI) campaign which aims to support child safety on Philippine roads at the just concluded Manila International Auto Show (MIAS). The World Health Organization’s road safety facts show about 1.24 million die each year globally as a result of vehicle related accidents. Child restraint systems like child seats and booster seats also reduce risk for children by about 70% for infants and upto 80% for small children. This …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options