Philippine 'Sin Tax' Proposals Face Opposition

by Mary Swire, Tax-News.com, Hong Kong

29 January 2009

A meeting of Filipino congress officials to debate the introduction of an increase to 'sin' taxes has drawn mixed reactions, with some opposing the idea altogether.

The country's Ways and Means Committee met on January 26 to discuss the implications that increased tax rates for alcohol and tobacco-related products would have for the economy at this present time.

Earlier this month, Finance Minister for the Philippines, Margarito Teves announced that he was seeking permission from congress to increase the taxes on these items in a bid to raise enough revenue to overcome the expected shortfall in the budget, and to offset a 5% cut in the rate of corporate tax to 30%.

According to government estimations, an additional PHP30bn (USD635m) in revenue could be generated via the increases, per year.

However, the recent meeting of congress has highlighted that whilst some individuals agree with Teves's proposal, there is also a significant amount of opposition.

Backing the tax increase, speaker Prospero Nograles argued that raising levies on the so-called 'sins' would generate a much needed cushion of revenue for the government amid the current financial downturn.

In stark contrast to Nograles' opinion, Chairman of the ways and means committee at the House of Representatives, Exequiel B. Javier has opposed a tax increase, arguing that hitting individuals who are already struggling financially with higher taxes on luxury items would inevitably discourage public spending, despite the fact that it might encourage them to give up their unhealthy vices.

The fate of the sin tax proposals is as yet unclear.

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