Philippines Parliament Fails To Pass Text And Sin Taxes

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

04 January 2010

The Philippine House of Representatives has not passed either of the revenue-enhancing bills before it, which would have established an excise tax on text messages and higher 'sin' taxes on cigarettes and alcohol.

The bill to levy a tax on every text message sent from mobile phones in the Philippines would have produced, it was estimated, additional revenue for the government of up to PHP36bn (USD780m) annually.

However, following opposition to that tax, the country’s Department of Finance then promoted higher sin taxes on cigarettes and alcohol in the House, as a means of counteracting falling tax revenue. It was proposed to introduce a unitary system that would abolish the present unequal taxation of different products.

Under the new bill, there would have been one rate of excise duty for cigarettes, as well as for each category of alcoholic drinks. According to reported government estimates, the proposed higher sin taxes could have raised PHP20bn in the first year.

Now that neither measure has been passed, the House has issued a statement in which its Speaker, Prospero C. Nograles, maintains that the legislation of additional tax measures would be "ill-timed and ill-advised" in the present situation, and insists that improving tax administration and collection is still the best option to increase government revenues.

He rejects any suggestion that the House should be blamed for its failure to pass additional tax measures, thereby increasing the government’s projected budget deficit from PHP250bn to PHP300bn, arguing that additional taxation during the current period of economic uncertainty is the last thing that the House should contemplate.

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