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Enrile warns of cigarette smuggling.

Byline: Norman Bordadora

SENATE President Juan Ponce Enrile yesterday warned that Mindanao could become a corridor for smuggled cigarettes if the Aquino administration's proposed increases in sin taxes are passed by Congress and implemented by the government.

Enrile, a former finance secretary and customs commissioner, made the remarks during the Senate committee on ways and means hearing on House Bill No. 5727, the sin tax reform measure that the administration is pushing for in the Senate, which the House passed earlier this year.

Enrile and Sen. Ralph Recto, chair of the Senate panel, both adverted to a need for balance between generating enough revenues for the government's health program and ensuring sound business for the industries concerned.

The administration is pushing for the increase in the taxes imposed on tobacco products and alcoholic beverages. The government expects the measure to generate more than P60.7 billion in revenues, most of which would go to health services.

"We try your system, I'm willing to bet with you, you won't be able to collect what you're trying to collect," Enrile told administration officials, led by Finance Secretary Cesar Purisima and Bureau of Internal Revenue Commissioner Kim Jacinto-Henares.

Tax history

"I'll tell it to your faces and I'm not talking from theory. I'm talking from experience. You read your tax history," Enrile added.

Recto acknowledged that tax rates that are either too low or too high would be bad for the government.

"At zero percent tax there's nothing to collect. At a hundred percent tax there's nothing to collect," Recto said during the hearing.

"So we're looking for that sweet spot to generate more revenues for the government that will also be responsible--meaning to say, fair, equitable and efficient. By generating these revenues, then we can spend this for health considerations," Recto added.

Enrile said a huge tax on certain products make for a similarly high profit margin for smuggled goods.

"If you have a high tax rate, there's a big deferential that you can make a profit from and that's why you have smuggling. It's worth it to invest in high-speed fast boats to bring in Champion cigarettes," Enrile said.

Enrile said Champion was the widely smuggled brand during his time in government.

Prior to Enrile and Recto's remarks, Henares told the committee that smuggling of goods isn't directly related to the price of certain goods in a country.

She was reacting to cigarette industry representatives repeatedly citing the potential for intensified smuggling if the taxes make cigarettes too expensive for most Filipinos.

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Publication:Philippines Daily Inquirer (Makati City, Philippines)
Date:Aug 24, 2012
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