Higher sin taxes backed

Published July 26, 2018, 2:55 PM

by AJ Siytangco

By Hannah Torregoza

Senate Minority Leader Franklin Drilon on Thursday threw his support to efforts to review the Sin Tax Law that will increase taxes on cigarettes and liquors.

He likewise renewed his push for the review and rationalization of fiscal incentives granted to businesses as a way of increasing government revenue, saying these two measures could be better source of additional revenues of the government.

Senate Minority Leader Franklin Drilon (Facebook / MANILA BULLETIN)
Senate Minority Leader Franklin Drilon

“My position is that this is one area where we can prevent revenue leaks or minimize revenue leaks and increase the taxes we collect,” Drilon said during a KapihansaSenado forum when asked on his take on President Duterte’s push for the second tranche of the Tax Reform for Acceleration and Inclusion (TRAIN) law during his third State of the Nation Address (SONA).

“I am in favor of sin taxes. I sponsored that… so in so far as I am concerned, we should have a higher tax on cigarettes and liquor,” Drilon pointed out.

“These two measures can be sources of additional revenues – this rationalization of fiscal incentives where we can review the foregone revenues and with the sin tax – it’s something we really should study again,” the minority leader reiterated.

Drilon pointed out that he has been advocating for Senate Bill No. 229 or the measure rationalizing fiscal incentives being granted to companies in the country in the past Congresses, noting that there are currently at least 14 investment promotion agencies tasked to promote investments by granting incentives.

He also said there are already at least 123 investment laws as of today and yet this has resulted in at least P300billion in foregone revenues in 2015.

“As I said, there are 123 tax incentives laws that are in our laws today. Yet, it showed that in 2015, we have P300billion in foregone revenues that resulted in the tax incentives law. The question is what benefits did the people get in these incentives? What were the employments generated? What were the taxes paid? All of these things must be studied. And I believe it is about time that we rationalize these incentives that we got,” he pointed out.

He also said Congress should determine if this is the reason why, despite these tax incentives, the Philippines still lags behind in terms of foreign direct investments (FDIs), losing to other countries in Southeast Asia particularly, Vietnam, Thailand, and Malaysia.

“It’s about time that we look into this, as we know there are a lot of abuses with these incentives granted – perpetual na yung iba. Tax holidays are perpetual to some companies,” he said.

“And this is precisely, instead of burdening our people with additional taxes, here is a system which clearly results in foregone revenues. The question is what do we get in exchange? Do we get additional employment? Do we become an attractive business investment destination? Do we get to compete effectively with our neighbors to attract investments from these firms? So all these questions must be reviewed,” the minority chief reiterated.

Asked why the measure fails to get Congress’ nod, Drilon admitted there was a strong lobby against the bill.

“But, I think if we push this, there is a better chance that we can rationalize the incentives granted… So we must look at this to check on abuses, check on incentives, which are perpetual,” he said.

Drilon said these incentives are granted in order to entice companies to go into that industry “eh kung habambuhay andyan may incentives eh then that’s not in the contemplation of the (tax) incentives (laws),” he pointed out.

The minority leader, however, debunked Senate Majority Leader Juan Miguel “Migz” Zubiri’s concern of a possibility of foreign investors leaving the Philippines and companies downsizing employees if Congress tinkers with their fiscal incentives.

The second package of the TRAIN law actually seeks to rationalize investment incentives and reduce corporate income taxes.

“Hindi ako naniniwala dun. I don’t believe that. As long as the environment for doing business is favorable, they will not leave,” Drilon stressed.

“But there are some tax incentives which should no longer be there because it has already served its purpose and is being abused,” he reiterated.

Zubiri had earlier said none of the senators would like to sponsor TRAIN 2 as lawmakers are still “traumatized” with the effects of the first tranche of the Duterte administration’s tax reform law.

It does not mean, however, that the Senate is against the TRAIN 2. “There were no takers who would want to sponsor TRAIN 2. So we’ll have to wait for the House (of Representatives) to approve it and do the normal course of action, just basically for us to discuss,” Zubiri said.

“I believe it is our responsibility as legislators to let the President know what are the possible outcomes of this package. Because he might think this is all a bed of roses. Sometimes messages to the President are filtered by his closest confidants,” Zubiri had also said.