THE position of the Department of Finance on the proposed excise tax hike on alcohol, cigarette and tobacco products is still evolving, an official said on Wednesday.
Finance Undersecretary Eric O. Recto told reporters that the department is drafting a new proposal which may be presented to the Senate on Thursday
“We want to be careful and not come up with a new measure that would boomerang on us when it’s implemented and result in a deterioration rather than an improvement in revenue collection,” he said.
Imposing a high tax rate might cause consumers to shift to lower-priced products, which could result in a lower tax take for the government, the finance official said.
“Brand loyalty only goes as far as purchasing power,” he said.
The finance department initially proposed that the tax rates on the so-called sin products be indexed using cumulative inflation of 30.1 percent, representing cumulative inflation form 1997 to 2003, but netting out the 12 percent increase in tax rates in 2000.
But the DOF decided to cut the proposed rate increase to 20 percent following consultations with economic managers.
Last month, the House of Representatives approved House Bill 3174, which would raise excise taxes by 20 percent in 2005, 3 percent in 2006, and another 3 percent in 2007.
Armie Margaret Lee