Lobby dovey

Every three years, our government makes a lot of noise about “sin” taxes—right on the dot. It may be just pure coincidence that we also have a new Congress every three years. Or not.

Anyway, just a few months into the Aquino (Part II) administration, congressmen filed bills after bills, all seeking to change the six-year-old Republic Act (RA) 9334, aka taxation on sin products, meaning liquor and tobacco products.

That law already created quite a stir in Congress only a few years ago, thus inspiring different interest groups to carry out all sorts of lobby. Some said it was actually “costly” lobbying.

That was in 2004. Three years after, in 2007, the new Congress again saw a flurry of bills calling for changes in the law. A foreign cigarette company was said to have been rather, ah, er, “active” in lobbying for the amendments at that time.

Under the new Congress in the Aquino (Part II) administration, there were already five bills filed in the House of Representatives—as of last count, anyway—that, precisely, also seek to amend the same sin tax law.

In a surprise move last August, moreover, the Aquino (Part II) administration decided to classify those proposed bills as “priority” legislation during a rare meeting of the Ledac, or the Legislative Executive Development Advisory Council.

Previous to the Ledac meeting, only the Department of Finance was pushing for the amendments to the sin tax law. In particular, Finance Secretary Cesar Purisima wanted to impose a single tax rate on liquor and tobacco products. The existing law provides for tiered rates, depending on the prices of the products, with automatic provision for increases in the rates to adjust for inflation.

The biggest surprise came from Budget Secretary Florencio Abad, who recently made a complete turnaround from the position of the Department of Budget Management (DBM) last year when those bills were first filed.

Really, the DBM opposed the proposed bills, particularly the one seeking a “unitary” tax rate for the “sin” products, no matter their targeted market segments. In effect, the bill would want everybody who would buy tobacco products or liquor to pay the same amount of tax—whether rich or poor.

At that time, the DBM even quoted a report made by the National Tax Research Center (NTRC), which noted that an increase in tax rates on sin products would not necessarily lead to an increase in tax collection from those products.

More importantly, the NTRC said that while a “unitary” (single rate) system may simplify tax administration, it is “regressive.” On top of it all, it is not sensitive to inflation, meaning, really, that the government may just end up collecting less taxes on those products with the unitary system.

Now, Abad is in favor of the same supposedly regressive system. And to explain his flip-flopping ways, he now says that last year’s decision of the DBM was based on an outdated position paper.

The last time I checked, the NTRC has not changed its report on the unitary system being regressive.

Something is definitely up in the three-year cycle of amendments to the sin tax law. We can expect fireworks. The big question is, well, who is financing them.

* * *

The main justification for all those proposals to change the sin tax law is that the government needs to raise money. Sure. And changing the sin tax law, with all the expensive lobbying that goes with it, is the only way to do it? There are no other ways? Why are collections of the Bureau of Customs (BoC) still pathetic?

Anybody in business that has dealings with the BoC knows that cleaning up the bureau was supposed to be the top priority of the month-old Customs Commissioner Rufino Biazon. Not anymore. It seems the BoC now is tolerating some monkey business at the piers.

Upon his appointment as BoC chief, the BoC suddenly saw a truckload of former military officers as “technical” appointees.

And so importers, particularly the naughty ones among them, meaning the well-known big-time smugglers, slowed down on their import shipment. It was the fear factor. They would not risk getting caught, what with all those military figures in the BoC.

Everybody in business thus noted that, even just a couple of weeks in office, Biazon all of a sudden started telling media that the BoC could not possibly meet its target collection for the year.

Translation: the Bo would miss its collection from those big-time smugglers. (Well, even smugglers must remit to the BoC some amount of taxes and duties—albeit heavily discounted.)

Not surprisingly, rumors are going around that a top BoC official was forced to meet with a group of known smugglers of chemicals, such as TY, MO, JT, MS and a certain “Mr. D.”

Top of the agenda was the, well, you know, “rates.” It seems that the “going rate” for a container of the chemicals is now P120,000.

Earlier, it was said that the “going rate” under the administration of Gloriaetta was down to P2,000 per container.

It actually moved up to P180,000 per container during the time of former Customs boss Angelito Alvarez, who was fired by our leader Benigno Simeon, aka BS.

The rate is down to P120,000 per container. Well, at least, the BoC would have some collection to show for the secret meeting that was even held at the house of the top BoC official.