Overhaul of ‘sin’ tax structure key to economic growth, AER says

The government can readily address budget deficit concerns by overhauling the tax structure for tobacco and alcohol, an economic advocacy group said.

The Action for Economic Reforms (AER) said in a statement that the current debate at the House of Representatives over “sin” tax reform was critical to the government’s bid to generate additional revenues without raising taxes or introducing new ones.

AER said it was supporting the Malacañang version of the sin tax reform measure, House Bill 5727, authored by Cavite Representative Joseph Emilio Abaya.

The Abaya bill seeks to shift to a simpler tax structure by adopting a unitary rate, which would address issues posed by the current multi-rate specific structure of the excise tax such as unfair tax treatment between and among tobacco and alcohol products.

AER said the government would need to settle the sin tax reform issue if it wanted to meet growth targets.

The Abaya bill is projected to raise at least P30 billion in revenues a year.

For 2012, the government’s economic planners have projected a budget deficit of P279 billion given a planned increase in public spending.

The Bureau of Internal Revenue has been given a 2012 revenue target of P1.06 trillion while the Bureau of Customs’ target was lowered to P347 billion.

The government stayed below the P300-billion budget deficit last year mainly by underspending.

“If we want growth, then we must address revenue generation squarely. Any measure that limits the potential for additional revenues and consequently puts pressure on increased public spending fans the flames of a fiscal crisis,” AER said.