ISSUES AND PROBLEMS IN THE PHILIPPINE TAXATION

JEFFREY C. FLORESMAEd Student

INTRODUCTIONSIN TAXAIR LINESDOUBLE TAXATIONALLOWANCESEVAT

SIN TAXSmokers’ NirvanaThe Costs of the Unreformed System

Components of the Sin Tax Bill

Disinformation by the Tobacco Lobby

HEALTH OR ECONOMIC GAIN?The Department of Health (DOH) has

sounded the alarm bells over what it described as an imminent “smoking epidemic” in the country, noting that smoking prevalence among Filipinos has intensified despite the passage of the sin tax in 2004.

The evidence that our excise tax system has been inept, health-wise, is simply undeniable. Neither have they lessened our country’s staggering healthcare expenses and economic losses from smoking-related diseases

Aquino Urges Passage Of Mining, Sin Tax ReformsIn his third State of the Nation Address on

July 23, 2012, President Benigno S. Aquino III called for the passage through the Philippines parliament, as soon as possible, of his government’s present priorities, the mining and ‘sin’ tax reforms.

Aquino also looks to the reforms presaged by his recent Executive Order on mining to provide further funds for the development of the country. He confirmed that the government “engaged stakeholders in a level-headed discussion in crafting the Executive Order,” and that its intent is that “the public and private sectors will receive just benefits from this industry”.

The government has not yet given any details on what the new increased tax measures might be, but previous indications were that, in future mining contracts, increased revenue would be found through a hike to the current 2% excise tax and/or by the introduction of a 5% or 7% royalty on production.

PROBLEMincorrect data on the importation and

smuggling of cigarettes and liquor to pave the way for the passage of a “sin tax” measure that is equitable and acceptable to stakeholders in the affected industries, particularly tobacco farmers and workers in liquor factories.

PROBLEMThe Federation of Philippine Industries (FPI)

had constantly warned on the possible increase in smuggling and had testified before the House ways and means committee that smuggling  in the country has resulted to P170 billion in foregone revenues.

Philippines Advised To Scrap Airline TaxesAirlines have, for some time, lobbied for the

removal, or at least a reduction, in the 2.5% Gross Philippine Billings Tax (GPBT) and the 3% Common Carrier’s Tax (CCT) to which they are subjected. The GPBT and CCT are levied on all revenues, passengers, cargoes and excess baggage leaving the Philippines.

DOUBLE TAXATIONIt was announced that both sides have agreed

on the adoption of new standards in the tax treaty, designed to provide further protection against the risk of double taxation where the same income is taxable in the Philippines and Germany. It is also aimed at preventing tax evasion and fostering cooperation between two countries by enforcing their respective tax laws.

ALLOWANCES"There is no exemption" The BIR chief spelled out the requirement in

the Internal Revenue Code (Sections 244 and 245) following disclosure at the Senate impeachment trial of Chief Justice Renato C. Corona that high tribunal justices were recipients of tax-free multi-million-peso bonuses and allowances through the years.

Other revenue officials said that under the Tax Code even the 13th-month pay and other Christmas bonuses are also subject to income tax if the amount goes beyond P30,000 per year.

They said certain “de minimis” (small value) allowances are tax exempt under Revenue Regulations 2-28, including monetized unused vacation leave, medical cash allowance, rice subsidy and uniform, or clothing allowance.

EXPANDED VALUED ADDED TAXthe government officials believe that implementing EVAT

is the best way to reduce our debt problems of the Philippines. In contrast, many opposition leaders think that it would not help; instead it can make lives of people more difficult. In our present situation, the government should also consider the economic status of the country. They should enact laws that protect the people to ensure the survival of future generations. Moreover, they should understand the situation that more people are suffering, because of the high amount of taxes they asked. The problem must be given solution as soon as possible. The most important of all is that, the improvement of a country could not only be seen through infrastructures, but also in the way its people live.

THANK YOU!