Enrile grills BIR chief on Sin Tax bill
BY citing a World Bank study on smuggling, this prompted Senate President Juan Ponce Enrile to question Bureau of Internal Revenue (BIR) chief Kim Jacinto-Henares on her knowhow regarding the supposed correlation of smuggling in prices of sin tax products.
Henares was in the Senate during the second hearing of the Senate committee on ways and means chaired by Sen. Ralph Recto.
Henares urged Congress to pass the Sin Tax bill to minimize illicit trade on sin products.
“There is a World Bank study that smuggling is not directly related to the price, it is directly related to corruption and governance. A World Bank study on Sweden which has the high price (of sin products), has low incident of smuggling, only two percent because their governance index is 9.5 percent,” Henares said.
These prompted Enrile to question Henares on how the tax chief administered the collection of taxes in the country since during the old days, there were no illicit trade on sin products because there was no tax on it.
“Before there was no smuggling in the Philippines because the tax system was denied. When smuggling in the Philippines is very prevalent in Cavite and Batangas, what is their system of taxation then, ad valorem or specific tax?,” Enrile asked Henares.
Kim only answered that she was only 16 years old then.
“That is why i am telling you on that time, I am professional at that time, that is why we shifted from specifics to ad valorem and then from ad valorem to specifics again because if you have a high tax rate, there is a big differential that you can make a profit from. That is why there is smuggling worth it to invest in kumpits or fast boats to bring in Champion cigarettes to the philippines. The most common brand smuggled into the Philippines in those days is Champion, not Malboro, Winston, Camel, Lucky Strike, it was Champion,” Enrile said.
Enrile said the government tax collector should nevertheless study the taxation history of the country in order to defend what the present administration is asking to Congress for a new tax.
“I am talking from my experience. I tell if you try your system, I bet in your face, you cannot collect what are you’re trying to collect. I am telling it in your faces. I am not talking from theories but from my experience. You read your tax history of this country,” Enrile said.
“That is why we are trying to find a median system that will serve of the self interest of the government, and the self interest of the industry. I am not protecting anybody here,” he added.
Enrile also reiterated that during his time, there is a proposal of a unitary system precisely to address the problem of migration that unitary system under a specific regime contemplated a downward move to the high grade cigarettes to a mediam specific tax regime, and the law is going up also to meet in a certain point.
“But if pushed everything up, i assure you in this whole country, you cannot police it no matter if you employ the entire forces of the Armed Forces of the Philippines and Philippine Navy to prevent smuggling, you will have the southern border of the Philippines a verifiable busy corridor for smuggled cigarettes,” Enrile averred.
“The government has an obligation to generate revenue, but we should not create a law the will make a side effect aside from the problems of the country,” he added.