Last December 19, President Aquino signed Republic Act 10351, otherwise known as the Sin Tax Reform bill, which would increase excise taxes on alcohol and tobacco products and would give the government billions in tax revenue to be split between the two products, 40-60.
Tax increases would, however, be incremental, and would hence raise even more revenue in the years to come. Taxes on cigarettes for example will increase to 30 pesos per pack in 2017 from 12 pesos this year.
Under the reconciled version of the bill, lawmakers added a new provision that would grant more funds from the tax revenue to congressional districts nationwide.
“After deducting the allocations under Republic Act (RA) Nos. 7171 and 8240, eighty percent (80 percent) of the remaining balance of the incremental revenue derived from this Act shall be allocated for the universal health care under the National Health Insurance Program, the attainment of the millennium development goals and health awareness programs; and twenty percent (20 percent) shall be allocated nationwide, based on political and district subdivisions, for medical assistance and health enhancement facilities program, the annual requirements of which shall be determined by the Department of Health (DOH).”
Under RA 8240, “Fifteen percent (15 percent) of the incremental revenue collected from the excise tax on tobacco products shall be allocated and divided among the provinces producing burley and native tobacco in accordance with the volume of tobacco leaf production. The fund shall be exclusively utilized for programs to promote economically viable alternatives for tobacco farmers and workers.”
The budget allocation that would come from the bill is an addition to the amount senators and congressmen are already receiving from the country’s 25 billion peso Priority Development Assistance Fund (PDAF).
Political leaders should ensure that the additional millions and the millions that they have received and those they are already receiving would go to those who really need it. Moreover, lawmakers need to determine which projects would benefit the people the most in the long run as many projects have, in the past few decades, had negligible impact on economic growth and social welfare.
This has begged the question, “Do we even need taxes at all when the money does not even go to the people, and the amount that does benefits few, sometimes even the privileged?”
The Aquino administration needs to understand that getting tax revenue or efficiency in tax collection efficiency is not the issue as previous administrations have argued. Yes, many people do not pay the right taxes, but, for the most part, it is because of lack of trust. In other words, the problem lies with how the government spends hard earned money; treating millions of tax revenues like the 25-centavo coin many are leaving in the streets.
While many say that the sin tax will reduce tobacco and alcohol related diseases in the country, the tax comes at a price. Thousands if not millions of farmers and workers may be affected by the sharp tax increase as companies scramble to determine their share in the tax. Hence, companies will start to reduce costs, which include labor.
While a part of the tax revenue would be used to fund other livelihood projects for the affected farmers and workers, many of them are scared, and have every reason to, that the billions of pesos of aid that they should receive would turn into another Coco Levy Fund.
In addition, as prescribed by law, a part of the fund will go to congressional districts that many politicians, senators and congressmen alike, could exploit.
Aside from implementing proper auditing procedures on all additional funds that would come from the tax, which includes the new fund for farmers, additional pork and additional funding of the different government agencies, the government needs to start developing political will.
When Aquino ran for President, he claimed that the administration he would establish would end corruption. For the most part though, the political will our administration has shown has been selective and weak.
The government should have enough political will to evaluate the projects proposed by senators and congressmen to look for redundancy and to look for real impact as many politicians have, in the past and until today, used the pork barrel as a petty cash for friends and campaign funds.
In addition, the administration needs to have the will to go after lawmakers who have used funds for their own benefit especially in a time when lawmakers have learned to give gifts to each other.