‘Simplistic reading’ of a line in the Constitution
This refers to the letter of the Action for Economic Reforms advocating the unitary system of taxation as proposed in House Bill 5727 (Inquirer, 4/19/12). The group anchors its argument on a simplistic reading of a single line of the Constitution that “taxation should be uniform and equitable,” while conveniently ignoring the rulings of the Supreme Court regarding this subject over the last decade.
I speak of British American Tobacco (BAT) v. Camacho where the Supreme Court, in a 13-0 decision, ruled that the classification did not violate the clause on equal protection, saying that the provision for a classification freeze is not arbitrary, nor motivated by a hostile or oppressive attitude to favor existing brands, but introduced to provide stability in the collection of revenue. The Court said this would improve the efficiency and effectivity of tax administration over excise products as Congress sought to simplify the entire tax system to close potential windows of abuse and corruption to both the taxpayers (who may try to manipulate their prices intentionally or through market competition) and the government (who may periodically adjust the tax rate and reclassify brands in order to achieve revenue targets for a particular year).
In the same case the Court further ruled that the present law does not violate the constitutional prohibition on unfair competition. BAT failed to prove that the classification freeze provision provides a substantial barrier to the entry of new brands in the market. In fact, there were 29 new brands introduced in the market after the current multi-tiered specific tax system took effect in January 1997. If the brands and their makers are able to compete in the market despite the existence of the price classification freeze, why can’t BAT and other entrants also respect Philippines laws?
I would also like to rebut the tired argument of alternative livelihood. Time and again the unitary tax system’s proponents have cavalierly waved off the economic impact of these “reforms” with the promise of alternative crops for farmers, despite the fact that in every session of the House of Representatives, these advocates have been vehemently refuted by irate farmers who want none of it, citing their gross unprofitability. For example, rice sells at P35 per kilo while tobacco trades at P86 per kilo. It is also worth noting that the proposed amendment to the existing law makes no provisions for helping laborers, factory workers and businesses that would be adversely affected by this tax measure.
I hope our legislators will not be swayed by the arguments of HB 5727’s advocates who do not truly understand or care about the local industry. It’s easy to argue for extreme reforms when it’s not your livelihood and families on the line.
It may be time to change the tax structure, but any tax increase should be moderate and not excessive so as not to kill the tobacco industry which provides for 2.9 million Filipinos.
—BLAKE CLINTON Y. DY,
vice president,
Associated Anglo-American Tobacco Corp.,
