We welcome the statement of President Benigno Aquino III to back reforms on excise taxes on sin products, including tobacco and cigarettes. In his statement, President Aquino said that, "From asocietal concern, I say yes to the idea of an increase in sin taxes.There are trade-offs. As you know, these sin products have a health burden on the people, and this health burden has a peso value."

Year after year, tobacco-related diseases claim the lives of millions. Inthe Philippines alone, approximately 90,000 die every year or about 10 Filipinos every hour die from smoking-related diseases. [1] We believe that increased excise taxes, particularly on tobacco products, will not only address the economic costs by curbing tobacco usage, but also increase revenues for the government.

Tax reforms are most difficult to do.  For one thing, the constituency for tax reforms, especially those relating to new taxes or increasing tax rates, is hard to find.  For another thing, precisely because the constituency is narrow, legislators avoid being supporters, much less being champions, of tax reforms.

We have seen, for example, how Ralph Recto, who sponsored the law that increased the valued-added tax (VAT) from 10 percent to 12 percent, was trounced in the 2007 Senate elections.  He has regained his position by joining the Noynoy Aquino bandwagon and by doing a complete turn-around—packaging himself as a populist by calling for measures (say, reduced oil prices) that make the whole population, especially the rich, happy, even if such measures aggravate the government’s fiscal problems.

And in the 2010 elections, Mar Roxas was painted as a firm supporter of the increase in the VAT rate.  On the other hand, rival Jojo Binay projected himself as the creator of a socialist Makati, which he intends to replicate all over the country. This is Binay’s  Makati that offers cash gifts, free movies, free groceries to senior citizens, even to those residing in Dasmariñas and Forbes Park, that has a state-of-the art hospital and  modern clinics that are accessible to all, that provides not only free education but also free uniforms, textbooks, and school supplies to children.

One of the critical binding constraints that the incoming Noynoy Aquino administration will face is the low tax effort.  Tax effort, described as the amount of taxes collected as a percentage of Gross Domestic Product, has been dismally low during the Gloria Macapagal-Arroyo regime.  In 2009, the tax effort was just 12.65 percent, far from the desirable 17 percent that was reached before the economy plummeted in the wake of the 1997 financial crisis.

What is ironic is that the tax effort has stagnated and even declined despite the fact that the Macapagal-Arroyo administration increased the excise taxes on sin products and jacked up the rate of the value-added tax (VAT) from 10 percent to 12 percent.

The increase in said taxes, among other things, was a forced move on the part of the Macapagal-Arroyo administration to avert a looming fiscal crisis after the highly controversial elections in 2004. The fiscal crisis was manifested in declining tax effort, increasing debt and debt-service ratios, and a yawning public sector deficit.  It was triggered by overspending, unsustainable populist measures, huge losses incurred by government corporations, and non-implementation of tax reforms—all intended to favor political allies and vested interests as well as placate or woo voters.

Senator Noynoy Aquino has emerged as the people’s candidate. That he has made the accountability of Gloria Arroyo and her regime a central plank of his program boosts his position as the most suitable to preside over the next administration.  We have identified Arroyo’s illegitimacy, plunder, and destruction of institutions as the main obstacle to our country’s progress.

The mission for the next six years is gargantuan. The next President carries the responsibility of resuscitating our institutions of democracy, transparency, and accountability from the vicious blows inflicted by Arroyo. But to get there, Arroyo’s forces must first be overcome. This will not be easy, given the state machinery that Arroyo commands.
This is where the candidacy of Noynoy Aquino finds relevance. By far, he appears most capable of generating the broadest coalition that stands the best chance of defeating the vilest, most dangerous enemy.

Noynoy’s democratic credentials have deep roots. He is personally closest to the legacy of Ninoy and Cory Aquino, two Filipinos to whom people and country mattered most. Noynoy, as he proclaims to continue the fight of his parents, resonates as well the people’s unfinished fight for democracy and decent governance. He also lays claim to a moral uprightness that the likes of former president Joseph Estrada cannot hope to match.

Moral uprightness and the fortitude to fight for people and country – nothing less is needed to be up to the daunting tasks of 2010-2016.

Half of the population of the Philippines live in poverty. If multinationals were to pay the correct amount of taxes, the Philippines government would have more resources to help people like Wilson Manuba, a disabled fisherman who isn't getting the medical care he desperately needs to treat his life-threatening illness... 

This video was produced by Christian Aid.  The key informants for this video were Undersecretary Gil Beltran of the Department of Finance and Filomeno Sta. Ana III, the coordinator of Action for Economic Reforms.