Trade group questions sin tax decision

By Elaine Ruzul S. Ramos
Published on the June 29, 2005 issue of the Manila Standard TODAY

The Fair Trade Alliance (FTA) has questioned the basis for the recent ruling of a local court prohibiting government from collecting excise taxes on cigarettes and spirits imported into the Subic Freeport.

FTA labor convenor Angelito Mendoza said government stands to lose as much as P5 billion in sin taxes from the free port with the enforcement of the ruling.

He said the Olongapo City Regional Trial Court ruled in favor of a Subic importer, who earlier argued that businesses inside the free port should be tax-exempt based on Republic Act 7227, which provides “no taxes, local and national, shall be imposed within the Subic Special Economic Zone.”

“Investors-locators in the free port are tax-exempt only in relation to the importation of their inputs and other production or business requirements. The law does not envisage tax exemption for goods, which are sold to the larger domestic market outside the free port,” Mendoza said in a statement.

RA 9334, which raises the excise taxes on tobacco and liquor starting this year, requires duty-free shops and importers inside economic zones to pay the same taxes.

“Government had difficulty enacting this year the new sin taxes on locally produced cigarettes and spirits, and here comes the RTC offsetting this by exempting these nonproductive importers,” Mendoza said.

“This is unfair to local producers, their workers and the tobacco farmers in the Ilocos. It is also unfair to our cash-strapped government. The RTC decision virtually legitimizes cigarette and alcohol smuggling, and is an outright attack against local producers.”

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