The Philippines must pass a law increasing the excise levy on liquor and tobacco, or sin tax, to meet its goal of winning an investment-grade rating in four years, Tax Commissioner Kim Henares said.

“This is one of two measures that the three major rating agencies have identified as important,” Henares said in an interview in Bloomberg’s Manila office yesterday. “We want to correct a defective system that will increase our revenue and use the funds for health care. Once passed, we think the measure will trigger rating upgrades and positive outlook.”

Standard & Poor’s raised the nation’s credit rating twice in the past two years, bringing it to one level below investment grade in July, citing a reduced debt burden and improved public finances. The bill that seeks to boost annual collections by at least 60.6 billion pesos ($1.46 billion) and introduce an inflation-adjustment mechanism will test the resolve of President Benigno Aquino, a smoker himself, to battle some of the country’s biggest companies.

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