By Charmaine A. Tadalan
THE MEASURE increasing excise taxes on alcohol products and e-cigarettes bagged third and final reading at the House of Representatives on Tuesday.
Its counterpart measure in the Senate went through initial deliberation in that chamber’s ways and means committee, with its chairman Senator Pia S. Cayetano targeting to approve higher rates against the House version.
With 184 affirmative votes, two negative votes and one abstention, House Bill No. 1026, principally authored by Albay-2nd district Rep. Jose Ma. Clemente S. Salceda, was passed by the chamber.
The measure proposed to increase ad valorem tax on distilled spirits to 22% of net retail price (NRP) per proof from 20% and a specific tax of P35 per liter from P24.33 in 2020. The specific tax rate will then increase by P5 every year until it reaches P45 in 2022, after which it will be increased by seven percent annually beginning 2023.
The measure will introduce a 15% ad valorem tax per liter on sparkling wines, which is not imposed under the present system; in addition to a P696 specific tax per liter in 2020, regardless of price. At present, sparkling wines costing P500 or less are levied P316.33 while those sold at a higher price are levied P885.72. This is also set to increase by seven percent annually thereafter.
Excise tax on still wines, meanwhile, will vary according to alcohol content. It will be increased to P40 per liter from the current P37.96 for wines with up to 14% alcohol volume and to P80 from P75.92 for those containing more than 14%. This tax will increase by seven percent annually.
For fermented liquor, such as beer and ale, the bill proposed to increase current excise tax to P32 in 2020, P34 in 2021 and P36 in 2022, with a seven percent increase every year thereafter.
Cooking wines with salt content of at least 1.5 grams for every 100 milliliters are exempt from excise tax.
E-CIGARETTES AS WELL
Amendments to the bill included provisions on e-cigarettes and vapor products.
Heated tobacco products, for one, will be taxed at a rate of P45 per pack starting January 1, 2020 and will increase by P5 in the years thereafter until 2023.
The bill further provided that tax rate for vapor products, containing nicotine salts, will increase by P5 every year from P30 in 2020 until it reaches P45 in 2023.
The Department of Finance (DoF) on Tuesday said in a Senate hearing that its proposed alcohol product excise tax increase is expected to generate P33.3 billion in 2020. This was cut by half in HB 1026, which is seen to bring in only P16.6 billion from alcohol products in the first year of implementation.
“Well for me, as long as I’m convinced about the goals set by the DoH, the funding they want to raise, [as well as] the other issues raised by the industries and other concerned parties are addressed, I’m more than happy to target the goal of DoF,” Ms. Cayetano told reporters after the hearing. “‘Cause I work with the administration, so that is my goal. As to whether I would be able to deliver that, we have to see.”
Department of Health (DoH) Undersecretary Rolando Enrique D. Domingo said the measure intends to sustain implementation of Republic Act No. 11223, or the Universal Health Care Act. “For 2020, we are asking P257 billion, but… the Department of Finance so far has only identified P195 billion, we have a gap of about 65 billion,” he told the panel.
Enactment of Republic Act No. 11346, which will increase excise tax on tobacco products to P45 per pack 2020 from the current P35, will contribute P15.5 billion, leaving a P46.9-billion funding gap.
The committee was tackling Senate Bill No. 383, filed by Senator Emmanuel D. Pacquiao, which adopted the DoF-DoH proposal, but does not cover excise tax increase on e-cigarettes.
The alcohol and e-cigarette excise tax increase was among the bills mentioned by President Rodrigo R. Duterte in his fourth State of the Nation Address on July 22.
The President also urged Congress to pass the proposal to reduce corporate income tax to 20% by 2029 from 30%; centralize real property valuation and assessment, and simplify the tax structure for financial investment instruments.
The government has so far enacted the Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Law, which slashed personal income tax and increased or added levies on several goods and services; RA 11213, the Tax Amnesty Act, which grants estate tax amnesty and amnesty on delinquencies, or delinquent accounts that remained unpaid after being given final assessment and RA 11346, which will gradually increase the excise tax on tobacco products to P60 per pack by 2023 from P35 currently.
The Senate bill proposed to increase the ad valorem tax rate to 25% of net retail price of distilled spirits and the specific tax rate to P40 per proof liter. The specific tax rate will increase by P5 annually until it reaches P55 in 2023, and will rise by 10% per year thereafter.
Sparkling wines will be levied with a P335 specific tax rate for bottles costing P500 or less and P937 for those costing more than P500. In 2020, excise tax on sparkling wines will cost P328.99 and P921.15, respectively.
Excise tax on still wines will increase to P40 in 2020 for wines with up to 14% alcohol volume and to P80 for those containing more than 14%. It will then increase 10% annually beginning 2021.
The bill also proposes that for fermented liquor, excise tax will increase to P40 in 2020 from P26.43 currently, to P45 in 2021, to P50 in 2022 and to P55 in 2023, with a 10% increase every year thereafter. — with V. A. C. Ferreras