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Distilled spirits makers warn excessive taxation could depress demand, harm government revenue

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Distilled spirits demand is highly likely to fall disproportionately with every increase in price -- Distilled Spirits Association of the Philippines President Olivia Limpe-Aw. -- PEXELS -- HAKAN ERENLER

MAKERS of distilled spirits warned against excessive tax increases targeting the segment, saying that falling demand could leave the government with less revenue than it is projecting.

Distilled Spirits Association of the Philippines President Olivia Limpe-Aw said distilled spirits demand is highly likely to fall disproportionately with every increase in price.

“Between 2017 and 2018, the price of alcoholic beverages and tobacco products increased by 20%, while no other major household expenditure increased by (more than) 7%. The effects of these are decreased consumption of alcoholic beverages that seem to be decreasing at a higher rate, from down 3.4% in 2017 to down 5.1% in 2018,” she was quoted as saying in a statement.

The industry submitted a position paper Sept. 13, to the Senate Committee on Ways and Means chair, Senator Pilar Juliana S. Cayetano.

Finance Undersecretary Karl Kendrick T. Chua called the DSAP’s argument “one-sided,” adding that as the population and incomes grow, individuals will have more purchasing power, thereby boosting government revenue.

“Incomes are increasing so they will have more purchasing power to spend, and that’s what we’ve seen in the last six or seven since the sin tax, so we don’t think that demand will fall. Besides, the population is growing,” Mr. Chua said in a phone interview Wednesday.




“Yes there’s a price effect but we have also the income effect and the population effect, overall means demand will continue to increase and we will generate more revenues and they will generate their own income,” he added.

Ms. Limpe-Aw said the tax burden is lighter in the House of Representatives version of the excise tax on alcoholic beverages, at 25.65% compared to the 31.22% tax in the Senate version.

DSAP has called for a “level playing field” in the excise tax on alcoholic products, alleging that the proposed taxes leave the spirits industry at a disadvantage relative to wine.

She said that high-end distilled brands, under the Senate bill, will have higher excise tax than wine product.

House Bill 1026, written by Albay-2nd district Rep. Jose Ma. Clemente S. Salceda, hurdled third and final reading on Aug. 20 in the House of Representatives.

Meanwhile, Senate Bill No. 383, incorporating drafts put forward by the Department of Finance (DoF) and the Department of Health (DoH), has been filed by Senator Emmanuel D. Pacquiao.

Under the Senate bill, distilled spirits will have 25% ad valorem tax on the net retail price and another P40 specific tax per liter, which will gradually increase by P5 annually up to P55 in 2023, and then further rise by 10% yearly thereafter.

Meanwhile, the excise tax on wine will increase to P40 per liter next year for products containing 14% alcohol by volume and P80 for those with more than 14%, with an incremental annual increase of 10% starting 2021. There is no ad valorem tax in the bill. — Beatrice M. Laforga

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