Palace to get ‘sin’ tax bill next week

THE MEASURE increasing the excise tax on alcohol products, electronic cigarettes and other vapor products made it out of the bicameral conference committee on Wednesday, in time for its ratification on the same day ahead of Congress’ Dec. 21, 2019-Jan. 19, 2020 Christmas-New Year break.

The tax measure is expected to generate P22.2 billion in the first year of implementation, of which 60% will be earmarked for Universal Health Care programs, 20% for Health Facilities Enhancement Program and 20% for attaining Sustainable Development Goals.

House Ways and Means Committee Chairman Jose Ma. Clemente S. Salceda confirmed that the measure would be ratified “in the House (of Representatives)” that same day, while his counterpart, Senator Pia S. Cayetano said the same of the Senate. The two were speaking in a briefing with reporters during which they held up a copy of the signed committee report.

Mr. Salceda told reporters later that the measure will be transmitted “next week” for President Rodrigo R. Duterte’s signature.

The Finance department has been pushing approval of this measure in time for implementation starting Jan. 1.

The measure forms part of the administration’s comprehensive tax reform program, which Mr. Duterte asked Congress to prioritize during his fourth State of the Nation Address on July 22.

The Senate approved its version, Senate Bill No. 1074, on second and third reading last Monday, while the House passed House Bill No. 1026 on Aug. 20.

The reconciled version provided to increase the specific tax on distilled products to P42 per proof liter in 2020 from P23.40 currently; P47 in 2021; P52 in 2022; P59 in 2023; P66 in 2024. This is on top of a 22% ad valorem tax on net retail price, compared to 20% currently.

The bicameral conference committee retained the amendment proposed by Senate President Pro Tempore Ralph G. Recto to impose a P50 per liter single rate on all types of wine, after he said the industry makes up just one percent of the alcoholic drinks market.

At present, sparkling wines costing up to P500 and those costing more than P500 are levied P316.33 and P885.72, respectively, while still wines and carbonated wines are charged P37.96 for bottles with up to 14% alcohol content and P75.92 for those with more than 14%.

The panel also retained the Senate proposal to raise the tax on fermented liquor to P35 in 2020, which will increase by P2 every year until it reaches P43 in 2024. Fermented liquors are currently levied P25.42 per liter.

The measure also amends Republic Act (RA) No. 11346, which will increase excise tax on tobacco products to P45 per pack beginning 2020 from P35 currently. It will then increase by P5 per year until it reaches P60 in 2023.

The same law introduced a P10 per pack rate on heated tobacco products in 2020; and a P10 rate for 10 milliliter vapor products, P20 for 20 ml, P30 for 30 ml, P40 for 40 ml, P50 for 50 ml and so on.

If the new “sin” tax bill is enacted, it will increase rates on heated tobacco products to 25 in 2020, P27.50 in 2021, P30 in 2022 and to P32.50 in 2023.

Vapor products with salt nicotine will be charged a P37 specific tax in 2020, increasing by P5 annually until it reaches P52 in 2023; while vapor products with conventional nicotine will be taxed at par with conventional cigarettes.

The bicameral conference committee also adopted the Recto amendment to exempt the sale and importation of prescription drugs for diabetes, hypertension and high cholesterol from value-added tax in the law’s first three years of implementation. After those three years, such exemption will extend to medicines for kidney diseases, tuberculosis, cancer and illness related to mental health.

Other tax reform packages awaiting approval by Congress are measures that seek to reduce corporate income tax and overhaul fiscal incentives; provide a uniform framework for real property valuation and assessment; and simplify the tax structure for financial investments.

Besides RA 11346, the government has so far enacted RA 10963, which slashed personal income tax rates and increased or added levies on several goods and services — the main component of the tax reform package — and RA 11213, which grants estate tax amnesty and amnesty on delinquent accounts left unpaid even after being given final assessment. — Charmaine A. Tadalan