Duterte vetoes provision of new sin tax law

PRESIDENT Rodrigo R. Duterte on Wednesday signed into law the measure increasing the excise tax imposed on electronic cigarettes and alcohol products, but vetoed a provision seen to curtail the power of the Bureau of Internal Revenue (BIR) to conduct raids as part of its efforts to clamp down on illicit trade.

House Ways and Means Committee Chairman Jose Ma. Clemente S. Salceda said the new “sin” tax law or Republic Act (RA) No. 11467 is expected to generate P17-billion revenues in the first year of implementation, which will help fund the government’s universal health care program.

Executive Secretary Salvador C. Medialdea also answered in the affirmative when sought for confirmation, while Senator Pia S. Cayetano, ways and means committee chairman, broke the news in a social media post late Wednesday evening.

RA 11467 amends RA 8424 or the National Internal Revenue Code of 1997.

Mr. Salceda said President Duterte vetoed the provision to remove the court order requirement, which Finance Secretary Carlos G. Dominguez III earlier flagged.

“’Yung court order requirement,” Mr. Salceda said in a phone message Wednesday evening. “It was the intent of the bicam to delete it pero di nailagay sa report.”

The bill, as approved in the bicameral conference committee, provided that internal revenue officers may only raid a house, building or any place upon the order of the court.

In his veto message, Mr. Duterte said the provision curtails the power of the state to collect taxes as well as the search and seizure powers of the BIR, which is in line with its mandate to counter illicit trade.

Mr. Duterte also noted that this restriction is not imposed on other taxable products.

The law was signed on Jan. 22, but Mr. Dominguez said: “The BIR will implement the new law with new rates on alcohol and e-cigarette effective Jan. 1, 2020 as the law clearly says Jan. 1 is when the new rates apply.”

The newly signed law will increase the ad valorem tax to 22% of the net retail price of distilled spirits from the current 20%, and the specific tax to P42 per proof liter in 2020 from P23.40 in 2019. The specific tax will increase to P47 per proof liter in 2021, P52 in 2022, P59 in 2023, and P66 in 2024.

It will also levy a P50 per liter single rate on all types of wines. This is a departure from the previous tax structure that varied according to the wine type, price and alcohol content. The rate will be increased by 6% every year, effective Jan. 1, 2021.

In the previous system, 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%.

Meanwhile, excise tax on fermented liquor will be at P35 starting this year from P25.42 per liter in 2019. It is set to increase by P2 every year until it reaches P43 in 2024, and will increase by 6% every year effective Jan. 1, 2025 via BIR revenue regulations issued by the Finance secretary.

E-CIGARETTES
The law also increases the levies on electronic cigarettes introduced in RA 11346 that was enacted in July last year, which are at a P10 per pack on heated tobacco products (HTPs) for 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.

Under the new law, the tax rate on HTPs will be raised to P25 per pack 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 per milliliter specific tax in 2020, which will increase by P5 annually until it reaches P52 in 2023; while vapor products with conventional nicotine will be taxed P45 per 10 ml in 2020. This is set to increase by P5 annually until it reaches P60 in 2023. All these rates will be increased by 5% every year effective Jan. 1, 2024.

Other tax reform packages still pending in 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, which also increased excise tax on tobacco products to P45 per pack beginning 2020 from P35 in 2019, 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