Senate to rush ‘sin’ tax increases ahead of break

By Charmaine A. Tadalan
Reporter

THE MEASURE increasing excise tax imposed on alcohol products, electronic cigarettes and other vapor products may hurdle the Senate this week, a Senate leader said.

Senate Majority Leader Juan Miguel F. Zubiri confirmed the Chamber will resume deliberation of Senate Bill No. 1074, which is calendared to go through the period of amendments during the session on Monday.

“Yes, supposed to be ’yung amendments,” Mr. Zubiri said in an interview on Wednesday when asked on the plan for the measure on Monday.

“So hopefully by Monday, tapos na rin ’yun (work on the bill will be finished). Kapag amendments, second reading na rin ’yun (Second-reading approval will follow the period of amendments).”

Mr. Zubiri also noted that since President Rodrigo R. Duterte had certified the bill as an urgent measure, the Senate can approve it on third and final reading on the same day.

Its counterpart, House Bill No. 1026, bagged final-reading approval on Aug. 20.

Congress takes its Christmas-New Year break on Dec. 21, 2019-Jan. 19, 2020.

The measure is expected to generate P47.9 billion in the first year of implementation, which the Action for Economic Reforms (AER) said will be more than halved to P21 billion should the Senate adopt the lower rates pushed by Senate President Pro Tempore Ralph G. Recto. “Senator Recto’s proposal of significantly lower tax rates will not bring us close to achieving our goal of curbing the consumption of these sin products,” the AER said in a Dec. 11 statement. “We also mention that his amendments would yield only P21 billion in incremental revenue for health, as opposed to the P47.9 billion that the current version would yield.”

During his interpellation last week, Mr. Recto proposed to impose a single specific tax rate on alcohol products based on alcohol content, arguing that this scheme will result in manufacturers producing less alcoholic beverages.

“Let’s have specific tax rate for all alcohol products based on alcohol content,” Mr. Recto said during the Dec. 9 plenary debates.

“If you tax it by alcohol content, there will be local manufacturers — instead of paying such a high tax that he will pass on to consumers at 40% alcohol content — he will introduce into the market alcoholic products with a lower alcohol content. That’s a health reform measure.”

The bill, among others, proposes to increase the specific tax rate for distilled spirits to P90 per proof liter in 2020 from P23.40 currently and retained the 20% ad valorem tax on net retail price of the same products.

The measure will also impose varied rates on sparkling wines, and still wines and carbonated wines.

But Mr. Recto recommended that all wines be levied with a single rate, noting that the wine industry makes up just 1% of the alcoholic drinks market.

Under the Senate proposal, sparkling wines will be levied P600 per liter, while still wines and carbonated wines will be taxed at P43 per liter in 2020. Rates will increase by 10% annually beginning 2021.

At present, sparkling wines costing P500 or less and those costing more than P500 are levied P316.33 and P885.72, respectively.

Still wines and carbonated wines are charged P37.96 for bottles with up to 14% alcohol and P75.92 for bottles containing more than 14%.

The bill will impose a P45 per liter tax on fermented liquor and alcopops in 2020, which will gradually increase to P75 in 2023. The rate will increase by 10% annually beginning 2024.

Mr. Recto also sought to reduce rates for heated tobacco products (HTPs), instead of increasing it at par with conventional cigarettes. The current proposal will raise excise tax on HTPs to P45 per pack in 2020 from P10, when Republic Act No. 11346 takes effect this January.

“You are making it more difficult for those who want to quit smoking,” Mr. Recto said. “Tax them… but at a lower rate. Incentivize them to make that shift.”

The measure forms part of the administration’s comprehensive tax reform program, alongside measures that seek to reduce corporate income tax and overhaul fiscal incentives; provide a uniform structure for real property valuation and assessment; and simplify the tax structure for financial investments.

All said measures were mentioned by President Rodrigo R. Duterte in his fourth State of the Nation Address last July 22.