By Rea Cu & VG Cabuag
AFTER the approval of the measure further increasing excise tax rates on cigarette products, the other aspect of the government’s “sin” tax reform measure—the excise tax hike on alcoholic beverages, will be tackled during the 18th Congress, the Department of Finance (DOF) said.
And one of those most affected by such a prospective hike, conglomerate San Miguel Corp. (SMC), has served notice it will cooperate with the government’s move to slap excise taxes on liquor products, even if it meant a fall in consumption, but warned the increase should be reasonable.
Ramon S. Ang, San Miguel’s president and COO, said beer giant SMC is amenable to any type of increase as long as the consumer can absorb it.
In a statement issued on Wednesday, Finance Secretary Carlos G. Dominguez III said increasing taxes on tobacco products is only one aspect of sin tax reform, as higher taxes on alcohol products still have to be tackled and approved by the incoming 18th Congress.
The DOF has proposed a tax of at least P40 per liter on alcoholic drinks, under Package 2 plus under the Comprehensive Tax Reform Program (CTRP).
“It’s a work in progress,” Dominguez said of the tax reforms.
Last month, Health Secretary Francisco T. Duque III said that apart from raising revenues to fund the Universal Health Care (UHC) program of the government, further increasing excise tax rates on both tobacco and alcohol products is first a health measure meant to keep Filipinos, especially the youth, from smoking and drinking alcohol.
In March this year, the DOF supported Sen. Emmanuel D. Pacquiao’s proposal raising excise tax on alcoholic beverages, which is seen to provide additional revenues of around P237 billion over a five-year period and minimize binge drinking.
According to the DOF, Senate Bill (SB) 2197 will raise around P32.3 billion in the first year of its implementation in 2019, P40 billion in 2020, P47.4 billion in 2021, P54.6 billion in 2022 and P62.4 billion in 2023, for a total of P236.6 billion.
Under SB 2197, an ad valorem tax equivalent to 25 percent of the net retail price per proof liter and a specific tax of P40 per proof liter will be imposed on distilled spirits starting this year. The specific tax will increase by P5 per proof liter every year thereafter until 2022. Starting 2023, the specific tax will be increased by 10 percent every year.
Meanwhile, the finance chief thanked both the House of Representatives and the Senate for passing this week a new sin tax reform bill that provides substantially higher excise tax rates on tobacco products. The proceeds of this will be earmarked primarily to fill the huge funding gap in the UHC program.
“I think we made history. I think it is only in this administration that tobacco taxes were raised twice. We’re quite thankful to the Senate and also to the House [of Representatives] for putting this bill over the line,” Dominguez added.
SB 2233, approved unanimously by senators on third and final reading on Tuesday, provides for a unitary P45 excise tax increase per pack on tobacco products in 2020, followed by a series of P5 hikes until the rate reaches P60 in 2023, and a 5-percent annual increase thereafter.
The House concurred in the Senate version after senators reconsidered their earlier final-reading approval of the bill on Monday night, in order to address the concerns raised by representatives from the tobacco-producing provinces of Northern Luzon.
Dominguez also recognized the Senate’s progressive proposal during the period of amendments on the bill to introduce taxes on electronic cigarettes (e-cigarettes), such as vapor and heated tobacco products, which are now becoming increasingly popular among the youth.
The approved measure also placed a P10 tax for every 10 milliliters of vaping liquids.
The unitary excise tax rate on tobacco products was earlier increased under the Tax Reform for Acceleration and Inclusion (TRAIN) law from P30 per pack of cigarettes to P32.50 beginning January 1, 2018, and to P35.00 beginning July 1, 2018.
Earlier, the finance chief said that from 2020 to 2024, all current sources of government funding can cover UHC at around P200 billion annually, while the cost of the program will start at P257 billion in 2020 and grow at an average of around P11 billion to P12 billion per year, amounting to a five-year total of around P1.44 trillion by 2024.
Without substantially adjusting the current sin tax rates, Dominguez said the cumulative funding gap by 2024 will reach P426 billion.
San Miguel OK with liquor tax hike
“Our beer taxes are almost on a par with the region,” Ang told reporters after the annual stockholders’ meeting of San Miguel Food and Beverage Inc.
He said per-capita consumption of beer by the Filipinos is only at 20 liters, or just half compared with the Vietnamese consumption of 40 liter.
“When I went to Vietnam in 1998, their beer consumption was only 1 liter per capita. 20 years later it is now 40 liters per capita,” he said.
He said the volume may go down as a result of the additional excise taxes, but the public will eventually adjust with the increase.
Ang, however, warned that if the taxes are too much, the public may drink other type of liquor products. He said liquor consumption in the country is too low and it is very hard to increase due to the affordability of the products.