FINANCE Secretary Carlos G. Dominguez III is lobbying Congress to first pass the set of laws focusing on taxation for alcoholic beverages and electronic cigarettes (e-cigarettes) of the remaining tax reform packages to fund the implementation of the Universal Health Care (UHC) law.
“For me, I want to get the ones that have revenue impact out of the way because the revenues measures we have here are to primarily fund the UHC,” Dominguez said in a news briefing. “And UHC is not going to wait; so you might as well get that going first. Where there’s a significant impact on the revenue.”
According to Dominguez, Package 2 Plus is the only remaining package under the Comprehensive Tax Reform Program (CTRP) that will help increase government revenues. He said Package 2, which aims to lower corporate income tax rates, Package 3 (property valuation) and Package 4 (on financial taxes and passive income) are all revenue neutral.
“The other measures are not revenue measures. For instance, the valuation, even the passive income tax, is not really a revenue measure; it’s just to clean up the system,” Dominguez added. “I’m not saying it’s not important. But let’s get the revenue measures down because [for] UHC, the train is leaving. So you might as well make sure it has enough gas.”
According to Finance Assistant Secretary Ma. Teresa S. Habitan, the revenue estimates for alcopops alone is estimated to reach P33.3 billion under the DOF version of Package 2 Plus.
Alcopops are classified as flavored alcoholic beverages with relatively low alcohol content which also includes malt beverages wherein fruit juices or flavorings have been added.
“Our latest, as of August 1, for 2020 for alcopops, [it’s] P33.3 billion additional [revenues],” Habitan said. “Right now, they are taxed same as distilled spirits but their alcohol content is similar to beer so we want them to be taxed same as beer or fermented liquor.”
She explained that under the Package 2 Plus version passed during the 17th Congress, excise taxes on alcoholic beverages alone are estimated to reach P14.5 billion for 2020 as opposed to the DOF version of the proposal of around P40 billion. Habitan said these are only initial estimates.
“It’s [revenue figures] moving. For the Citira [Corporate Income Tax and Incentives Reform Act], that’s neutral; similar with valuation reform and passive income. For the passive income, probably a small gain depending on how the final package comes out,” she added. “Now, for the alcohol [Package 2 Plus] this is still being refined, so the HOR [House of Representatives] version that is the one that was approved before for the 17th Congress, the total impact is, for example, for 2020 that is P16.2 billion, the DOF proposal on the other hand is P72.4 billion.”
Last month, the DOF called on the 18th Congress to pass this year a measure that will increase taxes on alcohol products to at least P40 per liter and further raise taxes on heated tobacco and vapor products.
Dominguez said the new measure will help boost funds for the government’s UHC program while curbing smoking, binge drinking and other vices, especially among the youth.
The finance chief noted that from 2020 to 2024, all current sources of government funding can cover UHC at around P200 billion annually.
The cost of the program will start at P257 billion in 2020, and increase by an average of around P11 billion to P12 billion a year. Funding will amount to a total of P1.44 trillion by 2024.
Without a substantial adjustment to the current sin taxes, the cumulative funding gap for the UHC will reach P426 billion by 2024.
This is why raising excise taxes on tobacco products, Dominguez said, is a major step in ensuring that the UHC program is properly implemented.
Last month, President Duterte signed into law the Republic Act 11346 increasing further excise taxes on tobacco products, as well as introducing taxes on e-cigarettes.
The new law increases the excise tax on cigarettes from the current P35 per pack to P45, starting January 1 next year, followed by a P5 increase every year until the rate reaches P60 in 2023. The rate will then be increased by 5 percent every year starting 2024.
It also imposes a new tax on electronic cigarettes (e-cigarettes), including heated tobacco and vapor products, with a minimum P10 excise tax for zero milliliter to 10 ml of liquid solution or gel starting January 1, 2020.
Every 10.01-20 ml is taxed P20; 20.01-30 ml, P30; 30.01-40 ml, P40; 40.01-50 ml, P50; and for more than 50 ml, P50 plus P10 for every additional 10 ml. Starting January 1, 2021, the rate will be increased by 5 percent every year.