By Bianca Cuaresma & Butch Fernandez
THE Department of Finance (DoF) proposed higher tax increases on alcoholic beverages to the Senate on Tuesday, saying the House of Representatives’s approved hikes in alcoholic excise tax are not enough to finance the Universal Health Care (UHC) program of the government.
Senate leaders said they have yet to firm up a consensus on whether to heed the DOF’s request, as hearings on the next-round excise tax hikes have just opened.
In a hearing on Tuesday, Finance Undersecretary Karl Kendrick Chua proposed their version to the Senate—reflecting revenue gains that are double the House’s version which was passed at the committee level last week via House Bill 1026. Late Tuesday, the House approved the bill on third and final reading. See related story on page A8, “House gives 3rd reading okay to higher excise tax on alcohol.”
According to Chua, their proposed version of the bill will yield a revenue gain of P33.3 billion for 2020—about double the estimated revenue generation that will be produced should the House Bill be approved with its P16.6 billion version.
In particular, Chua said the House bill proposes an ad valorem excise tax rates of distilled spirits from the current 20 percent to 22 percent starting next year. The DoF’s proposal wants this hiked to 25 percent starting next year. Specific excise taxes—or the taxes charged per proof liter—for this kind of alcoholic beverages are proposed to be hiked to P35 per liter in 2020 by the House version. Chua wants this hiked by P40 per liter starting next year.
Also, the House-approved tax rate hike on fermented liquors—the largest contributor to alcohol excise tax revenues—is at P32 per liter starting 2020. Chua wants this to hit P40 per liter by next year.
He also wants alcopops—which were taxed as distilled spirits for 2019—to be taxed as fermented liquor with specific rate on a volume basis.
As an example, Chua said the leading beer in the country—currently priced at P86.90—will be priced at P93 given the House’s tax increase proposal.
“The increase is not significant. If your income is increasing, due to the lower income tax and the growing economy, we believe this is affordable,” Chua said.
The DoF’s proposal will hike this to P102.
Health care
“Again, according to the Universal Health Care we are proposing to get the P15.5 billion from the recently approved tobacco law and P36.5 billion from the DOF-DOH proposal that the Senate might want to consider, therefore giving us a much smaller gap which I think is more manageable so that we can finance the Universal Health Care according to what the law proposes,” Chua said.
“What we basically propose is to further improve the system and adjust the rates so that we fund Universal Health Care, discourage consumption and to promote a healthier work force,” he added.
Senators undecided
Meanwhile, Senate Minority Leader Franklin Drilon disclosed Tuesday that senators have yet to firm up a consensus on whether to heed the Finance department’s request to pass a higher version of excise tax rates on alcohol products.
Senate President Vicente Sotto III, asked if senators will heed the DOF request to pass a higher version of excise tax rates on alcohol products, confirmed that senators have yet to firm up a decision.
“We will study and review before any decision,” Sotto III told the BusinessMirror.
Senate President Pro Tempore Ralph Recto indicated, however, that senators are not likely to go beyond the House version, saying “the Senate has never topped the House proposal.”
Drilon indicated to reporters the senators have yet to reach a consensus on whether the “sin” tax bill is “a health measure rather than revenue raising.”
He added that legislators are still firming up a decision on “the proportion of tax on cigarettes and alcohol products,” referring, for instance, to the proposed “70-30 ratio which started at 50-50,” citing the position of Senator Pia Cayetano that “diabetes is caused by alcohol.”
Drilon, however, signalled that senators are close to firming up a consensus on the sin tax bill, noting “evidence that higher [sin] tax decreased consumption” from 2012.
Finance Undersecretary Chua confirmed a “modest drop in [alcohol] consumption to 40 percent,” but noted that, “nagbaba konti pero tumataas ulit [it declined slightly, but is going up again].”
For his part, Majority Leader Miguel Zubiri observed “a corelation” of tax hike projecting a drop in consumption.
DOF’s Chua affirmed “an initial drop in prevalence,” but projected it would be worse if the bill were not passed. He sees “an increase of 47 percent if we don’t increase” sin taxes on alcohol products.
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Image credits: Roy Domingo