The simplification of the tax base of excise tax for wine products, especially for sparkling wine, may reduce government’s revenue collection, state-run National Tax Research Center (NTRC) said.
In a research journal, the NTRC said Republic Act (RA) 11467 “simplified” the excise tax rates for wines as it imposed a specific tax rate of P50 per liter on all types of wine regardless of the net retail price (NRP).
“The change on wine classifications may decrease the collection, especially for sparkling wines, which was previously taxed at P316.34 and P885.73,” the NTRC said in the journal titled “Tax Implications of RA Nos. 11346 and 11467.”
Based on the data from NTRC, the specific tax rate for sparkling wines and/or champagnes with an NRP (excluding excise tax and value added tax or VAT) of P500 or less per 750 milliliter bottle was slashed by 532.68 percent to P50 from P316.34 in 2019 under the old law, RA 10351.
As for sparkling wine and/or champagne with an NRP of more than P500, regardless of proof, the excise tax rate was also reduced by a staggering 1,671.46 percent to P50 from P885.73 previously.
The excise tax rate for still wines and carbonated wines containing more than 14 percent of alcohol but not more than 25 percent was also cut to P50 from P75.93.
However, the excise tax rate for still wine and carbonated wine containing 14 percent of alcohol by volume or less also went up to P50 from P37.96 under the previous law.
Nonetheless, RA 11467 mandated that the specific tax per liter amounting to P50 for wines shall be increased by 6 percent effective January 1, 2021 and every year thereafter.
Apart from wines, the same law also simplified the excise tax structure for fermented liquors.
Despite the removal of the classification of fermented liquors based on where these are produced, the NTRC said they are expecting an increase in collection due to the imposition of a higher specific tax rate to P35 from P25.42, specifically for fermented liquors regardless of the NRP.
Meanwhile, fermented liquor brewed and sold at microbrewers or small establishments such as pubs and restaurants, regardless of the NRP are now levied with P35 excise tax rate, which is 1.23 percent down from P35.43 previously.
But the same law also imposed a P2 annual increase in specific tax rate for fermented liquors starting 2021 until it reaches P43 in 2024. It will increase by six percent every year thereafter.
The same law also jacked up the specific tax rate for distilled spirits by 44.29 percent to P42 per proof liter this year. This will be followed by an additional P5 per proof liter from 2021 to 2023. Starting 2024, the additional specific tax rate will be at P7 per proof liter and will increase by 6 percent every year thereafter, effective January 1, 2025.
The law also increased the ad valorem tax on distilled spirits to 22 percent of the NRP (excluding excise tax and VAT) from 20 percent in 2019. RA 11467 also amended the allocation of internal revenues from alcohol products, heated tobacco products and vapor products wherein 60 percent of the collected revenues will go to the implementation of the Universal Health Care Law, 20 percent to Health Facilities Enhancement Program of the Department of Health (DOH) and the remaining 20 percent for the attainment of the Sustainable Development Goals determined by the National Economic Development Authority.
The same also exempted from the VAT the sale or importation of prescription drugs and medicines for diabetes, high cholesterol, and hypertension beginning this year while the VAT exemption on the sale or importation of drugs and medicines for cancer, mental illness, tuberculosis, and kidney diseases will start on January 1, 2023, as provided in the list of approved drugs by the DOH.