PRESIDENT Duterte will certify as urgent a proposed measure to increase the excise tax for alcohol and tobacco products, Malacañang said on Tuesday.
Presidential Spokesman Salvador S. Panelo told reporters in a briefing that the President backs Sen. Manny Pacquiao’s bill doubling the excise tax on cigarettes from the current P30 per pack to as much as P60 per pack, with provisions for an annual increase of 9 percent, from the initial 4 percent.
In a separate development, the PhilTobacco Growers Association Inc. (PTGA) expressed dismay over the approval of another round of excise tax increase on tobacco products, which they claim would result in lower production and displace more farmers.
The Cabinet held its first meeting for the year on Monday night.
“The recommendation of the Department of Finance and [Department of Health] is that this bill should be certified as urgent. Because under the proposal, the tax on tobacco would be raised to P60 per pack, while on the part of alcohol it will be P40 per liter. So the recommendation is that, that bill should be passed and signed into law—that was what was approved last night,” said Panelo, who is also the Chief Presidential Legal Counsel.
According to Panelo, if the measure is signed into law, this will effectively amend the sin tax rate increases under the Tax Reform for Acceleration and Inclusion (TRAIN) law.
Last month the House of Representatives also approved on third and final reading two bills seeking to raise excise taxes on alcohol and tobacco products.
For health care
The bills’ main authors said that the revenue which will be generated from the excise of these sin products will fund the proposed Universal Health Care Act.
Apart from this, Panelo said these are also health measures to dissuade people from using these products.
The reconciled version of the UHC bill has yet to be signed by the President after the bicameral conference committee approved it in November.
Under House Bill 8618, the excise tax imposed on distilled spirits will be increased by P6.60.
Starting January 2019, an ad valorem rate of 22 percent, including specific tax rates per proof liter of P30, P35, P40, and P45 from 2019 to 2022 will be imposed on distilled spirits and it will be increased by 7 percent annually starting 2023.
Currently, Republic Act 10351 imposes on distilled spirits a P22.40 specific tax and an ad valorem tax of 20 percent.
The lower chamber also approved a shift to a unitary rate of P650 plus ad valorem of 15 percent for sparkling wines, compared to the two-tiered system under RA 10351.
It will be increased by 7 percent annually starting 2023.
Meanwhile, the tax on still and carbonated wines with lower than 14-percent alcohol content was increased by P2.10 (from P37.90 to P40), while those with an alcohol content higher than 14 percent saw a P4.10 increase effective January 2019. It will be increased by 7 percent every year thereafter.
Also, the approved tax rate on fermented liquors was P28—P2.60 higher than the P25.40 tax rate mandated by RA 10351. It will be increased by 7 percent every year thereafter.
Farmers upset
Farmers are chafing over the next-round excise tax increase on tobacco products.
“We find it worrisome for the government to consider another round of excise tax increases for tobacco,” PTGA President Saturnino Distor said in a statement on Tuesday.
“Cigarette taxes have gone up seven times in the last five years. This has directly impacted our production and caused the displacement of a lot of farmers,” he added.
Higher prices of tobacco products in the local market would lead to more smuggled cigarettes in the country, with the bulk coming from China that does not use Philipine tobacco produce, Distor said. Citing the National Tobacco Administration (NTA), Distor said tobacco production has declined to 48 million kilograms in 2017, from 68 million kilograms recorded in 2013.
“The tobacco industry has been contributing billions of pesos in excise tax revenues to the government that in 2017 alone, BIR collected P126 billion,” he said.
“These cigarette prices have contributed to the spike in inflation to all time highs. Our families are barely coping,” he added.
Image credits: Alysa Salen