Liquor makers cry double taxation, sue to stop new rule

A group of manufacturers of alcoholic beverages has asked the courts to stop the Department of Finance and Bureau of Internal Revenue from implementing a new regulation that  purportedly taxes both raw materials and the finished product, resulting in double taxation.

The Distilled Spirits Association of the Philippines Inc. (DSAPI) said in a complaint filed in the Manila Regional Trial Court last week that “in addition to the excise tax already paid on ethyl alcohol, new revenue regulations impose a separate excise tax on compounded liquor produced from the tax-paid ethyl alcohol.”

The DSAPI, as well as Destileria Limtuaco and Co. Inc., Emperador Distillers Inc. and Tanduay Distillers Inc., said this provision of Revenue Regulation No. 17-2012 issued in December conflicted with the National Internal Revenue Code (NIRC) and deprived local manufacturers of equal protection.

The DSAPI called for a temporary restraining order (TRO) against the implementation of the regulation pending judgment on its validity.

Section 12(c) of the implementing guidelines of the revised tax rates on alcohol and tobacco products states that, “The specific tax that was paid on the physical inventory of ethyl alcohol held in possession by manufacturers of compounded liquors  as of the effectivity of (Republic Act No. 10351 or the sin tax law) subsequently used as raw materials in the production of compounded liquors shall not be entitled to tax credit/refund or shall not be deducted from the total excise tax due on compounded liquors.”

The manufacturers cited a provision in the NIRC that states, “where a rectifier makes use of spirits upon which the excise tax has been paid, no further tax shall be collected on any rectified spirits produced exclusively therefrom.” Ethyl alcohol is considered a distilled spirit. Erika Sauler