DOF to still push alcohol taxes higher than rates OKd by House panel

Finance Undersecretary Karl Kendrick Chua.
INQUIRER file photo / LEO M. SABANGAN II

MANILA, Philippines–The Department of Finance (DOF) will still push for rates higher than the excise taxes on alcohol products approved by the House committee on ways and means.

“What they [the committee] approved is a lower rate, which is like P30-32 per liter. What we proposed is P40 per liter,” Finance Undersecretary Karl Kendrick T. Chua said on the sidelines of House hearings on the remaining packages of the Duterte administration’s comprehensive tax reform program.

The House panel last Tuesday approved to jack up the “sin tax” slapped on alcoholic products, which the previous 17th Congress had also passed.

READ: House panel OKs bill raising tax on beer, wine, alcohol

As such, the additional revenues expected during the first year of implementation of the higher levy on alcoholic drinks under the version approved by the House committee will only be half—about P15 billion—out of the P33 billion that the DOF wanted, Chua added.

Asked how the DOF could still push for the original alcohol excise tax rates it proposed, Chua replied: “There are many steps to propose our version—the [House] plenary, the Senate committee, the [Senate] plenary, and the bicam.”

Chua said the DOF remained “very optimistic” that their proposal will eventually prevail.

The different tax treatment on “alcopops” or flavored alcoholic drinks and the further increase in levies on e-cigarettes will also be proposed in the House plenary—these will no longer require any committee hearing as they were “part of the same subject [as the House-approved measure on alcohol], which is amending the Tax Code,” Chua said.

The joint DOF-Department of Health (DOH) proposal wanted to increase the specific tax per liter of fermented liquors to P40 in 2020, P45 in 2021, P50 in 2022, P55 in 2023, and 10-percent yearly indexation from 2024 onwards.

The DOF also wanted to apply the same tax rates of fermented liquor on alcopops—flavored alcoholic drinks popular among the youth—to discourage consumption.

For distilled spirits, the joint DOF-DOH proposal was to raise the ad valorem tax to 25 percent next year from 20 percent at present, while also jacking up the specific tax per proof liter from P23.4 currently to P40 next year, P45 in 2021, P50 in 2022, P55 in 2023, and 10-percent indexation each year thereafter starting 2024.

Sparkling wines and champagnes will be slapped a specific tax of P348 (for P500 net retail price or less than 750-mL volume capacity) and P974 (for more than P500 per bottle of 750-mL volume) per liter next year, to be followed by 10-percent indexation every year from 2021 onwards.

In the case of still wines and carbonated wines, the proposal was to levy P42 per liter for those with 14-percent alcohol or less, and P84 for those with more than 14-percent alcohol content, after which a similar 10-percent yearly indexation will be implemented beginning 2021.

As for still and carbonated wines with over 25-percent alcohol, the DOF and the DOH wanted them taxed as distilled spirits.

With regards e-cigarettes, Finance Secretary Carlos G. Dominguez III had said the new taxes under Republic Act (RA) No. 11346 signed by President Duterte last month were “too low.”

As such, the DOF proposed to also levy on heated tobacco the same excise tax rates of regular cigarettes beginning next year.

For vapes, the DOF wanted a tax of P45 per mL in 2020 regardless of volume, to be followed by P5 additional per pack per year similar to ordinary cigarettes.

Under RA 11346, the excise tax on cigarettes will be increased from P35 per pack at present to P45 a pack in 2020; P50 in 2021; P55 in 2022; and P60 in 2023, to be followed by 5-percent annual indexation from 2024 onwards.

Heated tobacco products will be levied excise of P10 a pack starting Jan. 1, 2020, to be followed by yearly hikes of 5 percent starting 2021.

As for vapor products, individual cartridges, refills, pods or containers of their liquid solutions will be slapped tax of P10 per 10 mL, or a larger P50 on top of P10 per additional 10 mL for those being sold in volumes higher than 50 mL in 2020.

In all, RA 11346 and the fresh DOF-DOH proposal once passed into law will add a total of P397.4 billion mainly to Universal Health Care funding in the next five years—P52 billion in 2020; P67.9 billion in 2021; P80.4 billion in 2022; P94.7 billion in 2023; and P102.4 billion in 2024. /jpv