The country’s top distilleries, through the Distilled Spirits Association of the Philippines (DSAP), said they supported the government’s proposal for higher taxes on alcohol products as long as it promoted a level playing field among industry players.
DSAP president Olivia Limpe-Aw said association members were concerned that current proposals imposed too much tax burden on distilled spirits and a lighter levy on wine products.
“As we told the Department of Finance, if you want to increase our taxes, we’re OK with that as long as you level the field,” Limpe-Aw said at a recent Senate ways and means committee meeting chaired by Sen. Pia Cayetano.
In particular, Limpe-Aw said DOF’s plan to exempt wines from the ad valorem tax was unfair to other alcohol makers.
She noted that under the DOF proposal, the government planned to collect two kinds of taxes from every proof liter of distilled spirits—first, a P40 specific tax and second, a 22-percent ad valorem tax based on net retail price per proof.
On the other hand, she pointed out that for wines, DOF proposed to impose a single specific tax of P40 a liter, exempted from ad valorem tax.
“We’re currently applying a progressive tax structure for distilled spirits,” said Limpe-Aw, who is also the president and CEO of Destileria Limtuaco Inc., the country’s oldest distillery. “There’s no reason it can’t be done across categories in the alcohol sector or industry. We just need to look for the right balance.”
She stressed that if adopted, the DOF proposal would unfairly penalize low-income consumers who could not afford to buy expensive wines costing up to P600,000 a bottle who pay only P40 excise a liter or equivalent to P30 per 750ml bottle.
“Let’s compare: Ginebra San Miguel Gin will be sold at P94 a bottle under this proposed tax, so the tax is P32.66 or a tax burden of 34.74 percent. The most expensive wine—P600,000—the tax is only P30 per bottle, or a tax burden of 0.005 percent,” she pointed out.
Limpe-Aw, however, admitted that not all distilled spirits catered to the mass market as there were also brands that catered to affluent consumers, and sell for more than P20,000 per bottle.
But she explained that high-end distilled spirit brands paid higher excise.
“Let’s use P20,000 per 750 ml bottle as our base price to compare taxes: the tax per bottle for this distilled spirit is P2,996.91. That’s still more than 100 times compared to the P30 tax on a P20,000 per bottle of wine,” Limpe-Aw stressed.
Based on industry data, 91.3 percent of Filipino drinkers who consume distilled spirits mainly come form the D and E segments. But Limpe-Aw said that competition among industry players was tight in this price sensitive business.
She said that alcohol was currently the lowest priority on household spending and continued to decrease every year. From 1.2 percent based on the 2009 Family Income and Expenditure Survey, it’s down to 0.592 percent in 2015.
“Assuming our minimum wage is P15,000 a month, the budget now for alcohol is P89 based on that 0.592 percent household income allocation,” Limpe-Aw said. “That’s too small, P89 is just a bottle of gin or brandy every month.”