DOF thanks Congress for P137B in expected revenue from ‘sin’ taxes until 2024

Finance Secretary Carlos G. Dominguez III on Friday welcomed the passage by Congress of higher excise on alcohol and e-cigarettes, which would generate P137.2 billion in additional revenue in the next five years.

In a statement, Dominguez said Congress’ approval of the new “sin” taxes was “an investment in the future of our people.”

He said it would also help President Rodrigo Duterte “deliver on his administration’s goal of providing a safe, comfortable and healthy life for every law-abiding Filipino.”

Dominguez thanked in particular Senate ways and committee chair Sen. Pia Cayetano as well as House ways and means committee chair Albay Rep. Joey Salceda “for painstakingly studying the measure and holding extensive consultations with concerned stakeholders, and spearheading efforts that led to the swift approval of the bill in their respective chambers.”

The final version of the bill, he said, provided that 60 percent of taxes from alcohol products and e-cigarettes, including heated tobacco and vapes, will be for the universal health care program.

At least 20 percent will be for “medical assistance and facilities” while the remaining 20 percent will be for “programs that will help the government fulfill its commitments under the United Nations’ Sustainable Development Goals (SDGs),” Finance Undersecretary Karl Kendrick T. Chua said.

Chua said the tax rates passed by Congress will raise P22.2 billion in 2020, lower than the Department of Finance’s (DOF) original proposal to rake in P36.5 billion in revenues next year.

Last Thursday, Dominguez said that since the additional levy on alcoholic drinks, heated tobacco and vaping products approved by Congress were lower than originally proposed funds for universal health care may suffer a gap.

“When you go into the legislative process, you don’t get everything you want, but it’s certainly better than the alternative of doing nothing,” Dominguez had said.

“People say, ‘I’m not going to get what I want, so I’ll not do it’—that’s not the right attitude. The attitude is, we go and do our best,” he said.

“Maybe it’s not exactly what we want, but the wisdom of the legislature is to be respected,” he added.

“We appreciate the understanding and the actions the legislature has taken, because these actions are certainly a lot better than past legislatures,” Dominguez said.

The finance chief and head of the Duterte economic team, however, admitted that the lower revenue projections may result into a funding gap for the universal health care program.

“I think, just from my opinion, most likely we will not quite hit the total amount that will be required. But again, we’re just talking about estimates now—we have to look at how it will actually work out,” Dominguez said.

Dominguez was nonetheless hopeful that the move to raise taxes on “sin” products and unhealthy foods such as sugar-sweetened beverages would also redound to lifestyle paradigm shifts.

“Maybe, who knows, Filipinos will actually get into the habit of eating better, smoking less and drinking less, so that the total cost of universal health care is going to go down,” he said.

“That is really very important—you have to take care of yourself first,” Dominguez said.

“We want to make sure these taxes are aimed at promoting or influencing people’s daily habits. I’m not sure that we can be 100-percent successful, but that’s really the idea of sin taxes,” Dominguez added.

Chua said the DOF was looking into the potential impact on revenue generation of the value-added tax (VAT) exemption on medicines for diabetes, high cholesterol and hypertension starting next year as well as for cancer, kidney diseases, mental illness and tuberculosis by 2023.

“Preliminary data suggest the projected revenue loss from this tax break can reach P5.2 billion in the first year of implementation or a total of P35.1 billion by the end of 2024,” Chua said.

“With this, the net incremental revenue of the ratified bill is P17.1 billion in 2020, and a total of P102.1 billion by 2024,” Chua added.

Edited by TSB