Lawmaker confident of sin tax passage in Senate

Cavite Representative Joseph Abaya. congress.gov.ph photo

MANILA, Philippines — Following its passage in the House of Representatives, House Bill 5727 otherwise known as the controversial sin tax reform bill’s next stop will be at the Senate where the measure’s author Cavite Representative Joseph Abaya felt confident it would also breeze through the upper chamber.

“We are confident that it will follow the same fate in Senate, however, it will require vigilance from supportive senators, health advocates, media and the people to ensure that the bill doesn’t get watered down,” Abaya said.

The measure was passed by lawmakers on its third reading Wednesday which was the last day of the second regular session via a landslide vote of 210 in favor for it, 21 against it and five abstentions.

“This is a landmark legislation since we have put in a reformed tax structure for sin products which has remained virtually unchanged for the last 16 years,” said Abaya.

Majority leader Neptali Gonzales II meanwhile expressed worry on changes that may take place once the Senate handles the measure.

“Our gut feel is that changes in the bill might happen. It’s possible taxes for alcohol would go up and taxes for tobacco will go down. But it is difficult to second guess but we hope the differences will not be significant,” Gonzales said.

The measure seeks to solve the decline in government revenue from excise tax on alcohol and tobacco since 1997, as reported by the Department of Finance, by:

– leveling the playing field through encouraging fair competition among all stakeholders in the alcohol and tobacco industry;

-increasing revenue base of the government;

-addressing the rise in social costs of consumption of the said products; and

-making tax laws compliant with World Trade Organization-General Agreement on Tariffs and Trade requirement.

It also seeks to resolve the case filed by the United States of America and the European Union against the country for low excise rates on local distilled spirits.

HB 5727 will simplify the basis of excise taxes on alcohol products, pegged on per proof liter for distilled spirits, per liter of volume capacity for wines and fermented liquor as well as the basis of excise tax on tobacco products: a) cigars – per cigar, b)cigarettes packed by hand – per pack, and 3) those packed by machine – per pack.

From January 1, 2013, excise tax rates based on net retail price (not including excise tax and value added tax) will be:

-for distilled spirits which priced at:
A) less than P90 – P20 per proof liter;
B) P90 to P150 – P80 per proof liter; and
C) more than P150 – P320 per proof liter;

-for wines:
A) sparkling wines, champagnes regardless of proof if the net retail price per bottle of 750 milliliter is:
– P500 or less – P250 and
– more than P500 – P700;

B) still wines and carbonated wines containing 14 percent of alcohol by volume or less, P30, and

C) still wines and carbonated wines with more than 14 percent but no more than 25 percent of alcohol, P60.

-for fermented liquor:
A) if the net retail price per liter is P50.60 or less, the tax will be P13.75 per liter; and
B) if the net retail price per liter is more than P50.60, the tax will be P18.80 per liter.

Fermented liquor brewed and sold at microbreweries or small establishments shall be subject to the rate of P28 per liter.

-on tobacco products P1.75 and P1.5;
-on cigars, P150 per cigar;
-on cigarettes packed by hand, P7.56 (by January 1, 2013), P12 (by January 1, 2014); and

-on cigarettes packed by machine by January 1, 2013:

A) if the net retail price is P11.50 and below per pack, the tax will be P12 per pack; and

B) if the net retail price is more than P11.50 per pack, the tax will be P28.30 per pack;

-on cigarettes packed by machine by January 1, 2014:

A) if the net retail price is P11.50 and below per pack, the tax will be P22 per pack; and

B) if the net retail is more than P11.50 per pack, the tax will be P30 per pack.

An eight percent increase every two years will be imposed on the excise tax rates from January 1, 2015 to January 1, 2025 for distilled spirits, wines, fermented liquor, tobacco products, cigars and cigarettes through revenue regulations issued by the Secretary of Finance. It will also remove the price or brand classification freeze on alcohol and tobacco products.

The Bureau of Internal Revenue projected a P33 billion revenue increase following the passage of the law. This additional revenue is being eyed to fund basic social services including the universal health care program and alternatives for tobacco farmers.

Gonzales said that this projected tax revenue can still change once the Senate tackles the measure.

Abaya also said that they were conscious of the Northern bloc opposing the bill due to the plight of tobacco farmers and explained that they “do recognize they are the most affected sectors thus 15 percent of the incremental revenues will be plowed back to them.”

“It is then incumbent upon the Northern block public servants to properly utilize such funds to really protect and support the farmers since that is the intent of the law,” he said.

“Even without this bill, roughly P4 billion is given back to tobacco growing areas. With the passage of this bill we are looking at around P11 billion to P12 billion being plowed back,” Abaya explained.

But much more important was that the tax reform measure could “wean away the poor and the youth from the bad habits of smoking and drinking,” he said.

Gonzales agreed with this, saying that although the government was “sensitive with their (farmers) plight, more will benefit from the trade off” pertaining in particular to the universal health care.