Finance Secretary Carlos Dominguez III has thanked Senator Pia Cayetano and the members of the Senate ways and means committee for pushing the swift panel approval of the measure imposing higher taxes on alcohol products and electronic cigarettes, which is estimated to raise around P47.9 billion in additional revenues for the Universal Health Care (UHC) program that will primarily benefit low-income families.
Dominguez said Cayetano’s well-studied proposal, as outlined under Senate Bill (SB) No. 1074 would augment the massive funding needed for the full implementation of the UHC while at the same time help curb binge drinking and deter the use of potentially harmful vaping and heated tobacco products, especially among young Filipinos.
“We thank Senator Cayetano, who, as chairperson of the Senate ways and means committee, painstakingly studied the proposed ‘sin’ tax increases. We hope Senator Cayetano’s strong advocacy of safeguarding the health of our people, her dedication and hard work that resulted in a bill that would substantially augment the funds needed for our UHC program, will inspire her fellow senators to swiftly approve the measure,” said Dominguez, who was present at the Senate last week when Cayetano sponsored the bill on the floor.
He pointed out that adequate funding for the UHC is crucial because this health-friendly program will go a long way in letting President Duterte deliver on his commitment to improve the lives of our people.
In sponsoring the “sin” tax hike, Cayetano said: “The moral sense of any proposed ‘sin’ tax rate is that it should serve as a deterrent to drinking. It should not be so cheap as to allow minors to afford and have access to these drinks. It should not be so cheap to make it easier for drunk fathers to be wife-beaters, and for traumatized children to lead miserable lives.”
SB 1074 represents Package 2 Plus of the Duterte administration’s comprehensive tax reform program (CTRP). The House of Representatives has approved its counterpart version of this bill last Aug. 20, with an overwhelming 184 votes in favor.
Global data show that on a per-capita basis, Filipinos were the number one consumers of distilled spirits in 2017.
“We have consumed more brandy, gin, and rum than the rest of the world combined,” Cayetano said. “Meanwhile, we are the largest gin consumers per capita in the world .…”
“Global champion na po tayo, sa inuman. But that is not something we should be proud of. Maging champion sana tayo sa sports katulad ni Senador Manny Pacquiao o sa darating na South East Asian Games. Pero wag naman sa inuman,” Cayetano added.
Cayetano said that with alcohol becoming cheaper for many people and manufacturers even targeting the youth as consumers through products like alcopops, Filipinos now consume, on average, 11 liters of alcohol per year. This is higher than the global and ASEAN averages of below 10 liters per year.
She said a “reasonable proposal” on taxing alcohol products “is one that actively protects the Filipino family. The only way to go is that which leads to the protection of people’s lives.”
“And this is not just me speaking as a mother or a health advocate. This is me speaking as an economics major. Demand for this product is inelastic. This means that even if we increase the prices by a great margin, the demand for these products will barely be affected,” she said.
As for e-cigarettes, the Philippine medical community has expressed grave concern about the dangers of these products, which have already been banned in other countries, Cayetano noted.
The devastating health impact of e-cigarettes, which are marketed with flavors that make them appealing to the youth, underscore the urgency of protecting children from these products by taxing them just like regular cigarettes, she said.
Cayetano said senators should keep the interests of every Filipino family and the future of the youth and the country in mind as she urged her colleagues to support the measure.
“I humbly ask that you review (the) numbers, keeping in mind that our higher calling is to improve people’s lives. The choice we make today can lead to healthier and happier households in the future,” she told her colleagues.
SB 1074 seeks to increase taxes on alcohol products through the following rate adjustments: Distilled spirits will be imposed an ad valorem tax of 20 percent on the net retail price per proof and a specific tax of P90 per proof liter on the first year of its implementation, which will be increased by P10 every year until the fourth year. The specific tax rate will increase by 10 percent every year thereafter.
For fermented liquor (beer) and alcopops, SB 1074 seeks a specific tax rate of P45 per liter on Year 1, increasing by P10 every year until Year 4. The specific tax rate will increase by 10 percent every year thereafter.
Wine products will be slapped with a specific tax of P600 per liter for sparkling wines and P43 per liter for still and carbonated wines. These rates will increase by 10 percent every year thereafter.
For e-cigarettes under the heat-not-burn product category, Cayetano proposed to increase the current rates of P10 per pack of 20 to P45 per pack on Year 1 to be at parity with regular cigarettes.
For vapor products, there will be a distinction between salt nicotine and freebase. From P10 per 10mL or less, salt nicotine will increase to P45 per mL, while freebase will increase to P45 per 10 mL on Year 1. These rates will increase by P5 every year until Year 4 then 5 percent every year thereafter.
According to Cayetano, her proposal for both alcohol and e-cigarettes is expected to raise incremental revenues of P47.9 billion to P61.2 billion in the first year of its implementation. By Year 4, the total estimated incremental revenues are from P356.9 billion to P478.4 billion.
Finance Undersecretary Karl Kendrick Chua said during a recent Senate press briefing on SB 1074 that the estimated revenues from Cayetano’s proposal is way higher than the House-approved version, which is projected to yield only P17 billion in the first year.
Under Cayetano’s measure, conservative estimates show that taxes on alcohol will generate P45.7 billion in incremental revenues, while e-cigarettes will yield P2.1 billion in the first year of its implementation, Chua said.
More on TaxReform News
TUCP, FINEX lead groups for DOF income tax reforms →Date Posted: May 14, 2017
Various organizations led by the Trade Union Congress of the Philippines (TUCP), Financial Executives of the Philippines (FINEX) and the National Tax Research Center (NTRC) are backing the “long-overdue” reforms in personal income tax (PIT) rates proposed by the Department of Finance (DOF) along with other measures to make the tax system simpler, more equitable and more efficient, especially for low- and middle-income taxpayers.
P571-B infra spending in 1st 9 months shows much better absorptive capacity →Date Posted: November 28, 2018
DAVAO CITY—Infrastructure spending of over a half-trillion pesos in the first nine months of 2018 … Continue reading P571-B infra spending in 1st 9 months shows much better absorptive capacity
Dominguez wants review of fiscal incentives once every two years–like MICC mining audits →Date Posted: September 5, 2019
Finance Secretary Carlos Dominguez III said that tax incentives given to companies must be reviewed … Continue reading Dominguez wants review of fiscal incentives once every two years–like MICC mining audits
Over 1,000 entrepreneurs take part in ‘Sulong’ regional forumsDate Posted: April 29, 2019
More than 1,000 entrepreneurs, mostly representing small and medium enterprises (SMEs), were consulted by the … Continue reading Over 1,000 entrepreneurs take part in ‘Sulong’ regional forums