Excise tax collections from so-called ‘sin’ products now redefined to include sweetened beverages (SBs) have raised a total of P269.1 billion in revenues in 2019, which is almost double the P143.5 billion collected from alcoholic drinks and cigarettes in 2015, the year prior to the assumption of President Duterte in office, according to data from the Department of Finance (DOF).
Finance Undersecretary Karl Kendrick Chua said that this year, DOF estimates show that the government would be able to raise around P332.3 billion from ‘sin’ taxes, given that  ‘sin’ products will also cover electronic cigarettes such as heated tobacco products (HTPs) and vapor (vaping) products, and  there are further increases in the excise taxes on alcohol and tobacco products.
‘Sin’ tax collections will be primarily used to augment funding for the implementation of the Universal Health Care (UHC) program, which starts this year. This program aims to provide affordable access to inpatient and outpatient services to all Filipinos, especially low-income families–in step with the ultimate goal of President Duterte to provide a decent life to every Filipino.
Higher ‘sin’ taxes also aim to deter the consumption of unhealthy products to help lower healthcare costs and promote a healthy citizenry.
“In 2015, the total revenues from ‘sin’ products was P143.5 billion. Last year, in 2019, the total was P269.1 billion or 87.5 percent more. Starting 2020, ‘sin’ taxes now include the collection of excise taxes on tobacco, alcohol, sweetened beverage and e-cigarette products,” said Chua in his report to Finance Secretary Carlos Dominguez III during a recent DOF Executive Committee (Execom) meeting.
Dominguez said at the Execom meeting that the Duterte administration has made history because it is the first government to have pushed more than one ‘sin’ tax hike bill in the Congress during its term.
Chua said the 2020 revenue estimate of P332.3 billion from ‘sin’ products represent a 131.6 percent increase from the 2015 collection.
By 2024, conservative DOF estimates show that the government would be able to collect about P480 billion. “This is a low-end projection,” Chua said.
The new set of ‘sin’ taxes comprise Package 2 plus of its Comprehensive Tax Reform Program (CTRP), which the state economic team is pushing to make the taxation system simpler and fairer for all Filipinos and at the same time raise sufficient funds for President Duterte’s high–and inclusive–growth agenda anchored on an unprecedented level of investments in infrastructure and human capital development.
Republic Act (RA) No. 11346 or the Tobacco Tax Reform that was signed into law in July 2019 increased excise taxes on tobacco products to P45 per pack starting this year and P5 per pack thereafter until the rate reaches P60 per pack in 2023. Starting 2024, the tax rate will be increased by 5 percent each year.
This law also introduced a new tax on e-cigarettes such as HTPs and vapor products.
RA 11346 is expected to raise P14.9 billion this year and P125.8 billion by 2024 from cigarettes alone, Chua said.
Last January 22, 2020, President Rodrigo Duterte signed into law RA 11467, which further increases excise taxes on alcohol, HTPs and vapor products, and is expected to raise an initial P22.2 billion this year.
Over a five-year period from 2020 to 2024, the DOF estimates revenues totaling P137.2 billion from this law.
Chua said RA 11467 earmarks 60 percent of revenues collected from the excise taxes on alcohol products and e-cigarettes to the UHC, while 20 percent will be spent for medical assistance and health facilities.
The remaining 20 percent will go to programs that will help the government fulfill its commitments under the United Nations (UN) Sustainable Development Goals (SDGs).
It also includes a provision exempting the sale and importation of all prescription medicines for high cholesterol, diabetes and hypertension from the value-added tax (VAT). This VAT exemption would then be extended to include medicines for mental illness, cancer, kidney diseases, and tuberculosis by 2023.
Chua said the DOF is studying the revenue impact of these VAT exemptions as preliminary data suggests the projected revenue loss from this tax break can reach P5.2 billion during the first year of implementation or a total of P35.1 billion by the end of 2024. With this, the net incremental revenue of the bill is P17.1 billion in 2020, and a total of P102.1 billion by 2024.
For fermented liquors, a specific tax of P35 per liter will be imposed in 2020, which will subsequently increase by P2 per liter per year until it reaches P43 per liter in 2024. Thereafter, the rate will increase by 6 percent every year.
Distilled spirits will be taxed with a 22 percent ad valorem tax on top of a specific tax of P42 per proof liter in 2020, which will increase to P47 per proof liter in 2021, P52 per proof liter in 2022, P59 per proof liter in 2023 and P66 per proof liter in 2024. Thereafter, the rate will increase by 6 percent every year.
Alcopops will be taxed similar to the rates for distilled spirits.
For wines, both still and sparkling, the specific tax is at P50 per liter in 2020, and will increase by 6 percent yearly thereafter.
HTPs will be taxed P25 per pack in 2020, P27.50 in 2021, P30 in 2022, P32.50 in 2023, and 5 percent yearly thereafter.
A tax of P45 per 10 milliliter of conventional freebase vapor products will be imposed in 2020, P50 in 2021, P55 in 2022, P60 in 2023. Thereafter, the rate will increase by 5 percent every year.
For salt nicotine vapor products, the tax of P37 per millimeter will be imposed on the first year, and additional P5 per ml per year until the rate reaches P52 per ml in 2024. Thereafter, the tax will be increased by 5 percent every year.
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